Sunday, May 08, 2016

How We Arrived at Trump v Clinton

The recent London mayoral election, in which Zac Goldsmith lost to Sadiq Khan, reminded me of his father, Sir James Goldsmith, who fought against economic globalization in the early 1990s.  There's a famous debate between Goldsmith and Bill Clinton's economic advisor Laura Tyson which took place in 1994 on Charley Rose's interview show -- Goldsmith, Tyson, and Rose discuss expanding economic globalization.

As I see it, Goldsmith warned of the problems we faced and Trump versus Hillary Clinton follows from this discussion as night follows day.  Tyson presented the neoliberal Clintonian position that free trade is win-win, while Goldsmith warned that it would be win for the rich capitalists taking advantage of lower cost laber, while labor would lose due to third world competition.  Twenty-two years labor, Clinton, supported by Nobel prize winning economist Paul Krugman, represents the status quo in the dysfunctional society predicted by Goldsmith.

In site of several asset bubbles and one severe recession, the conventional wisdom today remains much the same as it was.  Obama has been working on two new "free trade treaties", the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership.

The following graph shows real household income in the United States, a representative measure of economic well-being.  The General Agreement on Tariffs and Trade (GATT) was expanded in 1995, becoming the World Trade Organization.  Goldsmith warned that this expansion would result in a lose-lose situation for industrialized and less developed economies.  Since China joined the WTO in 2001, this measure of income has decreased significantly.

More reading on the subject:
Why Voters Will Stay Angry
A Progressive Logic of Trade