Saving Democracy from the Metropolitan Elite.
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• The New Class War: Saving Democracy from the Metropolitan Elite, by Michael Lind, Atlantic Books, 2020
Other relevant sources of information:
/////// Quoting Lind: The New Class War (2020, p, x):
Europe and North America are experiencing the greatest revolutionary wave of political protest since the 1960s or perhaps the 1930s. Except in France, the transatlantic revolution to date has remained nonviolent. But it is a revolution nonetheless.
To quote the saying of the radicals of the 1960s: the issue is not the issue. If the immediate issues that animate mostly native working-class populism in particular countries – immigration and trade for Trump, immigration and sovereignty for Brexiteers, high levels of Muslim immigration for German and Scandinavian populists, fuel prices and other domestic policies whose costs fall chiefly on the peripheral working class, in the case of the French yellow vest protestors – are not the issue, then what is the issue?
The issue is power. Social power exists in three realms – government, the economy, and the culture. Each of these three realms of social power is the site of a class conflict – sometimes intense and sometimes constrained by inter-class compromises. All three realms of Western society today are fronts in this new class war.
The first class war in the West began a century and a half ago, in the early stages of industrialization, when the pre-modern agrarian social structure was shattered by the emergence of the two major modern social classes: industrial or service workers on the one hand and, on the other, bourgeois capitalists, later joined by university-credentialed managers and professionals. Reforms were partial and limited, until the imperative of mobilizing entire national populations for war made ending class conflict a necessity.
During and after World War II, the United States and its Western European allies, often on the basis of wartime precedents, adopted versions of what I describe in this book as democratic pluralism. In the America of Truman and Eisenhower, the Germany of Adenauer, the Britain of Churchill, and other Western democracies, power brokers who answered to working-class and rural constituencies – grassroots party politicians, trade union and farm association leaders, and church leaders – bargained with national elites in the three realms of government, the economy, and the culture, respectively. In the era of democratic pluralism, the societies of the North Atlantic enjoyed mass prosperity and reduced inequality.
Between the 1960s and the present, as declining fear of great-power conflict gradually reduced the incentives of Western elites to make concessions to Western working classes, the postwar system has been dismantled in a revolution from above that has promoted the material interests and intangible values of the college-educated minority of managers and professionals, who have succeeded old-fashioned bourgeois capitalists as the dominant elite.
What has replaced democratic pluralism can be described as technocratic neoliberalism. In the realm of the economy, corporations have promoted de-unionization and labor market deregulation to the detriment of workers. Firms have also embraced global labor arbitrage, in the form of offshoring production to poor workers abroad or employing immigrant workers, to weaken unions and escape the constraints of national labor regulations.
Meanwhile, in the realm of politics and government, parties that were national federations of local, mass-membership organizations have given way to parties controlled by donors and media consultants. At the same time, many of the powers of democratic national legislatures have been usurped by, or delegated to, executive agencies, courts, or transnational bodies over which college-educated professionals have far more influence than the working-class majority, whether native- or foreign-born.
Finally, in the realm of culture, including media and education, local religious and civic watchdogs have lost power, often as a result of activism by judges born into the social elite who share their libertarian economic and social views with their university-educated peers.
The technocratic neoliberal revolution from above, carried out in one Western nation after another by members of the ever more aggressive and powerful managerial elite, has provoked a populist backlash from below by the defensive and disempowered native working class, many of whom are nonwhite (a substantial minority of black and ethnic British voters supported Brexit, and in the US an estimated 29 percent of Latinos voted in 2016 for Trump). Large numbers of alienated working-class voters, realizing that the political systems of their nations are rigged and that mainstream parties will continue to ignore their interests and values, have found sometimes unlikely champions in demagogic populists like Donald Trump, Nigel Farage, Boris Johnson, Marine Le Pen, and Matteo Salvini.
