Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Western Politics at a Point of Disjunction
Politics in the West -- in Europe and the United States -- it at a break point. A phase shift. If as currently appears the British have chosen Brexit, one might say that the moment of disjunction is upon us. What does it mean, and where is it going?
For more than half a century, the dominant political battle in the US and in much of Europe has been between economic and cultural left and right -- a fight principally over the degree to which governments will regulate, and the extent to which governments will tax and redistribute, and secondarily over secular versus traditional values. Major parties of the left and right have been relatively united in pursuit of globalism -- free movement of people, goods, and capital. With the strong vote for Brexit, the political toxicity of TPP and TTIP, and the strong performance of Trump and Sanders in US primaries, that epoch may be ending. The new lines of conflict are between nationalists of the left and right and globalists of the left and right.
That this moment has been reached reflects the wretched unforced errors of a generation of global leadership. Let us list just a few.
Perhaps the largest and most costly error of the last quarter century was one that only slowly has become apparent. In the early 1990s Soviet Russia had capitulated. Democratization and privatization were in full swing. Communist China by contrast had recently finished murdering unarmed pro-democracy protesters, was shifting its propaganda machine into high anti-American gear, and was beginning to accelerate its rise to global manufacturing dominance. In retrospect almost any help ought to have been given to democratizing Russia, and almost everything done to thwart the rise of anti-democratic dictatorial communist China. Instead, longstanding anti-Russian and pro-China biases in US and European politics prevailed. Russia's transition was badly mismanaged and ended in authoritarian Putinism. And under Bill Clinton's administration China received a stream of favors including at the end a grant of permanent most-favored-nation trade status and entry into the World Trade Organization -- a choice which alone cost many thousands, even millions of US middle class manufacturing jobs. At the end of the cold war, democracy and human rights ought to have been made preconditions for full entry into the global community of nations.
The second great blunder was made by the Federal Reserve during the Asian financial crisis of the late 1990s. Greenspan should have acted as Bernanke did a decade later. The central banks of Korea and other dollar-starved tigers should have received currency swaps, direct loans, and substantive American backing. Instead Greenspan unnecessarily cut US interest rates in the midst of a domestic economic expansion, put a domestic stock bubble on steroids, and conveyed the dangerous message that the United States central bank was unwilling to act its necessary role as a key lender of last resort in a dollar-dominated global economy. As countries self-insured and devalued, the value of the dollar and later the Euro were bid up to levels inconsistent with balanced global trade, housing and other asset markets in many countries soared and then soured, and the great middle and working classes of the West suffered.
Closely related, a third great blunder came in the rush to develop global and regional trade agreements, common currencies, and common markets. These agreements ought to have been more strongly focused upon maintaining balanced trade. Instead, agreements attempt to manage the domestic policies of the signatories. The TPP attempts to coerce Vietnam to provide particular labor protections and policies. Far better to be simpler. To key trade advantage to the political and economic liberty of a people. To focus agreements on managing global externalities incapable of domestic solution. And to uniformly discourage manipulation and distortion of trade through a mechanism such as the scaled tariff.
Were these blunders not made, the rising challenge of migration from the impoverished, corrupt, unenlightened and ill-governed parts of the world would likely still be with us, but a stronger, still-industrialized, and more prosperous West would be in a better position to protect its interests, defend its borders, project its values, and integrate some migrants.
Europe, threatened with fragmentation, may yet find the way to a new and more effective synthesis. What is called for is a continental nationalism akin to the nationalism that draws Californians, Alaskans, New Yorkers, and Texans together in the United States. And one that moves effectively to address the critical challenges faced -- defending the great good at the core of the enlightenment project Europe, the UK, and the United States share against both the narrow temptations of nativist nationalism and the dangerous naiveté of globalists who think that a world of perpetual and democratic peace will follow if only they shut their eyes to the folly, short-sightedness, and counter-productivity of their own policies, and the enemies of liberal democracy and the enlightenment on the march abroad.
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