Globalisation & the rise of Trump

In early 1997 the belief that markets, in particular financial markets, knew best was at a high point. Yes, the Federal Reserve chairman, Alan Greenspan, had muttered something near the end of the previous year about the stock market’s “irrational exuberance,” but investors shook off his words after a few days, the bull market resumed, and Mr Greenspan opted to shut up and run with it. The Thai currency crash that began a long series of financial crises around the world was a few months off. The American economy was humming. Washington was in the midst of a bipartisan rush to cut spending, regulations, trade barriers and taxes.

It was into this unwelcoming environment that the economic journalist Robert Kuttner launched his book, Everything for Sale: The Virtues and Limits of Markets, a systematic attempt to debunk the then prevailing view that markets solved all (the “virtues” in the subtitle was a head fake). It was an audacious undertaking, and it got attention.

Turning after this to Mr Kuttner’s latest, Can Democracy Survive Capitalism?, was probably unfair. For one thing, it’s not as good: The book is a timely polemic against globalisation and marketisation, not a document meant to withstand the test of time. For another, 675 straight pages of Robert Kuttner (I’m not counting endnotes or indexes, but I did read the acknowledgments) is a lot to take. The man is not a thrilling writer, or much of a humourist.

A key phrase in Mr Kuttner’s work is “mixed economy,” meant to describe a system in which markets and for-profit businesses play a crucial role, but share power with institutions like labour unions and mutual associations and are ultimately subservient to democratically elected governments. That’s more or less how things worked in the United States and Western Europe in the decades that followed World War II, which delivered widely shared prosperity on a scale never before seen.

The details of the mixed economy varied from nation to nation, but that was sort of the point. Unlike the universalist utopian visions of the dictatorship of the proletariat and the self-regulating market, the mixed economy requires endless tinkering and compromise. It also requires that nation-states have enough autonomy to go their own way. Can Democracy Survive Capitalism? is chiefly the story of how this autonomy was constrained.

During a break from journalism in the late 1970s, one learns from the book, Mr Kuttner drafted the Foreign Corrupt Practices Act for his then-boss, Senator William Proxmire. That law prohibited American businesses from paying bribes to foreign officials. It was, Mr Kuttner writes, “an exceptional instance of a nation-state setting progressive rules for globalism.”

Over the past four decades, though, global capitalism has increasingly come to set the rules for nation-states. This has occurred mostly through the mechanism of ever more free and powerful financial markets, but also through such multilateral bodies as the International Monetary Fund, World Bank, World Trade Organisation and European Union.

There are lots of international organisations, Mr Kuttner writes, but the only ones that seem able to compel nations to do anything are the ones setting economic rules. And while the IMF and World Bank were created in the waning days of World War II with the idea that they would give nations space to pursue domestic economic goals without having to worry about currency crises and such, they evolved in the 1970s into what Mr Kuttner calls “instruments for the enforcement of classical laissez-faire as a universal governing principle”. The results, in his telling, include skyrocketing inequality, stagnant middleclass incomes and, in recent years, a rightwing populist backlash embodied in the US by the election of Donald Trump.

Accounts of the economic changes of the past half century have tended to focus on how new technologies ranging from the computer to the shipping container reordered global markets, the workplace and society. Mr Kuttner gives such factors awfully short shrift, but one can understand why. Others have downplayed political choices, so he puts them front and centre.

Mr Kuttner isn’t an especially original or compelling analyst of electoral politics, and the weakest parts of this book are those in which he describes the rise of Mr Trump, or the 1990s embrace of markets by the Democrats in the US, Labour in the United Kingdom and the Social Democrats in Germany. But never fear: There’s lots more space devoted to the less personal politics of institutions and rules, where Mr Kuttner is in his element.

In this he follows in the footsteps of the economic historian Karl Polanyi, whose 1944 classic The Great Transformation is a model for this book. Polanyi argued that the 19th-century economic brew of “international free trade, competitive labor market, and gold standard” had, while bringing rapid economic growth for a time, eventually proved so unstable and destructive of existing social relations that it led to fascism. Mr Kuttner’s sadly plausible argument is that the renewed global economic order based on free trade, competitive labour markets and the dollar standard is now pushing politics in a similar direction.

What can stop it? Well, I don’t want to give away the ending, but it should be pretty clear by now that Mr Kuttner doesn’t think salvation lies in global hand-holding. He made national headlines last summer when he reported that Stephen K Bannon, then still chief strategist in the Trump White House, had telephoned him out of the blue (Mr Bannon did have an assistant email first to arrange the call). After declaring himself a longtime fan of Kuttner’s work, Bannon had argued that “if the left is focused on race and identity, and we go with economic nationalism, we can crush the Democrats.” Mr Kuttner wants the Democrats to win, but he too thinks economic nationalism is the ticket.

CAN DEMOCRACY SURVIVE GLOBAL CAPITALISM?

Robert Kuttner WW Norton & Company 359 pages; $27.95