For all their differences, these populist demagogues have launched similar counterattacks on dominant neoliberal establishments in all three realms of social power. In the realm of the economy, populists favor national restrictions on trade and immigration to shield workers from competing with imports and immigrants. In the realm of politics, populists denounce neoliberal parties and factions as corrupt and elitist. And in the realm of culture, populists denounce elite-promulgated multiculturalism and globalism, while deliberately flouting the norms of the “politically correct” etiquette that marks membership in the university-educated managerial elite.
Will populists in Europe and North America succeed in overthrowing and replacing technocratic neoliberalism? Almost certainly not. Populist voters are a substantial and enduring part of Western electorates, but they are only one constituency in pluralistic societies with increasingly fragmented political systems.
Moreover, populist demagogues tend to be charlatans. They are often corrupt. Many are racists or ethnocentric, though these traits are exaggerated by establishment critics who compare them to Mussolini and Hitler. While demagogic populists can win occasional isolated victories for their voters, history suggests that populist movements are likely to fail when confronted with well-entrenched ruling classes whose members enjoy near monopolies of expertise, wealth, and cultural influence.
In response to populist rebellions from below, the managerial elites of various Western countries may turn to outright repression of the working class by restricting access to political activity and the media by all dissenters, not populists alone. As an alternative, the managerial ruling classes may try to co-opt populist rebels by making minor concessions on immigration, trade, or domestic policy.
But sharing wealth through redistribution and symbolic gestures of respect are unlikely to end the new class war, if the small managerial overclass is not willing to share genuine power with the working-class majority. Achieving a genuine class peace in the democracies of the West will require uniting and empowering both native and immigrant workers while restoring genuine decision-making power to the non-university-educated majority in all three realms of social power – the economy, politics, and culture.
Demagogic populism is a symptom. Technocratic neoliberalism is the disease. Democratic pluralism is the cure.
/////// End of quote from Lind: The New Class War
/////// Quoting Lind: The New Class War (2020, p, 1):
The Cold War has been followed by the class war. A transatlantic class war has broken out simultaneously in many Western countries between elites based in the corporate, financial, government, media, and educational sectors and disproportionately native working-class populists. The old spectrum of left and right has given way to a new dichotomy in politics among insiders and outsiders.
None of the dominant political ideologies of the West can explain the new class war, because all of them pretend that enduring, self-perpetuating social classes no longer exist in the West.
Technocratic neoliberalism – the hegemonic ideology of the transatlantic elite – pretends that inherited class status has virtually disappeared in societies that are purely meritocratic, with the exception of barriers to individual upward mobility that still exist because of racism and misogyny. Unable to acknowledge the existence of social class, much less to discuss the conflicts among classes, neoliberals tend to attribute populism to bigotry or frustration on the part of maladjusted individuals or a resurgence of 1930s fascism or the sinister machinations of Russian president Vladimir Putin’s nationalist regime.
Like neoliberalism, mainstream conservatism assumes that hereditary classes no longer exist in the West. Along with neoliberals and libertarians, establishment conservatives claim that the economic elite is not a semi-hereditary class but rather an ever-changing, kaleidoscopic aggregate of talented and hard-working individuals. According to libertarian conservative ideology, the short-term interests of employers are always identical with those of workers and society as a whole. In conventional conservative thought, meritocratic capitalism is threatened from within by an anti-capitalist “new class” consisting of progressive intellectuals – professors, journalists, and nonprofit activists.
For its part, Marxism takes classes and class conflict seriously. But orthodox Marxism, with its secularized providential theory of history and its views of industrial workers as the cosmopolitan agents of global revolution, has always been absurd.
A body of thought does exist that can explain the current upheavals in the West and the world. It is James Burnham’s theory of the managerial revolution, supplemented by the economic sociology of John Kenneth Galbraith. Burnham’s thought has recently enjoyed a revival among thinkers of the American center-right. Unfortunately, Galbraith’s sociology, along with his economics, remains out of fashion.
