Tag Archives: Corporatism

What Protectionism Looks Like

Having re-read E.D. Kain’s original post on economic nationalism, I’m struck by the disconnect between his (laudable) concern for preserving US jobs and the real political implications of a protectionist revival. Viewed from a certain perspective, we’re actually quite lucky that the business lobby has internalized the logic of free trade. This is particularly surprising because on other issues – tax credits, subsidies etc. – Big Business is generally enthusiastic about securing as many special favors as possible. Now it may be possible to recreate some benign form of American autarky – I’m not a trade economist, so I really don’t know – but our political process probably precludes this from happening. A more plausible legislative outcome is something along the lines of our awful farm bill, which is not a program I’d care to replicate.

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Despoiler Alert

An off-hand comment I left over at the League provoked this blast from Daniel Larison:

Quite clearly, the difference is that economic sanctions imposed on “rogue” regimes are aimed at punishing a foreign population and trying to force changes in another government’s internal policies, which never works, while measures designed to protect against cheap competition are aimed at supporting domestic industries. Critics of protectionism do not deny that these supports are successful, but insist that they should not be implemented for the sake of efficiency and “growth.” Governments impose economic sanctions on the assumption that people in other countries think and act as nothing more than consumers whose loyalties can be manipulated through high prices for imports. Opposition to protectionist measures presupposes treating citizens as if they were consumers whose loyalties should be manipulated with low prices for imports. Protectionist policies take for granted that national sovereignty and citizenship are relevant factors in determing the regulation of international trade. Economic sanctions policies are based on the assumption that concepts of national sovereignty and citizenship mean as little to members of other nations as they do to globalists in the West. Does that about cover it?

P.S. Protectionist has always struck me as a strange epithet, as if it were an insult to say that you protect things. I suppose the opposite of a protectionist would be a despoiler. Now that’s an epithet!

With respect to Mr. Larison, the evidence that protectionism enhances domestic industry is far from incontrovertible. As I mentioned in the original thread, advocates of industrial policy tend to cherry-pick their examples: post-war Japan is held up as a shining beacon of benign economic nationalism, while sub-Saharan Africa’s ill-fated encounter with industrial policy is rarely mentioned. Perhaps the Africans were doing it wrong? Or perhaps corrupt technocrats simply aren’t very good at betting the field. Even Japan – the industrialists’ favored example – suffers from an incestuous relationship between politicians and big business, a state of affairs that is undoubtedly linked to its history of industrial protectionism.

Theory and practice aren’t synonymous, so it’s worth examining the pragmatic barriers to centralized industrial policy. I find it odd that two avowed skeptics of collusion between big business and big government are so eager to hand over the United States’ tariff policy to corporate lobbyists. Do we really think K Street has internalized the best interests of working American families? Or is it more likely that any attempt to revive economic protectionism will be immediately hijacked by the Chamber of Commerce?

I’ve seen this movie before and I didn’t care for the ending. Read Roderick Long’s indispensable post on the secret history of the American economy – centralized industrial policy is what created modern-day corporate welfare. The cultural homogenization E.D. spends so much time criticizing is a result of a political process that privileges scale and personal connections over merit. Here’s a relevant excerpt from Long’s recent piece in Cato Unbound:

I don’t mean to suggest that Wal-Mart and similar firms owe their success solely to governmental privilege; genuine entrepreneurial talent has doubtless been involved as well. But given the enormous governmental contribution to that success, it’s doubtful that in the absence of government intervention such firms would be in anything like the position they are today.

In a free market, firms would be smaller and less hierarchical, more local and more numerous (and many would probably be employee-owned); prices would be lower and wages higher; and corporate power would be in shambles. Small wonder that big business, despite often paying lip service to free market ideals, tends to systematically oppose them in practice.

It’s also worth noting that the most prominent contemporary example of American protectionism is completely dominated by Big Business. If we can’t manage farm subsidies competently, how can we expect any industrial policy that emerges from Washington to truly have the best interests of American workers at heart?

I’m more sympathetic to Larison’s arguments about the importance of our national community’s economic and social vitality. But I’m left wondering why responsibility for preserving local craftspeople falls to the Department of Commerce and the Office of the U.S. Trade Representative. If local jobs and industry are important, citizens ought to support and expand these institutions of their own accord. Anything less displaces responsibility from local communities to a faceless – and unresponsive – Washington bureaucracy.

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Honorable Intentions

Having witnessed several noble debacles, I’ve come to believe that principled ideologues have some obligation to outline how their preferred policy choices would function in a real-world setting. It would have been nice, for example, to have had a robust national debate on the merits of occupying Iraq before we started lobbing smart bombs through the desert.

