TPP On Trial

The Democrats’ revolt against President Obama’s Trans Pacific Partnership has everything to do with the “giant sucking sound” of job loss echoing over Baltimore and St. Louis, Detroit and Gary… and still more to do with the inability of our own polarized and privatized society to repair the social contract at home. Only at the end of our untypically acrimonious hour did a moral come clear: the 30-year regime of expanding global trade could well founder for want of a firm public decision to share the pain and the profits in that transformation. The more we learn about TPP, the more it looks like a blunt instrument of the banking and corporate interests to protect their investments, and of Big Pharma, Hollywood and Info Tech to protect their “intellectual property” abroad.   Enforceable compensations for workers and communities, here and there, would be nice, too.

Jeffrey Sachs of the Earth Institute at Columbia struck the resounding note on our show of disenchantment heading toward despair. Our friend Jeff has been an inexhaustibly cheerful and pragmatic promoter of globalization strategies that have in fact lifted the starving and the desperately poor. But the TPP bandwagon looks now to be fueled by the fantasy that trade is money-making magic — and he’s off it.

[Obama] said, “Look, why is Elizabeth Warren pounding on me? We’re together on minimum wage, we’re together on job training, we’re together on clean energy.” The problem is he hasn’t gotten any of those things passed…Trade worked more or less as one would expect trade and investment to work. It has created an expanded world economy, it has helped a lot of poor countries to gain a foothold and to grow, and it has exacerbated income inequalities in our country and elsewhere. What hasn’t worked is normal politics. We don’t have what I assumed 30 years ago, as a child of the sixties, was a completely normal idea: that there would be adjustment assistance, that there would be worker training, that we’d care for the environment. What we really have is a system of corporate governance. We don’t have a democratic polity right now in the sense of representing the interest and needs of the American people. Enough is enough. We can’t keep exacerbating these inequalities unless we get our own politics right.

The Harvard economist in our huddle, Robert Z. Lawrence, is a TPP stalwart. The loss of manufacturing work in America is not as extreme, he noted, as the near-vanishing of farm labor in the 20th Century — and the driving force in both transformations was not trade, he argued, so much as the vaulting productivity of new tools — mechanical and now digital.

Automation, technological change and innovation have allowed us to produce the same quantity of goods with far fewer workers… Trade allows us to get higher living standards, but what we haven’t been good at is adjustment policies that help workers who are dislocated… While I agree that we have deficiencies in terms of the way we help workers or don’t help workers, the real question facing us today is: Are we better off being in the game and negotiating for the kind of agreements we like or are we going to let others do it instead of us?

Our journalist, meanwhile, Barry C. Lynn mourned the fact that we can’t just hit the TPP kill-switch. Why not? We don’t own the switch anymore:

The WTO system — the agreement that we signed back in 1994, put in place in 1995 — was a decision by the U.S. government or by people who had control over the US government to get the government out of the job of regulating trade — essentially to turn over the job of regulating trade to the people who run our corporations and the people who run our banks.

We heard a lot of crossfire in this conversation and, in the end, an awkward consensus: that our president is pretending not to know that the trade regime is out of order.

Field Recording: “Seaming Suits in New Bedford”


Max and I went to Joseph Abboud Manufacturing, a garment factory in New Bedford, Mass., to gather sounds and hear from workers about technology, free trade, labor, and what it’s like to be one of the last manufacturers in this famous old whaling port. See some photographs we took, below.

