The Unequal Effects of Globalization

April 12, 2024

Previous | Next

Pinelopi Koujianou Goldberg with Greg Larson. The Unequal Effects of Globalization. Cambridge: The MIT Press, 2023.

For much of the past century, the United States has been a world leader in promoting free trade. During that period, most Americans probably took it for granted that the country benefited from having foreign markets for our products, while making foreign products available to American consumers. The idea that trading relationships should be a win-win for both parties was a pillar of economic theory. It was deeply rooted in the basic insight of free market economics, that economic actors prosper by dividing their labor between different forms of production and engaging in free exchange. If individuals and firms do so, why not countries? Let each country export the things it can produce most efficiently while importing the things it does not.

In recent decades, however, the increase in global trade has raised concerns about unequal economic effects. Globalization creates winners, to be sure, but maybe it also creates too many losers, notably manufacturing workers who lose their jobs to lower-wage foreign laborers. Donald Trump has gone so far as to assert that the United States as a country is losing from free trade, and we should return to an era of tariff barriers to protect our industries.

This short but timely book is based on a lecture that principal author Pinelopi Goldberg gave at the Stockholm School of Economics in 2019. At the time, she was chief economist of the World Bank Group.

Trends in globalization

Goldberg begins by identifying two main features of the “age of globalization.” The first is the historic decline in protective tariffs after World War II. The second is technological developments that lowered the costs of transportation and communication. As a result, “world exports, fairly constant in the nineteenth and early twentieth centuries, began rising after World War II and accelerated dramatically in the late 1990s and early 2000s—a period now known as hyperglobalization that coincided with the emergence of global value chains (GVCs).” In global value chains, many different countries play some part in designing, producing and/or marketing a finished product.

Since the United States has its own very large consumer market, it relies less on exports than many smaller economies do. The export share of its economy increased only from 4 percent to 9 percent between 1945 and 2014. But in recent years, the U.S. has imported more than it exports.

Economists have disagreed over how much of globalization to attribute to technological change, as opposed to policy changes. Recently, more have emphasized technological change, but Goldberg makes a case for policy effects, for several reasons. Tariffs are still falling in many developing countries, and the impact of that change is amplified by the increasing complexity of global value chains. Policy changes affect trade in other ways besides tariffs too, such as by setting standards that assure consumers that products produced in other countries are safe to use.

Global trade has slowed somewhat since the Global Financial Crisis of 2008. Goldberg says that it is too early to say if this will turn out to be a long-term trend. Even if trade should decline between distant countries with troubled relationships, such as the U.S. and China, trade within world regions like Europe or the Americas might still thrive. “GVCs may partially or entirely relocate their operations to different parts of the world…, and regionalism may become the new form of globalization.”

Many countries have experienced a growing backlash against international trade agreements. Backlash in the United States led the Trump administration to put tariffs on selected goods, especially steel and aluminum, electronic devices, and certain Chinese consumer products like vacuum cleaners. He promises additional tariffs if reelected.

Goldberg reports a drop from 80 percent to “slightly more than 65 percent” from 2002 to 2014 in the share of Americans who believed that trade was good for the economy. Increasing disenchantment with trade is one factor contributing to Trump’s MAGA movement. One research study reported that less educated whites were especially likely to leave the Democratic Party if they lived in counties affected by increased Mexican competition after NAFTA.

Some of the new resistance to trade arises from perceptions that our trading partners do not always play fair.

There are…many complaints that market access in some developing countries is limited, that many developing country governments give subsidies and other unfair advantages to local firms and state-owned enterprises, and that some countries, especially China, engage in forced technology transfer or the outright theft of intellectual property.

Of course, even fair trade could create winners and losers. Economists and policymakers want to know if international trade worsens economic inequality.

Trade and global inequality

The impact of global trade on inequality is not simple. Goldberg stresses the importance of distinguishing inequality across countries and inequality within countries.

Taking inequality across countries first, the book makes this claim: “There is substantial evidence and widespread consensus among economists and economic historians that global inequality has decreased dramatically in recent decades, especially in the decades since World War II.” The main evidence for a decline in global inequality is a reduction in the portion of the world’s population living in extreme poverty. The income distribution for the world population shows declining frequencies at the lowest end. In that respect, at least some very poor countries are looking a bit more like richer countries, a phenomenon economists call convergence.

