Free Trade in Moral Hypocrisy

Jeff Faux

Jeff Faux Founder, Economic Policy Institute

U.S. trade policy of the last 20 years, if not dead, is on life- support. The economic case for the series of neoliberal trade deals since the North American Free Trade Agreement has collapsed in the wake of job losses, lower wages and shrinking opportunities for American workers. Voters are hostile, and both candidates for President oppose the latest proposed trade pact—the Trans Pacific Partnership.

But neoliberal trade deals have brought enormous profits to America’s multinational corporate investors. So, big business lobbyists and their champions in the Congress and the Administration are organizing to pass the TPP in the post-election lame duck session—regardless of who wins the election.

With their economic arguments discredited, they are now draping these trade and investment pacts with a mantle of moral superiority. American workers who complain are now told that they should be ashamed of themselves. Why? Because off-shoring their jobs helps workers in other counties who are even poorer.

Paul Krugman tells his New York Times readers that they should support “open world markets…mainly because market access is so important to poor countries.”

Similarly, Charles Lane in the Washington Post calls Bernie Sanders’ criticism of trade deals “selfish” toward people in “poverty more grinding and miserable than anything even the worst-off Americans have experienced in recent years.”

And Zack Beauchamp of Vox writes that the moral question is, “how much we’re willing to hurt the world’s poor in order to help ourselves.”

Who is “we?”

Self-sacrifice for others is a noble sentiment. But proclaiming moral superiority for demanding that that other people do the sacrificing is base hypocrisy.

America is a rich country. But is it not America that is being asked to sacrifice. Neither is it America’s rich, whom neoliberal trade deals have made even richer. Nor is it the professionals who manage and promote the interests of the One Percent.

Instead, the sacrificing is reserved for those lower and middle income Americans who already have been kicked down the economic ladder by investor-privileged globalization.

There is a nasty subtext at work here – smug upper class professionals’ contempt for working people. Globalization’s “losers” are caricatured as older white men without college educations overpaid to work in U.S. factories —and are probably racist and sexist to boot. Roger Cohen of the New York Times dismisses them as “Trump’s people. And Le Pen’s.”

Driven by that stereotype, Republican leaders have for years cynically tried to channel worker discontent away from demands for economic security to quarrels over gun control, immigration and same-sex marriage.

For their part, Democrats, embracing the demographics of identity, have apparently decided they don’t need the working class anymore. With one exception – to extort campaign contributions from unions on the grounds that they will protect them from anti-labor Republicans.

Not just the blue-collar white guys

But as the primaries showed, this is not working anymore. What the “free-trade” moralizers have missed is that the pain from neoliberal globalization has gone far beyond manufacturing.

Labor markets are connected. When autoworkers and steelworkers are hired for $10 per hour instead of $20 per hour, lower wages ripple into the paychecks of those who work for suppliers, construction companies, restaurants, retail stores and local government.

Moreover, the pain has been rising up the education ladder. The wages of young college graduates, male and female, minority and white, have been declining for over a decade.

Threatening employees with off shoring has become standard practice in American business. It now impacts the jobs of lawyers, accountants, engineers, designers, middle managers and other who thought that their education would protect them. This erosion of future opportunity is clearly behind the outpouring of young people with education debt to the unlikely candidacy of Bernie Sanders.

What about the world’s poor?

For economic elites to justify the undercutting of American workers living standards on the grounds that workers elsewhere are even poorer is moral hypocrisy. It is also simplistic economics.

It assumes that if expanded trade is making workers in the United States poorer, workers in poorer countries must be becoming richer.

That may have been the logic of the past. But the so-called free-trade agreements of the last 20 years, including the rules establishing the World Trade Organization in 1995, radically changed the answer.

As Renato Ruggiero, the first head of the World Trade Organization put it, “We are no longer writing the rules of interaction among separate national economies. We are writing the constitution of a single global economy.”

Their purpose was not primarily trade. Rather it was to free corporate investment from national social constraints in order to undermine the bargaining power of labor in all countries.

The 1993 North American Free Trade Agreement (NAFTA) was the template for this global constitution.

Certainly, new jobs were created as U.S. corporations moved south. But NAFTA protected investors, not workers. So while Mexican autoworkers are roughly as productive as their U.S. counterparts, their wages are 15-20% of what American make.

The gap between U.S. and Mexican wages remains as wide as it was 20 years ago. Meanwhile, NAFTA enabled U.S. subsidized agribusiness to drive millions of Mexican farmers and their families off the land and into cities where they found few jobs that could support a family.

Just ask yourself this question: If NAFTA was so wonderful for the Mexican poor, why did so many then decide to risk their lives crossing over to the United States in search of work?

China, the poster child for U.S.-based free-trade moralists, has a level of inequality higher than even the United States. Independent trade unions are outlawed, occupational disease and accidents rates are recklessly high and child labor is rampant.

At the same time, China has more billionaires (in U.S. dollar terms) than the United States itself. Not to be outdone by the rest of the global mobile rich, they flaunt their wealth in every major city in the world.

The assertion that that American workers should sacrifice their jobs and their children’s future so that third world plutocrats can bid up real estate prices in Manhattan, Los Angeles and Miami makes a mockery of moral compassion. No wonder U.S. voters aren’t buying.

Class or country?

All market systems create economic classes. The global market is no different.

Pundits still think and talk as if global inequality was still just an issue of income and wealth distribution among countries.

But the trade deals that freed multinational capitalists from having to share the benefits of growth with their workers, allowed them to roam the world in search of sites that offer the cheapest labor and most pliable governments.

The result is that the assumption of a common interests between American workers and American corporations no longer holds. The implicit class struggle over the economic pie has now become borderless—between the internationally mobile multiethnic investor class and working people wherever they live.

And with each new trade agreement, the interests of global capital are strengthened and the interests of workers are weakened. Thus, for example, the TPP would further free “American” pharmaceutical companies to locate anywhere in the world where productions costs are cheapest and the governments most business-friendly. At the same time, it would protect these corporations with odious patent rules that allow them to charge these same poor workers in poor countries exorbitant prices for medicines.

The reactionary debate over globalization

The debate over globalization in America has not caught up to the dramatic change in the relationship between labor and capital over the last 20 years.

The people sense something is different, but the leaders and the policy intellectuals that advise them stubbornly insist that the world still works according to outdated nation-centric economic models in which a country’s investors and workers have the same interests.

This is why their forecasts of great benefits to workers from the trade deals of the new global constitution have consistently failed. And why workers, themselves trapped by the nation vs. nation language embedded in “free-trade” policies, become xenophobic.

We clearly need a new model of economic integration, in which the enemy of the American worker is not the Mexican or Chinese worker, but the multinational and multiethnic crony capitalists who are exploiting them both.

Demands by well-fed pundits that downwardly mobile Americans further tighten their belts may satisfy elites’ moral pretentions, but they get in the way of a search for an economic model that works for people everywhere.

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This was reposted from the EPI.

Jeff Faux founded the Economic Policy Institute in 1986, and made it into the country’s leading think tank on the political and economic issues that face working Americans. In 2003, he stepped down as EPI’s president, and is now the Institute’s Distinguished Fellow. Faux has studied, taught and published on a wide variety of economic and political issues from the global economy to neighborhood community development, from monetary policy to political strategy. He is the author or co-author of six books, the latest being, The Servant Economy: Where America’s Elite is Sending the Middle Class (Wiley, 2012).

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