Protectionism

October 3, 2017 § Leave a comment

In my previous post I talked about economic protectionism in very broad terms, rather than the common definition (propping up a particular industry to serve local self-interests). But in a broad sense any kind of policy that protects certain agents from the full effect of market forces can be seen as a form of protectionism. This would include policies like setting a minimum wage.

If we took an even broader view, any regulation of the market can be conceived as some form of protectionism as it will usually result in protection for some agents. Assuming that markets need rules to function (i.e. that they are “not self-creating, self-stabilising, self-regulating or self-legitimising”), then the main issue then becomes – what rules?

Conventional party lines were formed as follows: right-wing parties advocated for rules that tipped the balance in favour of the owners of capital, left-wing parties campaigned for rules that tipped the balance in favour of workers. Now, a new battlefront has formed between rules that prioritise domestic interests and rules that prioritise free trade and globalisation.

It’s difficult to see where the old and new battlefronts cross, but you could make the argument that with more resources and wealth, owners of capital (in many cases, corporations) side with globalisation (given they operate in markets that have already transcended national borders), while only some workers would benefit from a globalised labour market (i.e. not everyone has skills to offer to the global market) and in any case several factors limit individual mobility including:

  • visa and immigration laws (in general, while markets have transcended national borders, citizenship has not and has become more exclusive),
  • issues of social and cultural-fit, in addition to economic opportunity, and
  • the personal cost of moving to a different country.
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Political quadrants

September 15, 2017 § Leave a comment

As discussed in my previous post, here’s how I imagine the political ‘spectrum’ today:

Screen Shot 2017-09-15 at 11.59.06 pm

Within each quadrant, politicians will be conservative/progressive to different extents. For example, Trump is probably much more protectionist than Sanders (if we took his campaign rhetoric at face value).

Protectionism tends to be an ugly word. But in the quadrants above, I refer to it in a much broader sense, not just ceasing free trade in order to artificially prop up struggling, weak industries at home. It means giving priority to certain interests above economic interests and freedoms. Most of the time these ‘interests’ turn out to be national interests (e.g. preserving the environmental and social state of the nation), so the point I’m making may be irrelevant if preserving the state of the nation is no longer valued (e.g. if economic globalisation is followed by worldwide labour mobility, dissolution of national borders and transactional/flexible or even no such thing as citizenship other than ‘citizen of the world’). Conservatism in this sense really means blocking certain transactions or dealings which may be economically beneficial to both parties, but may violate other principles. These transactions or dealings could be:

Late capitalism: the weakness of western liberalism

September 14, 2017 § Leave a comment

Where do major parties stand now?

In a previous post, I wrote about what it means to be liberal on different fronts, including the difference between being culturally and socially progressive and economically progressive.

Formerly, major parties in western democracies largely differed in the extent of national economic liberalism they promoted. By national economic liberalism, I mean economic liberalism within a country. Left-wing parties supported workers and unions, right-wing parties supported big businesses and the owners of capital. Both sides were not particularly engaged in social or cultural rights, though perhaps right-wing parties more openly supported traditional social structures as time wore on.

Early capitalism was about economic liberty within a nation, and that’s how major parties aligned themselves – capital vs labour. However, when this “low hanging fruit” was picked, capitalism became less about capital vs worker and more about globalism vs protectionism, where the remaining gains lay. Most western major parties, whether left or right are largely pro-trade.

The negative effects of globalisation are only really being felt now (e.g. GFC, Brexit, Trump), but major political parties have been slow to re-align themselves along the globalism/protectionism spectrum.

Compounding this issue is the confusion over where major western parties stand on social and cultural liberty. While most major centre-left parties identify as socially progressive, at times this has jeopardised the support from their traditional voter base (blue collar workers).

Currently, major parties in western democracies tend to be either:

  1. Pro-globalisation (economically liberal) and socially progressive e.g. Democrats, or
  2. Pro-globalisation (economically liberal) and socially conservative e.g. Republicans, LNP

While the old capital vs worker division still exists between major parties, that division no longer meaningfully captures the biggest issues facing people living in western societies.

The common ground between Trump and Sanders

Lots of journalists have analysed the similarities between Trump and Sanders before. My understanding of their political alignment is that

They differ from major parties because they recognise that western countries are now at a stage where pursuing more pro-globalisation policies may do more harm than good. This is a difficult message to sell, possibly because

  • globalisation made so many people richer
  • free trade is the logical extent of capitalism, which in many ways has also become a moral way of living
  • protectionism has nationalistic connotations, and extreme nationalist countries in the past have limited individual cultural and social freedoms

Rebalancing freedoms: economic conservatism and social progressivism

Is the strongest society one that strikes a stable balance between individual freedoms and social cohesiveness? We’ve seen 20th century communism collapse because the balance was too far in favour of social cohesiveness. Maybe the problem with western democracies now is that the balance is too far in favour of individual freedoms.

