A Hamiltonian Calculus for the Left

Ryan’s ad touched off the latest salvo in a debate among progressives over how Democrats should rectify their fortunes in the rust belt. An exchange in the American Prospect between journalist Robert Kuttner and activist Tobita Chow, the director of the nonprofit Justice Is Global, is illustrative. Beyond alienating Asian-American voters alarmed by a rise in anti-Asian hate crimes, Chow argues Ryan has conceded the terms of the China policy debate to Republicans while completely missing a vital chance to attack the United States’ biggest firms for their new spate of union busting and price gouging.

Kuttner disagrees. Pointing to the relationship between offshored production and China’s neomercantilism, he counters, is fair game even if it is far from the only source of disinvestment and stagnant wages; the implication is that Ryan’s pugilistic approach to China may be a necessary evil if it means stopping far-right candidates backed by Peter Thiel and other plutocrats.

Chow is right to suggest Ryan could harm his and other Democrats’ ability to mobilize a multiracial coalition in the midterms. Contrary to popular media narratives about the demographics driving regional polarization, the Midwest and rural America have become increasingly diverse in the last decade. Progressives who have sounded the alarm over Democratic strength in the region have been alert to support ebbing among constituencies besides white industrial workers. Even with a modest rebound in black voter turnout in the 2020 election following a consequential drop in 2016, the Democratic elite continues to overlook black workers in farm and Rust Belt regions. If he wants to win, Ryan should be unambiguous about the centrality of the multiracial working class to a Rust Belt revival.

At the same time, Kuttner’s key point that neoliberal trade policies have contributed to the erosion of democratic capitalism in the United States is undeniable. Redressing the immiseration caused by offshoring is central to any sober attempt to beat back Trumpism. “The fact is that if any kind of social compact between labor and capital is to exist,” Kuttner writes, “it must operate at the level of the nation-state, where there is some semblance of democratic accountability and the rule of law.”

“In the U.S., Biden is trying to right several decades of imbalance, and China’s alliance with financial elites on behalf of corporate globalism is a prime obstacle,” Kuttner adds. Put another way, trade policy is one instrument in a larger carrot-and-stick strategy to persuade, if not oblige, capital to make domestic investments in a regulatory environment where at least some workers have more leverage than in countries with highly repressive export models. Should Ryan prevail at the polls, he will presumably lend vocal support to President Joe Biden’s industrial strategy, which promises, in the long-run, to benefit US workers of all backgrounds.

Echoing the recommendations of economist Mariana Mazzucato, Kuttner is part of a coalition of left-leaning intellectuals and policymakers that argues for an explicit pivot to what we might call neo-Hamiltonian realism, which would entail a new iteration of ambitious state-led development not seen since World War II. Since passing a transformative Green New Deal is not a possibility at present, the rationale is that more traditional trade and industrial policies are the best means for the United States to make headway on a constellation of progressive goals, from decarbonization to the expansion of domestic industries that supplant low-wage service and retail jobs in underdeveloped regions.

Support for a range of executive, administrative, and legislative action that can induce American capital to make new fixed investments in deindustrializing regions likewise reflects a wager on the part of Democrats that correcting disinvestment and uneven development will repair democracy. From this perspective, voices like Ryan serve to amplify the idea that democratic capitalism can again deliver the kind of wage compression and greater economic security that the working and lower-middle classes experienced in the postwar era.

Democratic socialists have reasons to be wary of economic nationalism. Nevertheless, trade policy is a necessary component of a broader industrial strategy: the latter cannot be executed without some protection that is sufficient to encourage experimentation and reinforce new, long-term allocations of capital and labor.

Trade policy, moreover, has developmental and distributional consequences for workers that democratic socialists cannot afford to ignore. Policies that stimulate domestic production, particularly for renewable energy sources, will impact a host of other issues, from housing construction to municipal pledges to divest from and cease use of fossil fuels.

Wherever possible, democratic socialists should approach trade policy as a means to rebuild unions and mold developmental incentives at the local level, while also thinking more expansively about how a green energy transition could encourage the movement for public power and even regional planning.

Worthy Goals and Strategic Dilemmas

The biggest cleavage among progressives regarding industrial policy is arguably the Biden administration’s continuation of most Trump-era tariffs. Just as critics of globalization have lamented the “race to the bottom” caused by exploitative supply chains, opponents of tariffs have invoked the threat to global consumer welfare (and even peace) that neomercantilist “zero-sum competition” poses.