James Burnham was a leader in the international Trotskyist movement in the 1930s before he became a zealous anticommunist and helped to fund the post-World War II American conservative movement. Burnham was influenced by the argument of Adolf Berle and Gardiner Means in The Modern Corporation and Private Property (1932), which documented the separation of ownership and control in large-scale modern enterprises, and possibly by Bruno Rizzi‘s Bureaucratization of the World (1939). In his worldwide bestseller The Managerial Revolution (1941), Burnham argued that in an area of large-scale capitalism and the bureaucratic state, the older bourgeoisie was being replaced by a new managerial class:
“What is occurring in this transition is a drive for social domination, for power and privilege, for the position of ruling class, by the social group or class of the managers. … At the conclusion of the transition period the managers will, in fact, have achieved social dominance, will be the ruling class in society. This drive, moreover, is world-wide in extent, already well advanced in all nations, though at different levels of development in different nations.”
“Capitalism is disappearing, but Socialism is not replacing it. What is now arising is a new kind of planned, centralized society which will be neither capitalist nor, in any accepted sense of the word, democratic. The rulers of this new society will be the people who effectively control the means of production: that is, business executives, technicians, bureaucrats and soldiers, lumped together by Burnham, under the name of “managers.” These people will eliminate the old capitalist class, crush the working class, and so organize society that all power and economic privilege remain in their own hands. Private property rights will be abolished, but common ownership will not be established.
The new “managerial” societies will not consist of a patchwork of small, independent states, but of great super-states grouped round the main industrial centers in Europe, Asia, and America. These super-states will fight among themselves for possession of the remaining uncaptured portions of the earth, but will probably be unable to conquer one another completely. Internally, each society will be hierarchical, with an aristocracy of talent at the top and a mass of semi-slaves at the bottom.”
Following the abandonment of communism, the global norm in both developed and developing countries, democratic and authoritarian alike, has been some version of the mixed economy dominated by bureaucratic corporations, bureaucratic government, and bureaucratic nonprofits, which are staffed by university-credentialed national elites who circulate among the three sectors. What Orwell called Burnham’s “great super-states grouped round the main industrial centers in Europe, Asia, and America” exist today under the names of NATO and NAFTA, the EU, Russia’s Eurasian Economic Union (EAEU), and the informal sphere of influence coalescing around China.
While private property rights have not been abolished, even in so-called capitalist countries they have been diluted and redefined beyond recognition. Vast numbers of temporary holders of corporate shares that are frequently bought and resold by intermediaries like mutual funds are said to “own” corporations. Ordinary people, with loan payments or installment plans who in effect are renting houses, cars, and phones from banks or corporations likewise are owners in name only.
Burnham’s theory of the managerial revolution is similar to the economic sociology of the American economist John Kenneth Galbraith. In their politics, the conservative Burnham and the liberal Galbraith could hardly have been more different from each other, despite their shared friendship with the influential conservative editor and journalist William F. Buckley Jr. Yet both believed that a new ruing elite had displaced the old bourgeoisie and aristocracy. In The New Industrial State (1967), Galbraith called the new elite the “technostructure.” In his memoir A Life in Our Times (1981) Galbraith wrote: “James Burnham, partly because he was a stalwart right-winger well out of the political mainstream and partly because he was not a certified academician, never got full credit for his contribution. In early editions of The New Industrial State I was among those in default.
While Burnham and Galbraith included engineers and scientists in the new elite, they were not describing a technocracy like the utopian “soviet of technicians” hoped for by the maverick economist Torstein Veblen. The most important managers are private and public bureaucrats who run large national and global corporations, government agencies, and nonprofit organizations. They exercise disproportionate influence in politics and society by virtue of their institutional positions in large, powerful bureaucracies. Some are independently wealthy, but most are salaried employees or fee-earning professionals. Most of today’s billionaires were born into this university-educated, credentialed bureaucratic upper middle-class, and their heirs tend to disappear back into it in a generation or two. Pre-modern titled aristocrats who survive in the contemporary West are anachronisms who, for the most part, avoid ridicule by disguising themselves as hard-working professionals and managers.
/////// End of quote from Lind: The New Class War
/////// Quoting Lind: The New Class War (2020, p, 67):
When a destructive forest fire breaks out, the question “How did it start?” has two answers. One has to do with what literally started the fire – a spark from a lightning strike, a poorly tended campfire, or the gasoline can of an arsonist. The other answer identifies the reason why dead wood and other tinder was allowed to accumulate over a long period of time in quantities sufficient to enable a single flame to ignite a conflagration.