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Guest List
Jeffrey Sachs
American economist, director of the Earth Institute at Columbia University, and the author of The Age of Sustainable Development
Barry C. Lynn
Journalist senior fellow at the New America Foundation, author of Cornered: The New Monopoly of Capitalism and the Economics of Destruction
Robert Z. Lawrence
Professor of international trade and investment at Harvard's John F. Kennedy School of Government, author of Rising Tide: Is Growth in Emerging Economies Good for the United States?
Reading List
With Obama on hand, Nike announces it might make shoes in the U.S. again
Mike DeBonis, The Washington Post
For many liberals and union types, Nike still stands for offshoring some of the last cut-and-sew jobs and banking profits from $.60/hour work overseas. They howled when President Obama chose the company's Oregon headquarters to stump for a new Pacific trade deal. It was a bet on Nike's labor standards rehab abroad, but also an endorsement of a new trade dream back home — full of high-tops, marketing buys, and design jobs.
Sen. Warren On The 'Tilted Process' Of Asia Trade Bill
NPR
Our senior senator went to war against the TPP because of the negotiations' secrecy and reports that the deal would give corporations more tools to challenge regulations on everything from oil drilling to food safety to financial fair play. When the White House asked Congress for trade promotion authority this week (basically, a freer hand to negotiate this and future pacts), she rallied fellow Democrats to deny the president for now. This week, Warren reminded NPR that she knows a rigged game when she sees one:
I can go and read about the agreement, but I cannot come out in public and talk about any of the specifics. The press can't see it. The public can't see it. But I will tell you this - there are some folks who've seen it. There are 28 working groups that have helped shape the trade deal. And in those 28 working groups, there are more than 500 people. It turns out that 85 percent of them are either corporate executives - senior corporate executives or lobbyists for the industries that are being affected. The way I see this, that's a tilted process, and a tilted process yields a tilted result.
 
What Exactly is Neoliberalism?
Timothy Shenk, Dissent
Why are we doing this anyway? Is a trade deal that only seems popular among elites a naked money grab, an example of profile-in-courage leadership, or simply an ideological reflex? In this interview, Berkeley professor Wendy Brown discusses her new book on neoliberalism — a slippery concept and lefty buzzword, but also an ever-important lens on the secrecy, confusion, and forced inevitably that surrounds trade:
I treat neoliberalism as a governing rationality through which everything is “economized” and in a very specific way: human beings become market actors and nothing but, every field of activity is seen as a market, and every entity (whether public or private, whether person, business, or state) is governed as a firm. Importantly, this is not simply a matter of extending commodification and monetization everywhere—that’s the old Marxist depiction of capital’s transformation of everyday life. Neoliberalism construes even non-wealth generating spheres—such as learning, dating, or exercising—in market terms, submits them to market metrics, and governs them with market techniques and practices. Above all, it casts people as human capital who must constantly tend to their own present and future value.
A trade deal must work for America’s middle class
Lawrence H. Summers, The Financial Times
President Obama's (and Harvard's) favorite economist weighs in on the Trans Pacific Partnership. Summers mourns a better version of the deal — that would have better served to tackle inequality:
Conversely, it is appropriate in TPP, and our international economic diplomacy more generally, that we use the substantial leverage we possess in areas that do bear directly on middle-class living standards. These include the prevention of inappropriate producer subsidies — including through manipulated exchange rates or distorted state enterprise accounting. And, more generally, co-operation to ensure that a world in which the greater mobility of capital and of companies does not become one in which governments lose the ability to protect citizens. If global integration means local disintegration it will be a failure.
The Political Roots of Widening Inequality
Robert Reich, The American Prospect
One happy byproduct of this trade season is a wave of Clinton-era economic wise men (Summers excepted) explaining how it could be that they were for NAFTA before they were against NAFTA-style international trade. (See: Brad Delong's recent analysis of how he and his colleagues simply modeled it wrong.) For Robert Reich — a leading leading trade evangelist for Bill Clinton and, now, a thoughtful critic of those policies  — the missing element in the globalization formula was always power:
The underlying problem, then, is not that most Americans are “worth” less in the market than they had been, or that they have been living beyond their means. Nor is it that they lack enough education to be sufficiently productive. The more basic problem is that the market itself has become tilted ever more in the direction of moneyed interests that have exerted disproportionate influence over it, while average workers have steadily lost bargaining power—both economic and political—to receive as large a portion of the economy’s gains as they commanded in the first three decades after World War II.

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  • Cambridge Forecast

    TPP STILL ON TRIAL: TWO DEEP PROBLEMS

    This ROS show with Jeffrey Sachs and the others was very topical.

    Prof. Sachs mentioned in passing that economists like himself and Robert Lawrence,
    etc were brought up on Paul Samuelson trade theory.

    Samuelson trade theory is a “deep tweak” of something called Heckscher-Ohlin trade theory
    which arose as an analysis of nineteen century economic patterns when Eli
    Heckscher a Swedish Jew began to reflect on them in 1919.