Based on other sources, however, such as Krugman and Wells’s Macroeconomics and Branko Milanovic’s Global Inequality, I believe that a generalization linking globalization and declining inequality needs to be carefully qualified. A decline in absolute poverty may not reduce inequality if the rich people of the world are also getting richer, as they have been. Only if poorer countries have higher rates of economic growth than richer countries can inequality across countries go down. In some developing countries, notably China and other countries in Eastern Asia, global trade has facilitated rapid enough growth to narrow the income gap with more developed countries. In other parts of Asia, as well as in Latin America and Africa, that is generally not the case.

Another way of looking at global inequality is to examine where along the global income distribution the greatest income growth is occurring. Based on data from 1980 to 2016 analyzed by Piketty, Saez and Zucman, the largest income growth has been experienced by the world’s richest 1%, the next largest by the poorest 40%, and the least growth by the middle-income group in between. That middle group consists mainly of the middle classes in the more advanced economies. That raises the question of whether the benefits of global trade experienced by the world’s rich and poor have occurred at the expense of those in the global middle.

Trade and within-country inequality

Has global trade increased inequality within countries, especially our own? Here too, the answer is not simple. The effects on workers and consumers are somewhat different, and most adults are both.

In general, workers in more developed economies have greater skills and higher wages, as well as lower birth rates, while developing countries have an abundance of low-skilled labor. Traditionally, economists have reasoned that when developing countries export the products of their labor, their own workers should benefit, but the least skilled workers within more developed countries should be hurt by the competition. In the 1990s, economists attributed the growing wage gap between skilled and unskilled workers more to the demands of new technologies. But they turned their attention to the role of trade in the deteriorating situation of many American workers after Chinese imports began to surge. In 2000, the U.S. enacted the United States-China Relations Act, which granted China permanent normal trade relations status; China joined the World Trade Organization the following year. Goldberg says that “even if one does not fully accept the claim that the China shock was the main driver behind the decline of US manufacturing employment, it is clear that it changed the relative positions of workers employed in certain industries and/or living in certain regions.”

In theory, workers in regions where jobs are lost to foreign competition can move to areas where more successful industries are creating jobs. But such mobility is in fact limited, since pulling up stakes and starting a new career in midlife is not easy.

On the other hand, economic theory predicts that many people stand to gain from foreign imports as consumers. They can get access to finished goods produced at lower cost abroad. They may also get lower prices on goods produced domestically, if producers pay less for imported inputs like raw materials, and if producers pass those cost savings on to consumers. (A good argument against tariffs is that they tend to negate these consumer benefits by taxing imports.)

Whether producers do in fact pass cost savings on to consumers may depend on how much competition they face in their industries. Dominant firms may have the market power to increase profit margins rather than share those benefits with consumers or workers. “Firms participating in GVCs typically pass a smaller share of the realized cost savings on to their consumers (in the form of lower prices) as well as a smaller share of their higher profit margins on to workers (in the form of higher wages).”

Considering the effects of trade on workers and consumers together, price benefits for consumers are likely to be spread rather evenly over the population, while wage losses are more likely to hit low-skilled workers in certain regions. That leads to the conclusion that the net effect of trade has been to increase inequality within developed countries, both by increasing the profits of wealthy shareholders and reducing employment prospects and wages in some segments of the working class.

Complementary effects of technology and trade

Having recently reviewed Mordicai Kurz’s Technology and Market Power, I am struck by similarities between his analysis of technology and this book’s analysis of trade. Kurz argues that the emergence of new technologies creates opportunities for innovative firms to monopolize technical knowledge and use the resulting market power to raise profit margins. Government can either constrain that process with egalitarian public policies, as it did for much of the twentieth century, or else facilitate it with more passive policies, as it has done since the 1980s.

New technologies and globalization have gone hand in hand in recent decades, making it hard for economists to distinguish their effects. Both have created opportunities for dominant firms to achieve market power and higher profit margins, enhancing the benefits for shareholders while limiting the benefits for consumers and workers.

