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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Populist, Social Democrat or Progressive? The Democrats’ Choice on Trade

By Will Marshall and Ed Gresser
Populism has a checkered history, but that hasn’t stopped a new crop of American politicians from embracing it in reaction to the supposed scourges of trade and globalization.
Today’s neo-populism has right and left strands. Republican populism is mainly anti-immigration: Think Patrick Buchanan or Rep. Tom Tancredo (R-Ariz). Democratic populism, personified by two newly elected Senators, Sherrod Brown of Ohio and Bernie Sanders of Vermont, is vehemently anti-trade. The two strands converge in the person of CNN blowhard Lou Dobbs, who blames immigrants and corporations for either taking American jobs or sending them overseas.
U.S. progressives ought to think twice before adopting the “populist” label, and not just because it’s commonly hung on such noxious demagogues as Jean Le Pen, Hugo Chavez and Mahmoud Ahmadinejad. The homegrown American populism of the 1880s and 1890s–the horny-handed-sons-of-toil faith identified first with the People’s Party in the 1880s and 1890s and, later, three-time Democratic Presidential nominee William Jennings Bryan–also is a dubious model.
The old populism, after all, was a curious amalgam of cultural reaction and worker-farmer radicalism, mixing calls for important democratic reforms–public regulation of corporations, the progressive income tax, labor union rights, direct election of U.S. Senators–with nutty obsessions like “bimetallism,” and nastier tinges of nativism, racism and religious bigotry.
A better model for today’s Democrats is the Progressives, who came after the populists. They agitated for fundamental reforms in government and society that went with, rather than against, the grain of industrial transformation and urbanization. That is why they succeeded where populists failed–in gaining power and governing.
Neo-populists are right to focus on growing economic insecurity and inequality in America. But they need to offer more realistic diagnoses of their causes as well as remedies.
Americans today face an economic paradox. U.S. industrial output is booming, consumers have their choice of the world’s goods, jobs are reasonably plentiful and unemployment is fairly low. But middle class workers simultaneously see their wages stagnating and old guarantees of security eroding–not only in the sense of stable jobs, but more fundamentally in their families’ security against financial disaster.
The combination is difficult for either party to manage.
On one hand it spells trouble for Republicans. Their tendency to discount well-grounded anxieties appears callous and out of touch. And the Bush administration’s answer to the global competitive challenge is principally tax cuts–‘more money back in your pocket.’ But that is irrelevant to fear of a sudden and sharp fall in income and security, especially when it favors the wealthy more than middle- and lower-income families. It is easy to see why the public gives the White House little credit for economic policy.
On the other hand, a phobic reaction to foreign competitive pressures carries risks for Democrats. Simply railing against the pain and unfairness of economic change didn’t work in Bryan’s time. (The Great Commoner, somewhat inconveniently, was an ardent champion of free trade.) It is likely to fare no better for today’s “Lou Dobbs Democrats,” as the tele-populist modestly calls them. They need only think back to the 1980s, when pessimistic rhetoric about decline and deindustrialization helped ensure Democratic presidential defeats.
Confronting the quandary, the center-left has fragmented into three main schools of thought: neo-populists who blame trade for economic woes; social Democrats who want to import the Nordic model of capitalism from Scandinavia; and progressive modernizers in the Clinton-Blair mold (like us), who want both to raise America’s game in global competition and raise the floor of security beneath ordinary working families.
The neo-populists, allied with industrial unions and a rump group of surviving protection-minded business lobbies, are convinced that foreign trade pressure is unfair and that the U.S. cannot compete against low-wage countries. A typical approach is to demand an indefinite halt to trade liberalization (a “strategic pause,” as Jeff Faux terms it) along with trade protection through tariffs on Chinese goods and strict labor-standards tests on all imports, and to rail against offshoring without offering a policy-based way to block it–because, short of somehow turning off the Internet, none exists.
Whatever its political utility, populism fails as policy. Higher labor standards in developing countries are a worthy goal, but they wouldn’t make countries with vast reserves of low-cost labor less competitive. And the experience of high-tariff U.S. industries like textiles and shoes gives little reason to believe new trade barriers would keep U.S. industries competitive. To the contrary, they would lower living standards and damage our companies’ ability to compete, by raising input costs, depressing the purchasing power of their local customers, and jeopardizing access to foreign markets just as America’s housing boom fades and we need to rely more heavily on exports to generate growth. Rather than offer a new path to the future, populism simply offers complaint.
A more sophisticated critique comes from what might be called the “social democratic” wing of U.S. liberalism. The American Prospect’s Robert Kuttner, for example, points out that trade is a much bigger part of European economies than our own–yet Europe has managed to avoid the job churning and worsening income disparities that have made globalization so contentious here. The reason? Europe has more lavish social welfare policies, more extensive labor market regulation, and stronger unions. Kuttner advises Americans to look to the Scandinavian model–the Danes are the popular flavor this year–in which solid growth rates and low unemployment coexist with high-wage policies and generous social spending. In this telling, America needs not old-fashioned protectionism but a healthy dollop of European-style social democracy.
Prospect editor Harold Meyerson likewise is no fan of free trade, but he stresses its impact on wages rather than jobs per se. He identifies the real problem as “global convergence of wages,” as U.S. workers lose bargaining power with employers thanks to shrinking unions and the surge of millions of low-wage workers from countries like China and India into the global marketplace; and the solution as a much enlarged form of global governance designed to create social democracy on a world scale.
But–even leaving aside the improbability of Americans voting in European tax burdens and state paternalism, or a global regulatory program–there’s a hitch. The U.S. social democrats seem determined to hold progress on trade liberalization hostage to highly ambitious and sometimes unattainable goals–a dramatic expansion of America’s welfare state; a miraculous revival of militant trade unionism; global governance mechanisms; and full implementation by low-income countries, enforced by trade sanctions, of labor and environmental standards which took Washington decades to develop. This means growth, efficiency, and trade reforms to help the poor must wait for a social-democratic millennium.
Which brings us to the third camp, the progressive modernizers. They reject claims that Americans can be shielded from technological and structural forces affecting the whole world, and hope instead to replace the industrial-era safety net with a new social contract that helps working Americans manage the risks of global competition and share in the rewards of growth. They agree with social democrats on a key point: as U.S. businesses and labor provide less security for workers, government must step into the breach and provide more.
Where they differ is in insisting that robust economic growth and open trade policies are not bargaining chips, but crucial policies for generating the resources and political support for a new social contract with American workers. They backed Bill Clinton’s trade liberalizing initiatives, which played a vital role in the prosperity of the late 1990s, support new trade initiatives that build upon Clinton’s work. But they also recognize that changing terms of global competition pose new risks for working Americans which demand new responses.
In short, they believe America must both fashion a winning strategy for global competition and build a more solid foundation of economic security beneath working families. The strategy can be summed up in four points:

