WASHINGTON – In the Financial Times today, Rana Foroohar touts the Biden-Harris Administration’s work to revitalizing the American economy by promoting worker-centered trade policy.
Foroohar writes that “[t]he problem in the global economy today isn’t tariff barriers — it’s concentrated power, be it in states […] or companies.” The Biden-Harris Administration is tackling this issue by delivering fair competition and fair trade – which in turn helps our workers and small businesses thrive.
Read more below:
Financial Times: Opinion | Power, as well as price, matters in a well-run economy
[Rana Foroohar, 10/21/24]
That’s the lesson to take from both the founding of the Bretton Woods system 80 years ago and the Biden administration today.
Joe Biden may be a one-term president, but his administration has changed the global political economy in ways that will continue to resonate long after he is gone. In particular, his trade policy put an end to the era of laissez-faire globalisation, which tended to favour the unfettered interests of the largest corporations and state actors, and ushered in a post-neoliberal era in which labour, natural resources and the market-distorting effects of concentrated power are once again major concerns for policymakers.
Critics like to portray this shift as some kind of wacky, woke deviation from economic norms. It is certainly a change from the trickle-down, market-knows-best approach of the last half century. But the Biden stance actually takes the US back to the first principles of the post-second world war period during which the Bretton Woods institutions were established. Back then, US leaders tried, and only partially succeeded, in crafting a postcolonial, worker-centred approach to trade, one that looks a lot like what the Biden White House has tried quite rightly to resuscitate.
Consider the original 1945 state department proposals on world trade and employment. They argued against government restrictions on trade, but also recognised the power of private actors to distort the system, as well as the need for states to guarantee regularity in the production of critical goods and secure employment at home.
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The worries that European states had about each other in the 1930s are clearly analogous to those that many countries today have about China exporting its own employment and overproduction issues to the rest of the world.
That’s why the US proposals acknowledged that “no government is ready to embrace ‘free trade’ in any absolute sense . . . Trade may also be restricted by business interests in order to obtain the unfair advantage of monopoly . . . Firms have banded together to restrain competition . . . these practices destroy fair competition and fair trade, damage new businesses and small businesses, and levy an unjust toll upon consumers. Upon occasion, they may be even more destructive of world trade than are restrictions imposed by governments.”
This sounds a lot like the Biden administration’s theories around antitrust and competition policy, which dovetail with its trade policy. The problem in the global economy today isn’t tariff barriers — it’s concentrated power, be it in states (like China) or companies (be they meatpackers or giant technology platforms). Building multiple nodes of production and consumption globally, and ensuring high labour and environmental standards, requires public restraint of undue power, no matter where it comes from.
Sadly, the initial US government approach to the Bretton Woods institutions was watered down by American business interests in the run-up to the creation of the Gatt (later the WTO), and they were further eroded in the 1970s with the turn towards the Chicago school notion that price not power matters in a well-functioning economy.
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The great triumph of the Biden administration is that it has reawakened America and to a great extent the world to an understanding that power exists in the political economy, and all of the challenges of the day — from Chinese steel and aluminium dumping to Big Tech monopoly power to recurring financial crises, supply chain disruption and the evolution of AI — will require an approach that puts power, not just price, at the centre of market-making.
I take great heart from the fact that the most recent Nobel laureates in economics, Simon Johnson, Daron Acemoglu and James Robinson, have a body of work that argues for exactly that. In a recent CEPR webcast, Johnson points out that the “postcolonial” vision put forward by the Biden administration, one focused on people and planet rather than merely price, is what the Bretton Woods system meant to deliver before it was hijacked by powerful state and corporate interests.
It’s a point well worth remembering as we look to reinvent these institutions and reform global trade today.
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