Both new technologies and global trade have impacted negatively on low-skilled workers, but in somewhat different ways. New technologies raise the skill requirements of many jobs, leaving less skilled workers at a disadvantage. Global trade puts less skilled workers in competition with workers from developing countries.

Both new technologies and global trade challenge policymakers to mitigate the detrimental effects of rising inequality. Goldberg’s policy proposals are much less detailed than Kurz’s, but she does advocate regionally targeted measures to give more help to displaced workers. She also shares Kurz’s concerns about market power:

[T]he dramatic growth of firms profits in light of globalization demands greater focus and policy action… First and foremost, addressing the recent increase in firm markups demands greater attention to how these large global firms are taxed and regulated.

Both these books represent some shift in economists’ views of these twin forces of economic change, technology and trade.  More economists seem to be turning away from passive acceptance of market outcomes and toward more active interest in mitigating their least desirable effects.

Leave a Comment » | Uncategorized | Tagged: , , | Permalink
Posted by Ed Steffes

MMT 4: Sectoral Accounting

July 6, 2018

Previous | Next

This is the fourth in a series of posts about Modern Monetary Theory, based on the text by Mitchell, Wray and Watts. If you have not seen the earlier posts, I recommend that you start at the beginning.

“The family that pays together…”

During my college years, I used to look forward to seeing my hometown girlfriend when I came home at Christmastime. I’ll call her “Thelma” to protect her privacy in case she’s still trying to live down her association with me. One time when I was in her family’s kitchen, I noticed a posted sheet of paper that recorded all the borrowing and lending that had been going on among the children, probably related to Christmas shopping. So Thelma might have lent her brother Sam $5 when he was short of cash, and on other occasions Sam might have lent money to Dave, and  later he might have lent money to Thelma, and so it went. After Christmas, I imagine they totaled up all the debits and credits to see where everybody stood. My contribution was to write at the bottom of the sheet, “The family that pays together stays together,” much to the parents’ delight.

Let’s suppose that when we balance it all out, Thrifty Thelma has lent $100 more than she borrowed, Sam has come out even, and Deadbeat Dave has borrowed $100 more than he lent. So the financial balances are:

Thelma +100, Sam 0, Dave -100

Every debt creates an asset for someone and a liability for someone else, so the balances have to add to zero.

Oh, I left something out. Thelma’s Chinese friend Meili had a yard sale, at which Thelma bought $140 worth of stuff. She was short of cash because of all the Christmas shopping, so she gave Meili an I.O.U. for the debt. That changed Thelma’s balance from +100 to -40. If we include Meili in the accounting, we now get:

Thelma -40, Sam 0, Dave -100, Meili 140

Notice that not only do the balances add to zero, but the sum of the balances inside the family (-140) must offset Meili’s external balance (140).

Debt can easily be moved around. Thelma could offset her $40 debt by lending $40 to Sam, which would give us:

Thelma 0, Sam -40, Dave -100, Meili 140

Taking it a step further, Sam could now assume the remaining family debt by lending $100 to Dave:

Thelma 0, Sam -140, Dave 0, Meili 140

Oh, Oh, “Uncle” Sam has wound up in debt to the Chinese! And Sam could even create surpluses for everyone except himself by borrowing from Thelma and Dave:

Thelma 100, Sam -340, Dave 100, Meili 140

You can probably see where I’m going.

Sectoral surpluses and deficits

Sectoral accounting in Modern Monetary Theory distinguishes three economic sectors: government, private domestic, and external (relating to foreign countries). Each sector can be in surplus or deficit, and the three financial balances have to add up to zero. For every surplus, there must be a deficit, and vice versa.

The government’s financial balance is given by T – G, where T is taxes net of transfer payments and G is government spending. The balance is a surplus when T > G and a deficit when T < G .

The private domestic financial balance is given by S – I, where S is saving and I is investment. If all saving is spent on investment, there is no financial surplus, just an addition to real assets like factories. If S > I, the surplus accumulates as financial assets. If S < I, the deficit results in some liquidation of financial assets. S – I is also called Net Acquisition of Financial Assets (NAFA). S – I was also discussed as a leakage from spending in the last post, when I was analyzing how much of the national income goes into spending.