So while I enjoyed reading Roderick Long and John Schwenkler on corporatism and libertarianism, I’m left wondering how exactly one would go about liberalizing a broad range of economic activities in our current political environment. I’ve always thought that the idea of regulatory capture was one of the more persuasive rebuttals to various progressive policies, but I’m not sure why corporations would suddenly cease to influence the political process in the midst of a thorough-going effort to liberalize the economy. Long actually discusses this problem in the context of conflating libertarianism with the interests of big corporations:

Similar concerns apply to that other conservative virtue-term, “deregulation.” From a libertarian standpoint, deregulating should mean the removal of governmental directives and interventions from the sphere of voluntary exchange. But when a private entity is granted special governmental privileges, “deregulating” it amounts instead to an increase, not a decrease, in governmental intrusion into the economy. To take an example not exactly at random, if assurances of a tax-funded bailout lead banks to make riskier loans than they otherwise would, then the banks are being made freer to take risks with the money of unconsenting taxpayers. When conservatives advocate this kind of deregulation they are wrapping redistribution and privilege in the language of economic freedom. When conservatives market their plutocratic schemes as free-market policies, can we really blame liberals and leftists for conflating the two?

This is a real PR hurdle, but corporatism also poses an immense challenge to the good-faith implementation of libertarian policies. Despite our best intentions, the deregulatory process would remain extremely vulnerable to all sorts of political pressures. Given these structural constraints, I sometimes envision deregulation as a sort of libertarian dystopia – think Bush’s Prescription Drug Benefit on steroids – where corporate priviliges remain largely untouched while welfare programs are systematically dismantled in the name of “curbing government waste.” If we’re going to be stuck with a massive regulatory apparatus, I’m a lot more sympathetic to saving programs aimed at addressing real social needs, and I worry that libertarians and other small-government advocates risk providing intellectual cover for a political process that isn’t very liberal at all.

UPDATE: Edited for clarity.

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Dystopian Dream Girl

I meant to flag this a few days ago, but Michael Lind penned a few truly disturbing predictions for TNR in the wake of the bailout (emphases mine):

In democracies, temporary spending programs tend to become permanent, so the “normal” government share of GDP in the U.S. may rise to 35 or even 40 percent. This will not be the end of the world, but it will be the end of America’s small-government exceptionalism.

Another likely consequence is a shift of welfare benefits onto business. Confronted with a national debt that may exceed GDP, Congress will avoid creating expensive new social programs. Instead, politicians may use unfunded mandates or tax credits to pressure corporations into doing the job of the welfare state.

The results of this predicted realignment promise to combine all the worst features of mid-century Leftism and the modern GOP:

The U.S. economy a decade from now may be dominated by a few huge universal banks and a small number of gigantic corporations, all of them “too big to fail.” In return for implicit government bail-out guarantees, these swollen private-sector Leviathans will abandon “greed is good” rhetoric for noble sentiments about corporate responsibility. The emerging system might be called “lemon corporatism.” A managerial state dominated by oligopolies and monopolies, where government encourages employer paternalism as an alternative to public welfare spending, would resemble contemporary Japan and the dystopian America of “Rollerball.”

Barring new, unavoidable conflicts, the Pentagon is also likely to be downsized, following the reduction of the U.S. efforts in Iraq and Afghanistan. The U.S. will remain the leading great power, but there will be no new American century, nor will Europe, hit even worse than the U.S., be a plausible partner in a Pax Atlantica. As in the 1970s, the U.S. will find itself in a multipolar world, struggling in both the commercial and the military arenas.

Something similar was suggested by National Review’s Robert Conquest in 2000:

In any case, at the political level, we see a meld of state and capitalist bureaucracies into something resembling a corporatist society. And it may be noted that this type of corporatism, with a capitalist element merged into (and controlled by) the state machine, is the sort of order that seems to be emerging in China. If so, we see an aberrant and paradoxical confirmation of the old “convergence” theory advanced by John Kenneth Galbraith and others. Such a corporatism, if established in Western societies, is bound to lead to a degeneration of democratic habits, civic relations, and, in the long run, mental independence, and so to an inability to cope with world or other problems.

Incidentally, I part ways with Lind on his predictions of American military decline. In a relative sense, the emergence of powerful strategic competitors could reduce the United States’ global influence, but I find it very difficult to imagine either party challenging the military-industrial complex. Obama is widely-derided as the most liberal presidential nominee in recent memory, but he’s done nothing to reduce our absurd defense expenditures, and his vision of the United States’ foreign policy is also quite expansive. Instead of cutting military spending, our political class will probably use their incestuous relationship with the defense industry as a template for “reforming” the rest of the economy.

Per Conquest, a corporatist approach to governance and social welfare will erode popular accountability on a massive scale. The results of the bailout debacle presage an elite consensus that is particularly damaging participatory democracy. Rule by technocrats and insiders will become the only way to plausibly navigate our Byzantine web of private sector institutions and public sector regulations. Much of this will take place at the transnational level – just now we’ve learned that the United States and Europe are considering massive cash infusions in return for nationalization “partial ownership stakes” in several major banks. The exigencies of the situation, we’re told, foreclose the possibility of careful deliberation. We must sit back quietly while the experts determine the best course of action. Things are simply too complicated for the voters to get involved.

None of this is entirely unprecedented, but Lind’s vision of the future is downright frightening. I’m not sure how any democracy can survive when its citizens are shut out of the deliberative process.

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