The Pendulum Swings and Produces Sore Winners and Sore Losers

Remote Visualization

Occasionally, it’s useful to step back and look at the big picture, which is where this week’s column begins. Sadly, it ends down in the dirt, but let’s start with the good stuff. An interesting book worth reading is The Fourth Turning is Here, by Neil Howe. Essentially it describes a cyclical theory of history in which the world changes roughly every 20 years from a High, involving strengthening institutions and a new civic order; to an Awakening when the existing order comes under attack from those with new values; to an Unraveling when things begin to fall apart; and finally to a Crisis, when the old order is replaced with a new one. (The author argues we are now in the fourth turning—Crisis.)

This is a modern expansion of Hegel’s thesis, antithesis, synthesis argument—that change comes out of permanent conflict. I would simplify that even further, based on some work by Paul De Grauwe (The Limits of the Market), which provides a metaphor of a pendulum swinging between the extremes of worker power and strong government and corporate power and weak government at roughly 40-year intervals. The New Deal of the 1930s featured a shift toward workers and greater government intervention in the economy, in large part a reaction to the corporate supremacy of previous decades that had ended in the Great Depression. Some 40 years later, the Reagan administration’s lax regulatory policies initiated a shift toward greater corporate power, justified at the time as the key to more rapid growth that would benefit everybody, including workers.

Now, 40 years later, the pendulum is shifting back in the other direction, as more and more people are concluding that “trickle down” economics has not worked for most people and that a rising tide does not lift all boats, just rich people’s yachts. The reasons for this, which could make another book, include the belief that the deck is stacked against ordinary people, the realization that globalization has enabled other countries to create comparative advantage through subsidies and trade barriers to our disadvantage, the fact that inevitable demographic changes are leading the United States to worker shortages and thus wage increases, the actions of vigorous labor leaders moving more aggressively to expand their members’ share of the pie, and a president who claims, correctly, to be the most pro-union president since Franklin Roosevelt.

Change always causes tension because it creates winners and losers. Currently, labor and trade skeptics are winning, and big companies are losing. Whether that is good or bad is an important question but one for another column. In this one I want to talk about how the winners and losers are behaving, and the short answer is poorly. Business complains that labor and trade-skeptical NGOs now have frequent access to administration decisionmakers while they have been shut out, ignoring the irony that for the previous 40 years it was the other way around, with labor complaining.

Recently, recriminations and litmus test politics have reached a new high, with Republicans and businesses attacking the Office of the U.S. Trade Representative and Rethink Trade’s Lori Wallach over the latter’s alleged undue influence over administration trade policy, specifically its digital trade policy retreat. I’ve known Lori for a long time—she’s the only person to have dinner with me and then picket my organization in the same week. We don’t agree on much, and I strongly disagree with the administration’s policy switch on digital trade, which Lori worked hard to accomplish. But what she has been doing is the same as what the business community has done for decades—lobbying. The difference this time is that she won, and they lost, at least so far. If you smell sour grapes, you’re not alone.

It would be simpler if all the pearl-clutching were on one side, but those on the left have been as sore of winners as those on the right have been sore losers. The best example is also on digital trade—the continuing attacks from progressives in the Democratic party against “Big Tech” efforts to influence the administration’s policy. The fact that the latter group has not had much success, at least on digital trade issues, has not deterred the attacks.

The reality is that, of course, the tech companies are trying to influence government policy, just as Lori Wallach is. In the past, these battles would be fought out in government office buildings or the corridors of congressional office buildings. Now, part of the battle has become trying to delegitimize the other side through public attacks on their efforts. It is no longer sufficient for each side to argue that the other is wrong. Each side now argues that the other side has no right to do what it is doing, even though both sides are doing essentially the same thing.

This is an ugly turn of events for trade policy, which has long been characterized by the left and right ganging up to shoot the center. Apparently, now that the center is rapidly disappearing, they have started shooting each other. Call me old-fashioned, but I miss the days when people remembered that the First Amendment did not apply only to them but also to their opponents and tried to advance their interests on the merits rather than by attacking the integrity of their opponents.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.