  • Trade liberalization remains crucial to growth, economic efficiency, rising living standards, and amicable relationships among great and rising powers.
  • The integrated global economy and the technological revolution are the result of structural forces–economic reform in places like India and China, container shipping, the Internet–as well as government-to-government negotiations. Their benefits outweigh their costs, and in any case they will not be repealed.
  • For workers, globalization brings risks, as many businesses can no longer provide the health, pension and other quasi-welfare state functions they did in earlier years. And independent of global competition, changing American patterns of work, with quick shifts among companies now far more common than careers at single firms, means neither businesses nor Wagner Act-style unions are as well-suited to providing these protections as they once were.
  • Imaginative policies can ease these problems. Government should step in where businesses no longer can, ensuring that job loss does not mean loss of health care, pensions, or hopes for college and home ownership. And social institutions, in particular a reformed and reshaped labor movement, have an essential part to play in finding solutions.

Democrats in Congress can begin to craft an agenda based upon these premises this year. A progressive, optimistic-but-realistic-and-empathetic legislative program for 2007 would open markets, by supporting completion of the Doha Round with a grant of fast-track authority focused on the WTO rather than small-scale free trade agreements. It would simultaneously begin strengthening family security. Recognizing that unions and liberals are right to say the Trade Adjustment Assistance program is wholly inadequate to the modern scale of disruption, it would also draft a broader Economic Adjustment program open to all dislocated workers, including broadened support for health insurance and job placement services. Accompanying both would be a competitiveness package to extend R/D tax credits, bolster investment in basic research, and ensure that visa policy allows American businesses and universities to attract the world’s brightest students and scientists. As we write, Congressman Charles Rangel is leading a courageous effort to develop such a broad policy synthesis, beginning with a formula for approval of several pending trade agreements and revival of the Doha Round.
A modern Progressive presidential candidate, in turn, can use this agenda as a foundation for a much more ambitious social contract, including fundamentally changed domestic policies and modernized civil-society institutions. By 2010, this would include guarantees of universal health insurance, portable pensions, and new forms of insurance to ensure that job loss does not mean inability to pay college tuition and mortgages. It would call upon unions to adopt a new role for the decades ahead, modeled on the approach of their most successful colleagues abroad, such as the Scandinavian unions.1 Their memberships are the world’s highest and their attraction for young workers uninterested in conflict with employers rests upon through career development, unemployment assistance and job training and placement programs.
In the 19th century, populism faded and died–unable to preserve a fading agrarian order, and offering more complaints than realistic solutions. Bryan, its great champion, lost three presidential elections. Rather than take this as their model, today’s Democrats would do better to look again at the Progressives who succeeded the populists. They struggled not to preserve a fading agrarian order, but to update old political and social arrangements to meet the new structural challenges emerging from industrialization and urbanization. The Democratic candidate who offers the modern version of this program may well be the one who can win; and will certainly be the one offering the new social contract that anxious workers and a puzzled country need.
Will Marshall is president and founder of the Progressive Policy Institute and editor of With All Our Might: A Progressive Strategy for Defeating Jihadism and Defending Liberty.