The external financial balance is given by -CAB, where CAB is the Current Account Balance. I defined that earlier as the difference between money flowing into the country and money flowing out of the country, taking into account both trade and investment income. We are accustomed to looking at this from the U.S. point of view, where a positive value would indicate a surplus in our favor. Now we have to reverse the sign, because we want a positive value to indicate a surplus in favor of foreign countries. This is just what I did when I expressed Thelma’s debt to Meili as Meili’s surplus. For the United States, CAB is negative because of the trade deficit, so the external financial balance is positive, representing a surplus held by foreigners.

This surplus is different in one respect from Meili’s surplus. She held Thelma’s I.O.U. for goods Thelma hadn’t yet paid for. The Chinese hold a surplus in dollars for goods Americans have paid for. Those dollars are a financial asset for them, but a liability for us, because they are claims against our economy that we “owe” them. The dollar itself is a kind of I.O.U., and that makes the Chinese our creditors and Americans their debtors.

With the sector balances defined that way, the three balances must add to zero:

(T – G) + (S + I) + (-CAB) = 0

This formula follows logically from the formulas for GNP and GNI given in the last post, but I’ll spare you the proof.

Here are recent estimates derived from the National Income and Product Accounts tables published by the U.S. Bureau of Economic Analysis. (The numbers are published quarterly and revised frequently.  They are annualized to estimate one year’s financial flows in billions of dollars.)

-1,022 + 609 + 413
(govt./private domestic/external)

The annual government deficit balances the private sector and foreign surpluses. The government takes on debt, while the private sector and foreign countries accumulate financial assets. Foreign investors now own about a third of the stock in U.S. companies, for example, and they got a nice financial windfall from the cut in corporate taxes.

Since the external sector has a surplus, the two internal balances must add up to a deficit just as large. And since both the external and private domestic sectors are in surplus, the government must have a deficit large enough to offset both of them.

Who should carry the debt burden?

Reducing the government’s debt burden requires either reducing the external trade imbalance or reducing the private sector’s surplus.

The United States would like to be more competitive in world markets, but there are several strong reasons why we aren’t:

  • As a country with a relatively high median income, we can afford to buy a lot from other countries.
  • The dollar is a strong currency on world markets. Other countries are willing to hold dollars and financial assets denominated in dollars, especially bonds issued by the U.S. Treasury.
  • Countries with low wages are able to produce more cheaply many products formerly made in America.
  • Some countries engage in unfair trading practices, although that is beyond the scope of the authors’ analysis.

Most of these will be very hard to change, even if we can agree they should be changed. Given that the external sector is in deficit from our point of view, and so has a surplus from the foreign perspective, which of our internal sectors should balance it with a deficit?

The text argues against allowing the private domestic sector to be in deficit:

We know that the private sector cannot sustain deficits permanently. This is because the flows of spending which deliver deficits have to be funded…. Private deficits ultimately manifest in an increasing stock of debt being held on the private sector’s balance sheet.

This process of debt accumulation is limited because at some point the susceptibility of the balance sheet to cyclical movements (for example, rising unemployment) increases and the risk of default rises….

In the long-term, the only sustainable position is for the private sector to be in surplus. An economy can absorb deviations around that position but only for short periods.

That leaves the government as the sector to take on deficits and debt accumulation. Unlike the private sector, government can sustain deficits because it has the power to create money when it spends beyond its tax revenue. I’ll describe the monetary operations by which it does that in the next post. Like Sam in my family example, government assumes the burden of debt so that the other sectors can maintain and grow their financial assets.

Under these conditions, regularly balanced budgets are hard to imagine. Not only would they reduce GNP, national income, consumption and saving, as discussed earlier; but they would force the private sector to incur annual deficits about as large as our trade imbalance, constantly shrinking our financial assets.

American society has done a useful—and maybe at least temporarily unavoidable—thing by piling its debts onto the entity most able to sustain them. That has enabled private wealth to keep flowing—to the rich anyway—even as our manufacturing declined and our global competitive position worsened. That’s one way to keep an economy growing, albeit at a sluggish rate with little gain for most workers.