In the same way, in understanding the populist eruptions that are burning down long-established party systems in Europe and North America, we must distinguish the sparks from the fuel. In different countries the sparks have been different – in Germany a sudden and controversial influx of Middle Eastern immigrants beginning in 2015, in France a regressive tax that fell heavily on working-class citizens, in the United States the migration of millions of illegal immigrants and the devastation of industrial regions by East Asian imports and the decision of US companies to shutter their factories and replace them by new ones abroad.
But what fueled the conflagration, once kindled, is a mass of grievances that have accumulated over years or decades. The class conflict in the transatlantic West has erupted into a roaring conflagration only recently, with the Brexit vote and the election of Donald Trump in 2016, the coming to power of a coalition of populist outsiders in Italy, the yellow vests protests in France, and other political fires. But the class war has been smoldering for half a century.
For the last two generations, in different decades, and in different Western countries, the occasions of populist protest have been different – the white backlash against the civil rights revolution of the 1960s, the traditional backlash against the sexual and censorship revolution of the 1970s, populist resistance to the Japanese import shocks of the 1980s, and then, more recently, mass immigration, globalization, deindustrialization, and the Great Recession. All of these different issues resulted in similar alignments of large portions of the non-college-educated working class against managerial and professional elites.
Long before Brexit and Trump, their lack of voice and influence made alienated native working-class voters – mostly but not exclusively white – a destabilizing force in politics. In the United States, “hardhats” and “Middle American radicals” were already identified as a social force as early as the 1960s and 1970s, when the foreign-born population of the US was at its lowest point and immigration was not a major issue. The antecedents of Trumpism can be traced to a series of independent presidential campaigns that drew many members of the white working class out of the midcentury New Deal coalition: George Wallace‘s independent presidential campaign in 1968, which won Wallace 13.5 percent of the popular vote, and the 1992 campaign of Ross Perot, who captured 19 percent, the highest percentage for a third-party candidate since Theodore Roosevelt ran as the candidate of the Progressive Party in 1912. Although he was a Texan, Perot did poorly among white southerners and did best among high-school educated whites in the industrial North. In 2000 Donald Trump considered running for president as the candidate of Perot’s short-lived Reform Party.
In Europe as well, populist nationalism was part of the political landscape long before its dramatic breakthroughs in the second decade of the twenty-first century. In 2002, disaffected former mainstream party voters in addition to the tiny number of far-right voters permitted the anti-Semitic neofascist candidate Jean-Marie Le Pen to make it to the second round in the French presidential elections. The only reason there was a British referendum on membership in the European Union at all was the desire of the British conservatives to appease a growing number of populist voters. Before the British “Leave” vote won the Brexit referendum in 2016, Dutch and French voters in 2005 and Irish voters in 2008 had rejected measures promoting greater centralization of the European Union in referendums. In all three countries, political elites later succeeded in maneuvers to ensure that the popular referendum results were nullified.
As a political phenomenon, then, populism in the West is nothing new. It is an ongoing counterrevolution from below against the half-century-long technocratic neoliberal revolution from above imposed by Western managerial elites. At every stage, populist movements of some sort have resisted technocratic neoliberalism. Again and again, because of their lack of wealth, power, and cultural influence, the populists have lost, becoming more alienated and resentful. And so the dry wood accumulates to fuel the next conflagration.
Thanks to the neoliberal revolution from above since the 1960s, on both sides of the Atlantic there are substantial numbers of voters – by no means only white or only working class – who have a coherent mix of public policy preferences that are ignored by national politicians and policy makers. These voters combine support for generous government entitlement like public pensions and health care spending with opposition to high levels of unskilled immigration and moderate cultural conservatism – what the British political scientist Matthew Goodwin calls a combination of economic and cultural protection.
How big is this populist group? In 2015, the political scientist Lee Drutman, then my colleague at New America, the think tank I cofounded, used survey data to map voters on two axes – one involving attitudes toward immigration and one involving attitudes toward Social Security. The diagram that resulted has since achieved considerable fame in the small world of social science charts.
