Saturday, 28 January 2017

Trump's quest for a better yesteryear

I'm reading quite a bit of Chad P. Brown at the moment. The Peterson Institute for International Economics is light-years ahead of any of the London based think tanks. Not least because the Tory ones tend to either be plagiarists or dogmatic followers of scripture. They do no thinking of their own.

Brown has it that "before the Obama administration entered office in 2009, most American workers were forced to rely exclusively on employer-provided health insurance. This made it more difficult for a worker to seek out a new job, and it also made involuntary job loss of any kind more disruptive.

The 2010 Affordable Care Act (ACA) was the largest expansion of the US social safety net in decades, and informed trade proponents hold it up as reducing one important impediment to worker mobility. Obamacare was a long overdue policy that supported the 21st century economy by making the US labour market more responsive to all forces of change".

Hardly the work of a "socialist" - and when you think about it, it makes perfect sense. Meanwhile the Tories here in the UK have piled ever more obligations on employers, not least auto-enrolment into pension schemes which makes no sense at all to me. In most respects the Tories have been pretty weak on labour market liberalisation and through there are EU factors to consider we have never needed any help from the EU in bureaucratising employment.

In fact, if the Tories were genuinely interested in deregulating and liberalising the labour market there was very little to stop them before Brexit. I certainly won't miss the agency workers directive but the tax code is long overdue an overhaul and that's very little to do with the EU.

What marks the Affordable Care Act out as an interesting intervention is that the relationship between employment and healthcare is one that has evolved as a result of union action and goes back to the time of mass industrialisation and employment. It's a piece of calculated intervention which breaks up old fashioned and ossified structures that will ultimately give both employers and employees more freedom.

It would appear that when you scratch the surface, Obama was very much a liberalising force, not least with an executive order on regulatory cooperation. In that regard the populist backlash against globalisation is very sad indeed. Even the largest estimates, according to Brown, find international trade has caused only a fraction of the US economic dislocation - including that likely suffered by Trump's key voters. There is much truth in this.

The Trump delusion is that the US can close itself off to competition and return to a Gran Torino world of white working class men in full employment, joining the ranks of the middle class as they go. Robots, progression in technology and changes in demand have had more of an impact on jobs. The net result of closing down trade generally means inferior and more expensive produce.

This is what makes the UKs symbolic alliance with the USA problematic. Now is the time when we need to be strengthening multilateral efforts to streamline trade. Bilateralism undermines it and if the USA and the UK weaken their commitment to trade liberalisation then the rest of the world will likely follow.

Theresa May has repeated her commitment at Davos to work within the global rules based trading system. These words are incompatible with US policy. We need to decide very carefully how we pick our alliances. We cannot ride two foreign policy horses. Either we are committed to a global Britain or we become a client state of the US and a dumping ground for US surpluses. I might think it worth it if it came with freedom of movement to and from the USA but I guarantee it won't.

If there is any reason that the USA has suffered it is because it has not modernised as quickly as it should and efforts to change the regulatory culture have fallen flat. Regulatory barriers are still the chief barrier to trade and too many vested interests are keen on keeping it that way. Trump will reinforce this, not least with his cretinous approach to deregulation inspired by kipperish allergies to common rules. This promises only to exclude US produce from the global marketplace. The EU will look liberal by contrast.

Because Brussels has for quarter of a century pretty much dictated the global regulatory agenda, the global standard is now one and the same meaning that those now complying with EU and global standards are more at liberty to trade with Europe and each other, with the USA being the odd one out. This explains why others have an easier time of securing trade with the EU when efforts to bridge the Atlantic have failed for nearly fifty years. 

This is not by any means an endorsement of the EU or indeed Obama, in that both have used the global system to plunder Africa - and both must be criticised for their murderous and hypocritical trade policies, but regressive change for its own sake should not be hailed as progress. If the system that evolved from GATT folds then we are back to a free for all where there are no winners.

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