Ed Gresser has served as Director of the Progressive Policy Institute’s Project on Trade and Global Markets since February, 2001. In this capacity, he writes and speaks on the value of open markets, internationalism and social responsibility in the global economy. Gresser joined PPI after ten years of service in the Clinton Administration and as a senior Congressional staffer.

1For a discussion of alternative models for modern unions, see the recent TDS discussion.

7 comments on “Populist, Social Democrat or Progressive? The Democrats’ Choice on Trade

  1. Joe Populist on

    I find your article a little disingenuous, pretending to be a objective review of the options available to the Democrat Party, when it’s obvious that you’re advocating your own point of view: “progressive”, which is really just contemporary liberalism, which is left-over 70’s era Identity Politics, dominated by the views of urban sophisticates with with cosmpolitan social views, and Alan Greenspan economic policies that dominated the Clinton Administration.
    Among your most obvious errors is claiming that Bryan was a “populist” when in fact, his “free silver” was a distraction from the more serious planks of the People’s Party, what Goodwyn called a “shadow” movement. Another is the alleged racism of the People’s Party, when in fact it’s central feature was uniting black and white farmer’s alliances, providing the most successful–and perhaps only—challange to the “Bloody Shirt” politics of the Democrat Party of the time.
    Your “progressive”—read old fashioned elitist liberalism—bias is reflected in your support for “free” trade, which is in reality not free at all. Worse, “free trade” is based on the unsustainable combination of trade and budget deficits, all financed by the petro-dollar and US dependence of Mideast Oil, which sustains the dollar as reserve currency of the world. What “free trade” really is old fashioned British Imperialism, as the “War for Oil” in the mideast proves.
    Combined with the fact, that so-called “free trade” only applies to certain categories of industrial workers, while protecting professional workers, something a real “populist” would recognize.
    The list of your obvious bias goes on and on, and we have merely a defense of dysfunction status quo of the present Democrat Party, a party of well-to-do urban liberals and their dependendent underclasses, united in common opposition to the white Christian majority.
    Democrats are only lately adopting a disingenous “populist” veneer, finally realizing that you can’t win elections based on a coalition of “people of color”, single unmarried women, government workers unions, and urban sophisticates with cosmopolitan social views.
    If that’s the politics of the “common man”, then I’ve got a bridge in Brooklyn that I want to sell you.

    Reply
  2. pdt on

    I think it’s kind of funny that you have Tom Tancredo representing Arizona, and I wish it were true. Sadly, he represents my district, CO-06, at least until we can boot him out next year.

    Reply
  3. Morris Sheppard on

    So much is wrong with this article it is difficult to know where to begin.
    To start, Marshall and Gresser use classic straw man techniques to mischaracterize what they see as the other two alternatives to their policy, then gloss over the problems in their solutions. Without writing a response as long as the article let me state that given that globalization “can not be repealed,” several things will be required for an acceptable trade policy, not all of which are outlined by Marshall and Gresser.
    First all trade agreements must have, as integral to their structure, guarantees for both environmental responsibility and fair treatment of workers, no matter where they live, along with substantial and intimidating penalties for violation of these tenets.
    Second, U.S. workers must be buffered from the disruptions caused by forces that benefit corporations but hurt the public. Universal health care freed from the relationship to employment should not be a distant goal but an immediate requirement.
    Third, tax and regulatory policy must reflect the realities of modern business. Transnational corporations must be required to pay their fair share of taxes to support the infrastucture, which includes the education and health of the workforce, that makes their profitablility possible. This may require a national business gross receipts tax, not unlike many cities impose, which taxes any business operating in the country based on receipts, not profits, and therefore can not be evaded by offshore headquartering or shifting profits to subsidiaries in foreign tax havens. If a company also pays U.S. income taxes, those taxes can be used to offset the gross receipts tax. Therefore the net effect on an existing company located in the U.S., which currently pays its taxes here would be negligible and “double taxation” for domestic manufacturers and service providers is eliminated.
    Fourth, education, being the foundation of a competitive and secure workforce, must be made available to all who are able to benefit from it. Economic security from the dislocations of globalization must be substantial, new bankruptcy laws and credit controls must be enacted. New technologies, which will be the basis for our ongoing prosperity must be encouraged and subsidized, if needed.
    Now that’s a program most progressives can get behind, as well as one that will actually protect and benefit the great middle class so in danger of being negatively impacted by new economic models.