Mutual dependency

Sectoral accounting reveals just how much creditors and debtors are mutually interdependent. If debtors want to spend more than their current income, they need creditors. If creditors want to acquire financial assets, they need debtors to accept the corresponding liabilities. In foreign relations, the U.S. is the debtor and our trading partners are, on average, the creditors. In domestic sector relations, the public sector is the debtor and the private sector is the creditor.

If we are to blame one side or the other, which side should it be? If debt is the fault of the deadbeat debtor, then we should be beating up on the United States for being a debtor nation, instead of attacking our trading partners for selling us more than we sell them. If debt is the fault of the predatory lender, then we should be angry at the private sector for accumulating assets, not at the public sector for accepting the liabilities. Who is doing whom a favor here?

Government is not some kind of alien invader or colonial power that preys on the “free market.” By giving in to the demands of assertive constituencies, government runs up the debts that become financial assets for someone in the private sphere. These include demands for high transfer payments from the elderly and the poor, demands for low taxes from corporations and the wealthy, and demands for the world’s highest military spending from the military industrial complex.

Too much of a good thing?

I think the text makes a pretty strong case that public debt is more sustainable than private debt, and that public deficits can stimulate the private sector. The authors would actually like to see more such stimulus, through government spending aimed at putting more people to work.

But this analysis also got me thinking about something the text does not discuss. If public deficits are not as bad as we’ve been led to believe, is it also possible that private surpluses are not as good as we’ve been led to believe? The private sector is better off running surpluses than deficits, yes, but is there any limit to how big the surpluses should be, especially when the financial assets are going primarily to make the rich richer?

I’m not worried about the government running out of money, because technically a government that controls its own currency never has to. I am more worried that a large pile of surplus capital not invested in productive assets supports a booming, high-flying financial sector that engages in too much speculation. In a worst-case scenario, business investment is flat, and the economy is growing only because of government’s deficit spending. Income, consumption and saving are rising, but the growing gap between S and I indicates a growth of surplus capital. Capital always seeks a good return, and if businesses aren’t investing enough to provide it, capitalists are tempted to resort to financial speculation. Financial firms can raise money selling “junk bonds” promising high interest rates, then use the money to buy up existing companies not to expand them, but to loot them of their assets or flip them for a quick profit. Banks can make risky mortgage loans to unqualified buyers, but then package them and pass them off as AAA-safe investments. Speculation can take many forms. But when it becomes rampant and people lose confidence in the value of financial assets, bubbles burst and financial crises occur.

We know what a financial crisis looks like because we have recently lived through one. Have the underlying dynamics of our economy changed very much since then?

Continued

Leave a Comment » | Uncategorized | Tagged: , , | Permalink
Posted by Ed Steffes

Working-Class Conservatism

June 5, 2017

Previous | Next

Like so many others who have been closely following current events, I can easily be caught up in the outrage over President Trump’s latest tweet or poorly thought-out policy proposal. Nevertheless, I do try to stay focused on issues that transcend any one personality, no matter how–um–large. Even if Donald Trump were to be impeached, the wave of popular anger that helped elect him would not entirely subside. The fact that so many of his supporters keep sticking by him, almost without regard to what he does, indicates that he has tapped into a strong current of public opinion that will continue to shape our politics. The country will have to come to grips with what Trump represents to people, even if his own presidency is a colossal failure.

In some of my earlier posts, such as “A Leap into the Dark” just after the election, I acknowledged Trump’s general appeal to conservative voters (using that term rather broadly), but questioned his authenticity as a champion of the working class. He did, in the end, get the support of most Republicans across the socioeconomic spectrum, and much of what he is trying to do has the support of the Republican establishment. Now however, having recently read Michael Lind’s article on “The New Class War,” I want to ask if there is a distinctly working-class brand of conservatism, even if Donald Trump represents it rather inconsistently. I want to explore how the interests of working-class Trump supporters and establishment Republicans may diverge on certain issues, even as they converge on others. An angrier and more outspoken working-class conservatism could be helping the G.O.P. win elections, but it could also prove to be a divisive force that could weaken the party and create opportunities for Democrats.

