Wages for American working men got a double whammy during the last fifty years. First, starting in the late 1960s, American women entered the paid workforce as never before. This added significantly to the supply of labor in the American workforce. Secondly, just as the American labor market had started to move beyond the economic shock of increased entry of women into the workforce, the uptick in globalization – easier mobility of capital and labor across national borders – effectively increased the supply of labor competing with U.S. workers a second time. Many of these workers were willing to work for wages significantly below wages for American workers. There are other causes as well, but these factors certainly contributed to stagnating wages for working men in the U.S. over the last 50 years.
But this is not simply a story of loss; there are tradeoffs.
The 2016 election was a victory for the Republican party but it was hardly a resounding one for classical liberalism at least as historically defined. Classical liberalism, for instance, has reflected an enthusiasm for free trade along with other free markets. But Donald Trump ran the most aggressively anti-free trade platform of any major party nominee Democratic or Republican in the last century.
But rather than simply bemoaning the fact, classical liberals need to take account of it, because the anti-trade turn is a part of the greatest challenge classical liberalism has ever faced: how to address the ever faster rate of social and economic change. The freedom to make such transformations through technology and trade creates very substantial wealth but it disrupts people’s lives, making them less liberal and more eager for state protection than before.
There can be no doubt that such disruption was at the heart of Trump’s victory.
Ronald Reagan and Margaret Thatcher together moved the world decisively back toward classical liberal principles in the 1980s. Thatcher was elected earlier than Reagan, and she was a harbinger of what was to come in America and the world. Thus, it is significant today that new Prime Minister of Britain, Theresa May, is moving the Conservative Party decisively in the opposite direction—toward more statism and less liberty. It is not only in the United States that the party of the right seems to have lost its classical liberal bearings.
Britain Makes History
By Richard Samuelson
So yet another effort to put all of Europe under one government seems to be failing. From Caesar to Charlemagne to Charles V to Louis XIV to Napoleon and beyond the vision of unity has been a recurring theme in European politics. The latest effort, a union forged in the wake of two destructive and nearly universal wars, is different in some ways—although not democratic, there have been democratic elements in the EU. Moreover, and most importantly, expansion has been peaceful, featuring conquest by referendum.
All that notwithstanding, one can, quite accurately see the Brexit as the latest in a long series of rejections of a universal European empire, with Eurocrats in the place of previous would-be emperors. As in previous centuries, Cambridge and Oxford dons are more comfortable conferencing with their peers at the Sorbonne than with their fellow subjects, and once again the would-be coutiers they train look to the Continent for moral guidance. And, as before, many of Her Majesty’s common subjects resent it.
Britain votes on whether to leave the European Union in a month. If I were a British, it would be a difficult decision, but on balance I would vote against Brexit. The benefits of free trade outweigh the costs of the EU’s regulatory regime.
From its birth classical liberalism has been dedicated to free trade among nations. Trade allows nations to specialize at products and services and which they excel, enriching them all. It creates a larger market, providing incentives for innovation and it is innovation that ultimately transforms the standard of living. This latter benefit is particularly important in this era of technological acceleration. More generally, free trade signals an openness to the world and a tolerance of foreigners. It is a moral as well as economic good.
EU is the largest free trade zone in the world and that counts heavily in favor of staying. But the free zone comes bundled with other more controversial requirements. For instance, membership carries with it the requirement to let citizens of other EU members work in Britain.
Donald Trump and the new campus political correctness movement have a lot in common. Both want to create safe spaces where people fear no challenge from the exercise of others’ liberties. In the case of the campus PC movement, their disdain for freedom is obvious. They want to stop others from saying things that may offend them or undermine their world view. But the modern university grows out the enlightenment, which of course gave much offense to aristocrats, priests, and various other purveyors of received wisdom. Illiberal political correctness is thus at war with the classical liberal ideas on which our universities are founded.
Donald Trump also wants to create safe spaces for people who do not want to be challenged by the liberty of others. This self-proclaimed master of the art of the deal is no friend of making markets more open. He opposes free trade agreements that would let our citizens and those of other nations make more mutually beneficial deals. He also promises literally to build a fence around America. To be sure, there is a national security threat to the United States from radical Islamic terrorism. But Trump’s proposals to ban Muslim immigration is at once excessive and ineffective. Why couldn’t jihadis simply pretend to be Middle Eastern Christians? Trump’s proposal is better understood as an attempt to insulate America from religious ideas that many disdain. His illiberal program is at war with America’s freedom.
The safe spaces offered by Trump and the PC movement lure people inside for similar reasons.
As one of its first acts, the Republican Congress should give President Obama fast-track authority for the Trans-Pacific Partnership, a proposed trade agreement between the United States and most important Asian nations with the exception of China. This free trade zone can help boost economic growth and help balance growing Chinese power in Asia. Negotiations have been ongoing for some time, but fast-track is needed to throw them into high gear.
Under fast-track authority, Congress suspends its rules and guarantees the President an up or down vote on a trade agreement that meets certain conditions. These provisions can help the agreement succeed by preventing interest groups from picking it apart. When the United States uses fast-track authority, other nations are more likely to summon the political will to make concessions in negotiations.
A plausible interpretation of America and the world at the moment is that the imperatives of the 21st century global marketplace are so powerful they trump anything religious and political leaders say or do.
Techno-economic change does not, to be sure, trump anything and everything that nature might do. We recently had the near-miss of the stormy sun disrupting our electric grid and plunging us into the 18th century, and experts think there’s a 12 percent that could still actually happen over the next decade. That’s a lot more scary, if you think about it, than the possible long-term effects on the climate of anthropogenic global warming, although I’ll admit there’s an inconvenient truth or two there, too.
There’s also, of course, the disturbingly successful indifference of Putin and ISIS to the market, and the maybe more disturbing agility by which the Chinese manage to be both authoritarian nationalists and techno-cagey capitalists.
Hayek argues that international or inter-society competition will cause regimes to evolve for the better through natural selection: Most of the steps in the evolution of culture were made possible by some individuals breaking some traditional rules and practicing new forms of conduct - not because they understood them to be better, but because the groups which acted on them prospered more than others and grew. I take the argument to be that when one or a few societies stumble on sound rules, their innovations will spread to others by competitive selection. My object here is to reflect on how (if at…