    Reply
  4. Morton Kurzweil on

    Dear Spin Doctors:
    Yor sound a little confused. It is your propensity for euphemisms that appear to demonstate erudition but leaves no basis for a reasoned discussion.
    All politics and economics are ideologies, beliefs with emotional fixations. There is no free trade, no cheap labor. Anyone subject to a soverign taxing authority e.g. pirates, warlords, democracies, autocracies, must play by their rules. If that taxing sovereignty, an entity that also controls the money supply or demands favors to permit trade it becomes a matter of a commerce by and for an elite who can pay for special favors, like protection, monopolies, subsidies, etc., all at the expense of your so called “populists”, labor, and resources. Any of these “governments” will rise and fall with the approval of the people and the army. Rule must be in the interests of the state. Global economy without global government is an excuse for commerce and industry to evade the obligations of citizenship. GNP is not a measurement of security, health, education, for which a soverignty has purpose. State is meant to outlive its populist founders by being able to plan ahead to protect the next generation. That is the genetic imperative. That is the selfish gene securing the maxomum chance for survival. We have tried anarchy, religion and other suicidal isms. Nothing beats reality for long term survival

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  5. james m kiss on

    This brilliant proposal could/should serve as the baseline for a strategy for 2008 et seq. Each presidential candidate should absorb it and decide. Will and Ed have scored impressively. Jim Kiss

    Reply
  6. The Hamiltonian on

    I must whole heartedly disagree with the policy prescriptions and with the underlying assesments of Mr’s Gresser and Marshall. For one thing, their analysis of the Populists is correct, but there logic is faulty; the reason WJB and the rest of his lot were defeated were for the very reasons you gave, not in spite of them. WJB was a anti-catholic, pro-free trade, pro-imperialistic, anti-urban, and anti-intellectual. He hated banks, and wanted to depreciate the currency so that farmers could pay their debts, and in the process make it more expensive for the average working man to take care of his family(by devaluing the currency). The urban middle class, seeing his scathing attacks and overt evangelicism as a direct threat to their new found freedom (both economically and socially, since many were roman catholics, jews, and orthodox christians) decided to support the party that stood for decent jobs, decent wages, strong dollar and a balanced budget. At that time that was the GOP. Remember the Full Dinner Pale? The Square Deal? These were all appeals to the innate fears of the middle class industrial worker. And let us not forget that at this time it was the Democratic president, Grover Cleveland, who presided over one of the worst anti-labor police actions ever taken (the Haymarket Riot, if I recall) and also was an ardent free trader. He did support the Gold Standard, so he wasn’t all bad, but nonetheless he had far more in common with today’s GOP than today’s Dems.
    That being said, what is the proper response? Well, while the idea of a new portable safety net may sound great, it is missing a key ingredient; money to pay for it. This is prohibitively expensive. Not to mention that assuming you had the money to initially pay for it the disincentivizing effect it has upon seeking new work, improving job skills, and saving is predictable. Look at the statistics for unemployment insurance; the vast majority of unemployment recipients find jobs within 9 months after losing a job. Why? because in most states unemployment only last 9 months. When it is expanded, as it was in 2002 and 1991, it seems that people take even longer to find jobs, which the government then uses as an excuse to extend unemployment benefits even more.
    The best way to stand against the threats of globalization while at the same time reaping many of the benefits is through a more mercantilist trade policy. The idea that the US should put the future of its citizens in the hands of nameless elites (WTO) is ridiculous. Leo Hinderey and many others have proposed another way, a real 3rd way, between the go go globalizers and the Chinese wall types; the government should set up a system where when the trade deficit reaches a certain point of GDP then the government would put restrictions on the amount of imports. That way we can keep a healthy balance. In addition, you then reform Subpart F of the tax Code which currently rewards companies for setting up overseas operations by allowing indefinite income deferral.The real target of this is not foreign companies, but US MNC who set up overseas operations and then reimport into the US. Then, they use the Code to shield this income from US tax. By reforming both, you ensure that the MNC won’t simply set up shop in a low-tax jurisdiction and the reimport as a foreign corp.

    Reply
  7. Clay Ramsay on

    An intriguing summary, but it seems to start by criticizing Door No. 2 (the social democratic door) only, at the end, to wind up going through Door No. 2.

    Reply

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