Drutman calculated that in the United States, “populists” – defined as those who favored maintaining or increasing Social Security spending, while maintaining or decreasing immigration – made up 40.3 percent of the electorate, while “moderate leftists” (American “liberals” or “progressives”), who supported maintaining or increasing both Social Service and immigration, made up 32.9 percent, with “moderates” (who wanted no changes in either Social Security or immigration) at 20.5 percent. The two groups that wanted to cut Social Security and increase immigration, “business conservatives” (3.8 percent), who are better described as “neoliberals,” and “political conservatives” (2.4 percent) who might also be described as “libertarians,” made up only 6.2 percent of voters.
In light of the fact that populists in the US, defined by this measure, outnumber neoliberals and libertarians combined by more than six to one in the American electorate, why is it that no party – indeed, no wing of either of the two major parties – represent their views? Drutman speculates that neoliberalism is the view of “the wealthy donors who are eager to cut entitlements because they are worried about high taxes and are also eager to expand immigration because they’d like to have more potential employees to choose from.” According to Drutman, both populists and “business Republicans” tend to support the Republican Party. The business Republicans, whose preferences Republican politicians promote, on average make $69,711 a year, around $30,000 more than the Republican populists, whose preferences most Republican politicians ignore.
The second-largest group of voters in the American electorate, those whom Drutman calls “liberals,” that is, the moderate left, shares liberal cultural views and support of mass immigration with the free market libertarian right. But on economic policy issues, leftists, agreeing with populists on issues like Social Security spending, find their policy preferences neglected by the much smaller but more influential neoliberal faction of the Democratic party.
One way to understand these results is to recognize that in the United States and similar Western democracies there are two political spectrums, one for the college-educated managerial-professional overclass minority and one for the non-college-educated working-class majority of all races. Each of these class-based political spectrums has its own “right,” its own “left,” and its own “center.”
The overclass political spectrum is bounded on the right by extreme free market libertarianism of the kind associated with the economist Milton Friedman ad promoted by the Koch brothers and the Cato Institute in the US. The elite political spectrum is bounded on the left by moderate, market-friendly neoliberalism of the kind associated with the Clintons and Obama in the US, Blair and Brown in the UK, and Schröder in Germany. The center of the elite political spectrum is occupied by moderate business-class conservatives like the Bush dynasty in the US, former prime ministers David Cameron and Theresa May in the UK, Angela Merkel and the Christian Democrats in Germany, and Emmanuel Macron and his supporters in France.
The “left,” “right,” and “center” of the working-class political spectrum are quite different from the equivalent positions on the overclass political spectrum. the leftmost point on the spectrum combines leftist cultural attributes with something like old-fashioned European social democracy, supportive of government aid to citizens and socially liberal. The rightmost point is defined by conservative populism – socially conservative on issues of sex and reproducing, but supportive of government programs that help the working class, like Medicare and Social Security in the US. The “center” can be identified with what the sociologist Donald Warren in the 1970s called “Middle American Radicalism” – moderate social attributes combined with pro-labor, New Deal-style democratic pluralism.
To put it another way, the center of gravity of the overclass is center-right (pro-market) on economic issues and center-left (anti-traditional) on social issues. In comparison, the center of gravity of the much larger working class is center-left on economic issues and center-right on social issues.
Populists combined with social democratic leftists make up half or more of the US population, but they are almost completely unrepresented among the college-educated overclass professionals who make up most of the personnel in legislatures, executive agencies, courts, corporate suits, think tanks, universities, philantropies, and media corporations. This explains why, for the last generation, “centrism” in American politics has been defined as overclass centrism, identified with support for cutting working-class entitlements like Social Security and Medicare in the name of “fiscal responsibility,” while embracing individualistic liberal views on reproduction and sex and, more recently, gender identity. Meanwhile, the “radical center,” the midpoint of the working-class majority’s political spectrum, has either been ignored by politicians and pundits and academics altogether or grossly mis-characterized by overclass journalists and overclass academics as the “far right” and lumped together with neo-Nazis and the Ku Klux Klan.
