Reprinted from robertreich.substack.com
And why that's a good thing
Friends,
President Biden is making a break with decades of free trade deals and embarking on an industrial policy designed to revive American manufacturing.
This has caused consternation among some of my former colleagues from the Clinton and Obama administrations.
For example, former Treasury Secretary Lawrence Summers last month called the president's thinking "increasingly dangerous" and expressed concern about what he termed "manufacturing-centered economic nationalism that is increasingly being put forth as a general principle to guide policy."
Well, this veteran of the Clinton administration is delighted by what Biden is doing.
Clinton and Obama thought globalization inevitable and bought into the textbook view that trade benefits all parties. "Globalization is not something we can hold off or turn off," Clinton explainedto the media. "It is the economic equivalent of a force of nature, like wind or water."
But "globalization" is not a force of nature. How it works and whom it benefits or harms depend on specific, negotiated rules about which assets will be protected and which will not.
In most trade deals, the assets of American corporations (including intellectual property) have been protected. If another nation adopts strict climate regulations that reduce the value of U.S. energy assets in that country, the country must compensate the American firms. Wall Street has been granted free rein to move financial assets into and out of our trading partners.
But the jobs and wages of American workers have not been protected. Why shouldn't American corporations that profit from trade be required to compensate American workers for job losses due to trade?
The age-old economic doctrine of "comparative advantage" assumes that more trade is good for all nations because each trading partner specializes in what it does best. But what if a country's comparative advantage comes in allowing its workers to labor under dangerous or exploitative conditions?
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