Convergent interests

Climate change is a good example of an issue where the interests of many blue-collar workers seem to converge with those of the Republican establishment. Even as the scientific consensus on climate change  grows stronger, and more and more Democrats support action to control carbon emissions, most Republican leaders support President Trump’s withdrawal from the Paris Accord and his renunciation of President Obama’s Clean Power Plan. In this respect, the Republican establishment most represents the interests of fossil-fuel industry executives and shareholders. Led by Americans for Prosperity, a group financed by the Koch brothers, the industry has poured millions of dollars into the effort to influence–perhaps I should say mislead–public opinion, support its political allies, and defeat its political opponents.

Almost by definition, the main concern of working-class conservatives is saving jobs in those established industries. For Republican leaders like Mitch McConnell of Kentucky, constituent pressures combine with fundraising incentives to motivate conservative environmental policy. Of course, those leaders almost always frame the issue as opposing “job-killing” regulation, not preserving corporate profits.

Continuing to do what one has always done, whether or not it makes sense to do it, is a simple conservative impulse that cuts across class lines. Conservative columnist Ross Douthat, who has voiced skepticism about climate change, now admits that “in actual right wing politics no serious assessment of the science and the risks is taking place….Instead there’s just a mix of business-class and blue-collar self-interest and a trollish, ‘If liberals are for it, we’re against it’ anti-intellectualism.”

Without sacrificing their environmental concerns, Democrats who wish to appeal to working-class voters need to emphasize the ways that government can promote job creation in clean-energy industries, as well as facilitate the retraining of displaced workers for new jobs. Just talking about the potential dire consequences of future climate change may not impress someone trying to make ends meet right now.

Divergent interests

Global trade and immigration are issues where working-class interests diverge in many ways from the traditional positions of the Republican establishment. In the recent past, Republicans have been the biggest advocates for free trade, consistent with the belief that unrestricted markets can best create wealth for all. They have been less united on immigration, but advocates of global free markets often welcome the flow of labor across borders to supply the labor needs of expanding industries. Cultural conservatives may worry about the threat to American culture from “alien” ideas or practices, worries enhanced by the threat of terrorism. Donald Trump’s proposals to build a wall between the U.S. and Mexico and ban travel from Muslim countries appeal especially to cultural conservatives.

If there is a distinctly working-class position on globalism, it is based again on concerns about jobs and incomes. The free flow of capital and labor across borders has enabled corporations to profit by seeking out cheaper labor, but a lot of that has come at the expense of  workers born in the United States. That is one reason why labor’s share of national income growth has been falling. (Another is replacement of human labor through automation.) This strengthens the anti-trade, anti-immigrant sentiment within the Republican Party. It is a kind of conservatism, but not the pro-capital kind that has dominated the party in the Reagan-Bush era.

The G.O.P. is unlikely to renounce its support for globalism anytime soon. Although the United States is now a debtor nation with an embarrassingly large trade deficit, trade is still a two-way street. American companies want foreign buyers and American consumers like inexpensive foreign goods. Powerful retailers like Walmart oppose new taxes on imports.

Some new policies might benefit American workers, but Democrats are at least as likely to propose them as Republicans. International trade agreements could include stronger protections for workers. Displaced workers could have more opportunities for education or retraining. American industries could compete globally on the basis of quality–more like the Germans do–rather than on cost-cutting.

Another area in which working-class interests diverge from Republican establishment interests is taxation and spending. Wealthy Republicans have the most to gain from tax cuts and the least to lose from cuts in social spending. Working-class people have less to gain from tax cuts, since they are taxed at a lower rate already, and more to lose from cuts in social programs on which they increasingly rely.

The current debate over repealing and replacing Obamacare has dramatized this difference. Establishment Republicans have long advocated repeal, while giving little thought to replacement. Their main aim was to eliminate the new taxes on the wealthy that financed the new insurance subsidies. Trump supporters apparently believed him when he promised better health insurance coverage at lower cost. Then he double-crossed them by endorsing a House Republican bill that accomplished no such thing.  Similarly, the President’s tax “reform” bill turns out to be mainly a huge tax cut for the rich. His budget proposal includes not only that tax cut, but extreme cuts in programs that benefit many of his own supporters.

