New York /
Joe Biden He may be a one-term president, but his administration changed the global political economy in ways that will continue to resonate long after he is gone. In particular, his trade policy ended the era of laissez-faire globalization, which was inclined to favor the unfettered interests of large corporations and state actors, and ushered in a post-neoliberal era in which the labor force , natural resources, and the market-distorting effects of concentration of power are once again major concerns for policymakers.
Critics like to portray this change as some kind of absurd departure from economic norms. It’s certainly a change from the trickle-down, let-the-market-knows approach of the last half-century. But Biden’s stance actually takes the United States back to the first principles of the post-World War II period during which the Bretton Woods institutions were established. Back then, American leaders attempted, and only partially succeeded, to craft a post-colonial, worker-centered approach to trade that closely resembles what the Biden White House has rightly attempted to resurrect.
Consider the State Department’s original 1945 proposals on world trade and employment. They argued against government restrictions on trade, but also recognized the power of private actors to distort the system, as well as the need for states to ensure regularity in the production of critical goods and ensure employment in the country.
“Full and regular production in the country, with greater participation in world trade, is the greatest benefit that any people can provide to producers around the world,” declared the State Department. “However, it is important that nations do not seek to achieve full employment for themselves by exporting unemployment to their neighbors.”
The concerns that European states had about each other in the 1930s are analogous to those that many countries have today about China exporting its own employment and overproduction problems to the rest of the world.
Thus, the US proposals recognized that “no government is ready to embrace ‘free trade’ in an absolute sense…trade can also be restricted by commercial interests in order to gain the unfair advantage of monopoly…businesses have come together to restrict competition…these practices destroy fair competition and fair trade, harm new and small businesses, and unfairly burden consumers. “Sometimes they can be even more destructive to global trade than restrictions imposed by governments.”
This sounds very similar to the Biden administration’s theories on antitrust and competition policy, which fit perfectly with its trade policy. The problem of today’s global economy is not tariff barriers, but the concentration of power, whether in states (like China) or in companies (in meatpacking plants or giant technology platforms). Building multiple production and consumption nodes on a global scale and ensuring high labor and environmental standards requires a public restraint on undue power, no matter where it comes from.
Unfortunately, the initial strategy regarding the Bretton Woods institutions was diluted by US business interests in the run-up to the creation of the GATT (later the WTO), and was further eroded in the 1970s with the shift towards the notion of the Chicago School that price, not power, is what matters in an economy.
A Roosevelt Institute report on the legacy of Biden’s economic and trade agenda, to be published this week, summarizes this shift with a quote from the economist and former US Treasury Secretary, Lawrence Summers: “Greater openness to trade makes a country richer than it would otherwise be and makes its workers better off than they would otherwise be… Why can’t anyone tell the Christmas story without imports? What if we had to have… Barbie dolls at a price four times higher than today?”
All of this is true, but the problem of the day is not a shortage of Barbie dolls, or any type of disposable consumer item. It’s just that more cheap stuff in landfills didn’t make up for the fact that wages in many countries haven’t kept pace with the cost of being middle class. Nor did they create the regularity in production and employment on a national scale that is required for a stable economy or democracy.
The great triumph of the Biden administration is that it reawakened the United States and the world to the understanding that there is power in the political economy, and all the current challenges (the dumping of Chinese steel and aluminum, the monopoly of large firms technology, financial crises, supply chain disruptions and the evolution of artificial intelligence) will require an approach that puts power, not just price, at the center of market creation.
I am encouraged by the fact that the most recent Nobel Prize winners in economics, Simon Johnson, Daron Acemoglu and James Robinson, have a body of work arguing just that. In a recent CEPR webcast, Johnson points out that the “postcolonial” vision proposed by the Biden administration, focused on people and the planet, not just price, is what the Bretton Woods system was intended to offer before it was hijacked by powerful state and corporate interests.
It is a point worth remembering as we seek to reinvent these institutions and reform global trade.