The single most important factor explaining the rise of populism in the US and Western Europe is the changing class composition of center-left parties between the mid-twentieth century and the early twenty-first. What used to be parties of the native white working class and rural voters have become parties of upscale members of the native white managerial elite, allied with racial and ethnic minorities and immigrants. Following the 2018 midterm elections, forty-two of the wealthiest fifty congressional districts in the United States were represented by Democrats. Between 2010 and 2018, whites with a college degree went from 40 to 29 percent of the voters in the Republican Party, while white voters with less than a college education expanded from 50 to 59 percent of the Republican electorate, a trend that accelerated during the campaign and presidency of Donald Trump.
The Democratic Party in the US is now a party of the affluent native white metropolitan elite, allied with immigrants and native minorities brought together by non-economic identity politics rather than by class politics. In Britain, the social base of the Labour Party has undergone a similar shift. In Germany, the Green Party shares the best-educated and wealthiest voters of the managerial-professional overclass with the free market libertarian Free Democrats.
The exclusion of the views of large numbers of voters from any representation in public policy or debate has created openings in politics that demagogic populists have sought to fill. Alone among Republican candidates in the 2016 presidential primaries, Donald Trump both denounced the Iraq War as a mistake and opposed cuts to Social Security and Medicare. This combination of views was the exact opposite of the orthodox conservative party line. George W. Bush, after all, had invaded Iraq and had sought to cut Social Security by means of partial privatization. Indeed, Trump’s stance on Social Security put him to the left of then-president Barack Obama, who, like Bush, had proposed cutting Social Security, by the different method of altering how it is indexed for inflation. Trump’s positions were heretical in the Republican Party and the American establishment as a whole. But they were popular with millions of American voters. And so trump went on to defeat George W. Bush’s brother and would-be successor, Jeb Bush, in the Republican primaries, and then to defeat Hillary Clinton in the electoral college, in part by appealing to former Democratic voters in the Midwest whom neoliberal overclass Democrats had ignored.
When populists have succeeded in Western countries, they have done so because they have opportunistically championed legitimate positions that are shared by many voters but excluded from the narrow neoliberal overclass political spectrum. In particular, they have given voice to popular concerns about trade and immigration that have been ignored for decades by the managerial ruling class.
In the late twentieth century, when its electoral base was still the native-born working class, the Democratic Party was more favorable to protectionist trade policies and restrictionist immigration policies than the Republican, then the party of the employer elite. Thanks in part to the trade issue, many former working-class whites have migrated into the Republican Party in the last few decades, while elite white college-educated professionals and their children increasingly have favored the Democrats.
As a result of the changing class composition of the two parties, the older dichotomy of Democratic protectionism and Republican support for free trade has been reversed. According to the Pew Research Center, by a margin of 56 percent to 38 percent, Democratic voters believe that free trade agreements have been good for the US. Among Republicans, those numbers are flipped: by a 53 percent to 38 percent margin, a majority of Republicans believe that free trade has been a bad thing. While partisan affiliations have been changed over time, the underlying division over globalization among overclass voters and working-class voters has not.
In immigration policy as in trade policy, the mainstream parties in the US and Europe have reversed positions, reflecting their changing class makeup. The historian of organized labor Vernon Briggs observed that “it is not surprizing that at every juncture and with no exception prior to the 1990s, the American labor movement either directly instigated or strongly endorsed every legitimate initiative by the US Congress to regulate and to restrict immigration. It also supported all related efforts to strengthen enforcement of their policies.
/////// End of quote from Lind: The New Class War
/////// Quoting Lind: The New Class War (2020, p, 149):
The economist Dani Rodrik has argued that “democracy, national sovereignty and global economic integration are mutualy incompatible: we can combine any two of the three, but never have all three simultaneously and in full.” If Rodrik’s trilemma, or “impossibility theorem,” is correct, then global integration should be sacrificed to the need to preserve and strengthen the peace treaty among the classes at home.