    A simple cartoon of this kind of reasoning visualizes two countries say USA and Mexico.

    The first is capital-rich (machines, highways, finance capital, skills) and the second is
    labor-rich.

    Other countries are rich in land. This trade theory tradition asks what happens when
    the various “factor endowments” (ie. capital (K), labor (L), land (T for terre)
    interact. Who gains, who loses?

    (Current versions of this theory include skills.)

    The theory is shaky:

    “Criticism”

    “The validity of the Heckscher–Ohlin model has been questioned since the classical Leontief
    paradox. Indeed, Feenstra (2004) called the Heckscher–Ohlin model
    “hopelessly inadequate as an explanation for historical and modern trade
    patterns”. As for the Stolper–Samuelson theorem itself, Davis and Mishra
    (2006) recently stated, “It is time to declare Stolper–Samuelson dead”.They
    argue that the Stolper–Samuelson theorem is “dead” because following trade
    liberalization in some developing countries (particularly in Latin
    America), wage inequality rose, and, under the assumption that these countries
    are labor-abundant, the SS theorem predicts that wage inequality should
    have fallen.”

    See: http://en.wikipedia.org/wiki/Stolper%E2%80%93Samuelson_theorem

    2. The Bank for International Settlements estimates that foreign exchange trading today is 5.7 trillion
    dollars a day.

    This means the financialization of the world has “subsumed” the economy of cars and planes and haircuts and ice
    cream by such a magnitude that economics itself is increasingly a “footnote” to finance.

    The Bank of England financial stability team tried to map out financial holdings on a global basis and
    basically gave it up. Ie it’s too intricate to be modeled. Prof. Sachs published an ingenious book years ago called “Global Linkages” but now we have to say the question of global linkages has itself become elusive.

    This means that trade theory is potentially “misspecified.”

    Economists remind one of the French army generals in May 1940 who were fundamentally really stuck back in August 1914.

    Since the world is in such uncharted waters, simple extrapolations as to what TPP will or won’t do are unreliable at
    best.

    As to whether, to put it plainly, TPP is a kind of transpacific extension of “trickle down” or a “make the cake bigger” fior some hypothetical “everybody” move is unproven.

    Richard Melson

  • Potter

    All excellent guests and discussion as I have come to expect. I tend to trust Jeff Sachs because I have heard him before and I agree with where he is coming from. I don’t think we gain morally or economically ( if that is more important) or security-wise as society if this TPP helps further already worrisome rising inequality. This is where Jeff Sachs began and I think ended. My gut feeling before even listening is that we had to be able to compensate or use or re-train, put to work, all those who get trampled by global trade. Those left out and struggling bring reverberations from that too. The losses are not isolated to particular individuals who are just out of luck, out of a job or means to live.

    It’s a complicated issue. The discussion catches me very uneducated about various agreements of the past (the acronyms of them! ) and their effects and the US involvement or un-involvement. But I do know that people who are not corporations need some protection and it’s up to our representatives to serve us in that capacity.

    I highly recommend Lawrence Lessig’s compelling lecture on citizen inequality which is titled “Why Elizabeth Warren Needs to Run for President” https://www.youtube.com/watch?v=FtpiRhTdt5k.

    The pitch for EW comes in at the end. It’s really not about EW and I don’t think EW is necessarily a savior. This is about what Lessig is calling citizen inequality because money in politics we call by the overused term “campaign finance” does not cover the issue.

  • EastCoastElitist

    1) I have yet to listen to the broadcast but I promise that I will.

    2) Re Shenk’s interview with Brown, Chris Lasch had a lot to say about the downside of “the market”. It would be interesting to hear a Lasch scholar (Scialabba?) weigh-in or to cite some of Lasch’s writing.

    3) Re the TPP in particular, Dean Baker has been all over it at the CEPR blog ( link = http://www.cepr.net/blogs/beat-the-press/ ) as has the Economic Policy Institute (link = http://www.epi.org/ ). Josh Bivens had a post at EPI yesterday where he addressed the distribution of trade-related economic effects, i.e., who wins, who loses and how much – http://www.epi.org/blog/more-notes-on-the-gains-from-trade-and-who-gets-them/ I have yet to hear TPP supporters address the distribution of the gains they predict.

  • Pete Crangle