But what kind of freedoms? Australia is currently conducting a same-sex marriage postal survey and among other reasons for voting no, is the broader concern that certain freedoms should not be allowed in society. This argument does not conceptualise and engage with same-sex marriage as a basic human right, and on its own logic fails to be convincing if same-sex marriage is the kind of freedom that society can absorb without affecting its fundamental “cohesiveness”.

In fact, such cultural and social rights have only been actively explored in mainstream politics since the 70s or 80s. Capitalism, and by this I mean economic liberalism, has had a much longer run time. If there is a critical threshold at which too much freedom becomes bad for society, then I think an argument can be made that this threshold has already been breached but not in relation to social and cultural rights. If western liberalism is retreating it is because we have afforded individuals and other economic agents too much freedom in the market.

A lot of social frustrations and instability stem from the lack of real wage growth and the growing wealth divide in developed countries. In terms of identifying the weakness of western democracies, expanding social and cultural freedoms is at best a distraction from the real issue, and at worst used as a scapegoat for the decline of western societies.

Who are the Brexit and Trump voters?

July 5, 2016 § 1 Comment

Brexit and Trump represent the increasing destabilisation of mainstream politics. What’s going on?

The underlying issue: no wage growth

In public discourse, the Leave and Remain side largely battled it out over immigration policy, but the real underlying issue of Brexit is the poor economy.

The leave vote expresses the frustration of low-income earners. Britain’s productivity has dropped relative to other developed countries, leading to stagnant wages and living standards. Income gains have accrued to the top one percent and unemployment is concentrated amongst the less skilled. These demographics appear to match those who voted for leave.

Solving these issues require costly, long-term investments in education, training and research. It is much easier to blame immigrants and EU policy, and politicians have capitalised on this accordingly to curry favour with voters.

In fact, immigrants tend to increase workers’ wages. The UK’s disillusioned blue-collar working class are actually losers of globalisation. Globalisation has meant that their job has been outsourced to other countries that can do it cheaper. Goods might be cheaper to consume as a result, but this can hardly make up for not having a job. Transition to new jobs has also been slow due to lack of training and education. Furthermore, unlike Australia, which has a strong union movement, labour markets in the UK are much more deregulated – a remnant of the Thatcher era.

Branko Milanovic’s work elegantly summarises this phenomenon. When we plot change in real income against global income distribution we get a clear view of which people in which countries are the most disenfranchised:

20160402_bkc849

The vertical axis shows the percentage change in real income over the years 1988-2008. The 50th percentile of global income distribution represents the middle class in developing countries like China and India, they have experienced the greatest growth in real income. At around the 80th percentile is the working class in rich, developed nations like the US and UK. These people have not experienced any real wage growth at all.

Rise of the new Right

No major political party represents these people. The conventional Right (i.e. the Conservatives in the UK and the GOP in the US) represent the socially conservative and economically elite. The major left parties are increasingly differentiating themselves by being socially progressive. Protectionist policies, from either side of the spectrum, are no longer politically feasible given the amount of wealth that globalisation has generated, and the tendency for such policies (such as the Brexit leave campaign, and Trump’s ‘make America great again’ campaign) to align with racist and anti-immigration agendas.

The established Right is now juggling between rich people who want liberal markets and small government and working class people who want to feel middle class again. Trump, who represents a ‘new Right’ speaks to the latter, while his Republican colleagues speak to the former.

Similarly, the Left is also juggling between the blue-collar working class (now abandoning leftist parties for the new Right), and urban-dwelling, socially progressive university graduates with well-paid jobs. Jeremy Corbyn represents the interests of the latter, who have flocked to join the Labour party, but fails to gain traction with those struggling to survive in rural towns and villages – Labour’s traditional voter base, and the very people the party was set up to support. It’s telling that Jeremy Corbyn advocated to remain in the EU, yet a third of Labour voters voted to leave – perhaps enough disaffected voters to strip Labour of its major party status come the next UK election.

There is a lot of focus on the supposed stupidity of Leave voters and their support of new extreme right-wing parties, but the real question we should be asking is why are these people voting this way, and how can we make sure they aren’t left behind by globalisation?

An act of economic self-harm

David Cameron called the Brexit result an act of economic self-harm before promptly abandoning the sinking ship. The irony is that by voting to leave the EU, struggling working-class people have only made their lives harder. The fault lies with politicians who have ignored their needs, failed to explain their policies, and yet still capitalise on their struggles to gain political popularity. An unsympathetic and angry Remain constituency can only lead to further ugliness and division, while the real issues at heart remain unsolved.

Economic liberalisation is not to blame. Globalisation and neoliberal economics has led to greater wealth, a bigger pie, if you will. We shouldn’t be shrinking the pie, we just need to divide it more evenly.

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