At the global level, this requires abandoning the ideal of a rule-governed gobal market for an à la carte approach to cross-border integration. Rich and poor countries alike should be allowed to use national developmentalist strategies tailored to their particular needs.
The term “developmental state” was used by scholars like Chalmers Johnson, Alice Amsden, and Meredith Woo-Cumings to describe the post-1945 regimes of Japan, South Korea, Taiwan, and Singapore, which relied on export-oriented strategies as part of programs to industrialize and catch up with the West. But as economists Erik Reinert, Ha-Joon Chang, and Michael Hudson, among others, have demonstrated, the mercantilism of Renaissance and early modern Western city-states, kingdoms, and empires was a version of developmentalism. Britain before the 1840s, Imperial Germany, the US before World War II (and to some degree to this day), Gaullist France, Japan, South Korea, Taiwan, and China have all had state-sponsored systems of national industrial development and technological innovation.
National economic development has two goals – widespread national productivity and widely shared national prosperity. Productivity growth must be encouraged in all sectors, not just a few advanced industries that glitter in a morass of stagnation. And the gains from growth must be shared among the managerial overclass and the working-class majority.
The two goals – productivity and prosperity – cannot be separated. If productivity is increased but the gains are concentrated in a tiny oligarchy, the country will lack a mass home market of consumers as an adequate base for globally competitive industries with increasing returns to scale, something that remains important in our less-than-global economy. The country will have temporarily purchased national productivity at the price of class peace. If, by means of redistribution, incomes are equalized but productivity stagnates or declines, the country will fall further and further behind more productive foreign rivals. The country will have temporarily purchased class peace at the price of national productivity.
In the system that succeeds today’s neoliberalism, global integration should be subordinated to the need to preserve and strengthen the democratic pluralist peace treaty among the managerial class and the working class at home, while government, business, and organized labor work together to promote technological modernization and shared gains from growth. the neoliberal argument that governments must not interfere in globalization, and can therefore only compensate the losers or help them to adapt, must be rejected. It is not necessary to reject trade and immigration as such. But democratic nation-state can, and should, engage in selective globalization. They should adopt strategic trade policies and selective immigration policies in the interest of national productivity, national productivity, and the bargaining power of citizen-workers and legal immigrants in negotiations with employers.
Compared to the devastation of industrial workers and industrial regions in the US and Europe that has contributed to the rise of anti-system populism, the benefits to consumers from imports from low-wage countries have been trivial, as even some defenders of offshoring admit. A 2017 report prepared for the US-China Business Council for Oxford Economists estimated that “average prices are 1-1.5 percent lower as a result of imports from China. Oxford Economics estimates that the influence of such low prices boosted US GDP by up to 0.8 percent in 2015.” Oxford Economics cites other studies that have concluded “that greater import penetration from China reduced US inflation by about 0.1 percent annually in the late 1990s and early 2000s” and that an Apple iPhone might cost 5 percent more if assembled in the US.
Does the benefit to workers in developing countries outweigh the cost to developed-country workers of cheap-labor globalization? When China is excluded from the data, developing countries grew at a lower rate in the globalizing era of 1980-2000 than in the more protectionist period of 1960-1980. Dani Rodrik has argued that developing countries today and in the future can no longer benefit from export-oriented manufacturing strategies like those of China, Japan, South Korea, and Taiwan and must instead focus on upgrading their non-traded domestic service industries.
Global labor arbitrage in the form of off-shoring and immigration is not the only cause of rising inequality and stagnant wages in the US and similar nations, or even the most important. Only a minority of workers labor in import-competing industries or compete directly against immigrants at home. And wages and unemployment levels are affected by many other factors, including changes in tax laws, reclassification of employees as independent contractors, zero-hours contracts, central bank austerity policies, and, in the US, the continuing practice of interregional labor arbitrage among states and the erosion of the minimum wage by inflation. But the two forms of global labor arbitrage have had their effects multiplied by weakening two institutions that reinforce the bargaining power of workers: unions and the welfare state.