Working-class attitudes toward social spending are a little complicated, however. The American Dream is having a good enough job so that you don’t have to rely on any government programs. You want to get good health benefits at work, so you don’t need to obtain insurance from a government exchange or an expansion of Medicaid. Working-class conservatism often takes the form of anger that so many Americans do rely on Medicaid, or food stamps, or housing subsidies. In many ways, a vote for the Republican Party is a vote for a mythical America in which everybody is successful and nobody needs such things. Just as a vote against a clean energy policy is a vote for a mythical planet where human activity has little impact on the weather.

That gives the Democratic Party the opportunity and the challenge of presenting itself as the party of the real America. That’s the America where rapid economic change creates the need for a stronger safety net, since working-class incomes have become less reliable. It’s the America where enhanced threats from foreign competition and automation force us to create new and better jobs by investing more in the talents of our own people.

In short, the Democratic Party does not have to become the party of some “liberal elite” consisting of upper-middle-class professionals. It does not have to cede working-class voters to the more conservative party, where their interests are often overshadowed by those of the wealthy. Donald Trump may have gotten a lot of their votes this time, but they are very much up for grabs if he and his party let them down.

The complexities of race and class

In many of the discussions about how the Democratic Party is losing the middle class, it’s the white working class that is the focus. That raises the question of whether the attitudes of working-class voters have a racial–or even racist–component that attracts those voters to the more conservative party. That’s true to a degree, but any such conclusion has to be carefully qualified.

Much has been written about how the Republican Party–the party of Lincoln and in many respects the liberal party of the nineteenth century–became the more conservative party on racial issues. To make a long story short, the Democratic Party outraged much of its base in the “Solid South” by aligning itself with the Civil Rights Movement from the 1940s on. Then the conservative movement that captured the Republican Party in the 1960s and 70s built its majority largely by relying on a “Southern strategy.”

As with the immigration issue, establishment Republicans often take a free-market position on race. That view treats racial discrimination as an anachronism that free-market competition and equal opportunity should eliminate. Rational employers have an interest in hiring the best person for the job, and workers can succeed if they do the right things, like work hard, stay in school, and avoid having children before getting married (without the help of Planned Parenthood, of course!). The G.O.P. is also home to some cultural conservatives who believe, deep in their hearts, in a predominantly white, Christian society. But most Republicans just tend to minimize the problem of racial discrimination and prefer to solve it more by individual changes of attitudes than by government mandates.

White working-class attitudes about race tend to be conservative for at least two reasons. First, less educated people tend to be less enlightened about race. They are less aware of how systematic and enduring racial discrimination has been in American history. They are more likely to attribute the present condition of Black Americans to defects of character like lack of will power. But in addition, they do not have the greater economic security that comes with solid job credentials. Whites who cannot claim high status on the basis of educational attainment or income may take pride in being white, just as lower-achieving men may take pride in being real men, whatever they think that is. Putting down non-whites or women is one way of bolstering one’s own status. People who feel that way, whether they consciously articulate it or not, are more likely to be drawn to the political party that is less associated with movements for racial or gender equality, and less supportive of government assistance to the “undeserving” poor.

That, however, is not an unmixed blessing for the Republican Party. Racial and gender attitudes have changed so much in this country that no major party wants to be known as the party of white or male supremacy. The party establishment has to walk a fine line, tolerating some unenlightened attitudes without fully embracing them. The Democrats, on the other hand, will remain–and should remain–the party identified with the struggle for equality. Their best hope for winning over working-class voters is to try to alleviate the causes of working-class status anxiety. Again, promote investments in education and job creation, so that working people of all races and ethnicities can get ahead without having to be afraid of one another.

Although I thought that Donald Trump was going to lose the election because of his own failings, I did not agree with Hillary Clinton’s campaign strategy of attacking him and his followers instead of focusing primarily on economic issues. I thought it was a big mistake to describe his followers as “deplorable” racists and other kinds of bigots. Racial attitudes are now too complex and subtle for such a large segment of the population to be characterized that way. Economic insecurity and class tensions are no doubt complicated by the country’s unfortunate racial history. But I think that the best course for the more liberal party is to address the economic concerns that working families of all races have in common. Reject outright bigotry where it does exist, for sure, but do your best to convince people that a flourishing society has no need for it.

Leave a Comment » | Uncategorized | Tagged: , , , , | Permalink
Posted by Ed Steffes