I Don’t Need This Pressure Ron – Billy Bragg
I’m pretty far left on most issues. I believe in affirmative action. I think the government should actively be in the business of desegregating schools. I think the US should probably disarm its nuclear weapons. I want universal health care, a legal system that stops propping up discrimination against gays, women, minorities of all sorts. I’d support incredibly strict restrictions on carbon emissions. I’m also pretty realistic about the way that politics works, which means I don’t expect any of that is going to just happen.
But one place where I often find myself on the outskirts of progressive opinion is trade. On this one, it’s not a matter of political realism – it’s a genuine disagreement about the normative value of policy choices. I’m not a blind free-trader or anything. It’s obvious to anyone paying the least bit of attention that laissez-faire systems are a chimera – maintained and organized by particular policy choices. Truly “free” trade is impossible. But that said, I see a lot of value in markets.
So it was of great interest to me when in my political economy class this week we took on the question of “embedded liberalism.” Basically, the idea that 20th century liberalism exists in the shadow of the Great Depression: resulting in a balancing act between domestic welfare needs and the free-flow of trade. The general idea is that trade does indeed promote efficiency, but at the cost of producing social disruption. Things like the welfare state are a compromise to shield a state from the total free-flow of goods and capital.
This literature suggests an equilibrium – a set of continually renegotiated checks and balances – that allows the growth of global trade without eliminates all restrictions. It also suggests that over the long term the balance will shift from one edge to the other. Support for government intervention in the postwar world took hold based on the memory of the deflationary spirals of the previous years. Later, the Regan/Thatcher revolutions emerged in part because the long expansion of the welfare state in the Western world had started to produce diminishing returns. Combined with a set of external factors (like the oil shocks of the 70s), states were now faced with the opposite concer: rapidly expanding inflation. The result: a rollback of government intervention into the market.
It’s an interesting way to read the history. Most importantly, it suggests that the real role of government in a world of embedded liberalism changes over time. Because, at its core, the government’s job is simply to ensure that the balancing act never tips too far to either side. In the context of deflationary fears, the government ought to intervene. In the context of inflation, the government should back off.
I’m not entirely convinced by that explanation, but I do think it offers a useful perspective that allows transcending the ideological commitments of any particular side. Both free trade AND domestic protection have their place. To speak of either as an absolute good or bad may miss the point, and in so doing it begs the question of context. Both are tactics, nothing more. The underlying strategy is preservation of a functioning balance between social disruption and economic innovation.
All of which helps to explain why I’ve found myself more and more on the side of policies that would have frustrated me as pure “protectionism” only a year or two ago. None of which is to say that I’m in favor of a modern Smoot-Hawley, or that I see any value in agricultural subsidies. But while we were talking over these issues in class, I found myself pondering “Buy American” provisions.
In the past, these have always seemed to be crassly political sops to powerful industries, serving no one’s interests (particularly not those of consumers who would be asked to subsidize the inefficient purchasing of resources). I still think that’s true in a general sense. But I wondered if in the context of the stimulus bill, they might actually make a great deal of sense. The point of stimulus, after all, is to spur domestic economic activity via the liquidity of governmental investment. It doesn’t make economic “sense” per se (as demonstrated by the famous Keynes statement that it might make sense to simply pay people to dig holes and then fill them up again), but may be necessary to hold together the rough consensus in favor of embedded liberalism.
Anyways, I had all these thoughts floating around in my head, and then read this piece from John Judis on Buy American provisions, which quite effectively captured a lot of what I was thinking.
UPDATE: My ambivalence on this issue is perfectly characterized by the way that my tepid support for Buy Americanism suddenly aligns me with people like this – who epitomize everything that I find aggravating about the heroic affirmation of protectionism which masquerades as populism. Bleh.