Private sector labor unions managed to limit the arbitrary power of employers from World War II until late in the Cold War. Union membership in the US has plummeted from roughly a third in the mid-twentieth century to only 10.5 percent in 2018. This is a transatlantic trend. While a few countries retain high union density, among the developed nations of the Organization for Economic Cooperation and Development (OECD), the percentage of the labor force that is unionized has declined from 30 percent to 17 percent on average.
This matters because, according to one estimate, the decline in unionization explains much of the growth in wage inequality. The link between coverage by collective bargaining agreements and the share of the working poor in Western nations is indisputable. In the US, with only one in ten workers covered by union contracts, more than a quarter work in low-wage jobs. In France and Denmark, where more than 80 percent of workers are covered, only 11 and 8 percent, respectively, receive low wages.
Labor unions can be weakened or destroyed by off-shoring or the threat of off-shoring, or in some cases by the use of immigrants, legal or illegal, as a reserve army of labor. In the case of automobile unions, the effects of labor arbitrage – both within nations and among them – are obvious. Not only American firms but also German, Japanese, and South Korean car companies have avided dealing with unionized workforces in the American “rust belt” by moving jobs to non-union workforces in the American South and Mexico. The use by employers of immigrants, both legal and illegal, to weaken or destroy unions in US sectors like agriculture and meatpackaging and janitorial work has been well documented.
The mere threat of replacement by foreign workers or immigrants can serve to intimidate a much larger group than those who are actually replaced. During the economic boom of the 1990s more than half of all employers in one study, to discourage union organizing, threatened to shut down all or part of a plant, even though employers acted on the threat in fewer than 3 percent of the cases.
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/////// Quoting Lind: The New Class War (2020, p, 153):
In addition to weakening organized labor, high levels of immigration can reduce public support for welfare state services that bolster the bargaining power of workers by allowing them to “hold out” longer in negotiations with employers. In modern Western welfare states, lower-paid immigrant workers may compete with better-paid native workers for limited public resources such as schools, hospitals, welfare services, or, in some countries, public housing. Even in the absence of direct occupational rivalry, this competition for public goods among ethnically divided sections of the working class can provoke a backlash that is channeled against the welfare state itself.
The incompatibility of the welfare state with mass immigration was noted by the libertarian economist Milton Friedman: “If you have a welfare state, if you have a state in which every resident is promised a certain minimum level of income, or a minimal level of subsistence, regardless of whether he works or not, produces it or not. Then [free immigration] really is an impossible thing.” Friedman callously welcomed illegal immigration – but only as long as illegal immigrants were ineligible for welfare: “But it’s only good so long as it’s illegal …. Make it legal and it’s no good. Why? Because as long as it’s illegal the people who come in do not qualify for welfare, they don’t qualify for social security, they don’t qualify for the other myriad of benefits.”
His ideological opposite, the progressive economist Paul Krugman, agrees with Friedman’s political point. Because modern America is a welfare state” and “low-skill immigrants don’t pay enough taxes to cover the cost of the benefits they receive,” Krugman observes that “the political threat that low-skill immigration poses to the welfare state is more serious” than its other consequences.
The new open-borders left might reply that unlimited immigration would not be a problem if all workers in a country were unionized, including immigrants who joined unions on arrival. In addition, the open-borders left could speculate that voters who were not racist or otherwise bigoted against particular groups of immigrants for non-economic reasons would not begrudge the use of the welfare system by wave after wave of poor people from other nations.
Perhaps the open-borders left is correct. But shouldn’t such a radical proposition be tested first in one or two countries, before other democratic nations take a chance on it? Let a small democratic nation-state known for its anti-racist attitudes of its population, its high levels of unionization and its generous welfare state adopt an open borders policy, allowing anyone on the planet to move there and immediately use welfare benefits on the same terms as citizens, without having previously paid for eligibility. After a generation or two, the results of the experiment of a highly unionized welfare state with an open borders immigration policy can be examined – assuming, of course, that the experiment does not quickly trigger an anti-immigration revolt that brings demagogic populists to power and the experiment in open-borders leftism to a swift and unpleasant stop.
/////// End of quote from Lind: The New Class War