It is, however, important to distinguish tariffs as ends in themselves — that is, retribution against adversaries that double as political payoffs to rent-seeking industries — and strategic protection as a buffer to help obtain practical goals for workers and regions starved of basic economic justice.

The Left, then, should study and evaluate the ongoing implementation of trade and industrial policies according to criteria the Biden administration itself has suggested. Expanding the domestic production of solar panels, electric vehicles and batteries, medical supplies, semiconductors, heat pumps, and other goods alongside fiscal support for advanced manufacturing startups has been touted as a way to build multisectoral resilience and sustainable growth. The success of these endeavors must therefore be considered in terms of the agglomerative effects of a new wave of fixed investment.

Some guiding questions can further help the Left develop an authoritative voice on these matters. Will medium-term state support for emerging or re-shored industries provide the kind of wages and revenue to stanch and reverse the population loss in struggling small and medium cities? Will Democratic allies work to ensure these industries are conducive to unionization wherever possible? Will local officials ensure that firms which benefit from federal assistance adequately help fund the social infrastructure — schools, parks, transit, sanitation, and other public services — of the places in which they build plants?

Democratic socialists should engage these questions with a mind toward cautiously supporting an “all of the above” approach to climate-sensitive developmentalism while prioritizing industries, including nuclear energy, that will do the most to accelerate decarbonization and provide union jobs. Just as the Green New Deal had promised, the point of strategic investments and regulations to advance domestic production and research and development (R&D) is to ultimately acclimate businesses and individual consumers to new habits that transform economic life.

Of course, even when treated as a mechanism, there are clear limits to tariffs. Some analysts, such as those from the Peterson Institute for International Economics, a free-market think tank, have argued that tariffs have worsened inflation, which has been somewhat regionally stratified.

On the Left, meanwhile, some have expressed concern about the potential impact of tariffs on Chinese workers, though recent data shows the East Asian nation’s exports have surged to an all-time high following an easing of pandemic restrictions. In general, one can be mindful of the trade-offs and hazards of strategic protectionism while recognizing that trade policy publicly divides capitalists as few other issues do, as recent debates over tariffs on Chinese solar panels have demonstrated. In America’s two-party system, progressives should approach these sorts of debates with a focus on which mix of policies will most likely build a durable developmental coalition that would strengthen the hand of the industrial working class.

A much bigger concern for the Left should be the mounting political pressure to cut inflation by inducing a recession through interest rate hikes. So far, the Biden administration has proudly attributed near-full employment to Keynesian stimulus and its industrial strategy, even as it pledges to tackle inflation. Slashing employment would inevitably hinder the reduction of import-dependency in the sectors the administration has promised to cultivate, which would debilitate Biden’s broader goals and gravely diminish the Democrats’ appetite for justifying the transitory costs of industrial policy in the future.

The Misunderstood History of US Protectionism

The fruits and weaknesses of Biden’s industrial strategy will be a barometer of how much the Democratic Party has reconciled itself to operating in what historian Quinn Slobodian in 2018 dubbed “Robert Lighthizer’s world.” As US trade representative under Trump, Lighthizer was perhaps the sole Republican to attempt to translate the ex-president’s platform into an economic agenda consistent with an archaic tradition of American statecraft.

An Ohioan himself, Lighthizer was an isolated Republican critic of globalization during the administrations of George W. Bush and Barack Obama, which, with few exceptions, built on the Third Way’s axiomatic commitment to trade liberalization. In scattered editorials, Lighthizer deplored the decline of US domestic industry, defending strategic protectionism on grounds that it had not only built the American middle class but was integral to sustaining it.

His stated goals of boosting domestic production and reducing the trade deficit attracted cautious support among certain progressives, including Robert C. Hockett of Cornell University and Robert E. Scott of the Economic Policy Institute, a pro-labor think tank, even as many economists roundly criticized the costs of a trade policy subject to Trump’s whims and bellicosity.

Less noted is the fact that Lighthizer’s beliefs resonate with a paternalistic strand of national capitalism which began to vanish from mainstream politics as postwar growth slowed. The links he draws between national security, trade “fairness,” and social stability taps into a dormant doctrine that can be traced to the developmentalist ideas of Alexander Hamilton, the Kentucky Whig Henry Clay, the heterodox economist Henry C. Carey, and the Vermont Republican Justin S. Morrill.

In this vein, Lighthizer has argued trade policy has meaningful impacts on the fabric of communities, regional prosperity, and the self-worth of wage earners. The overlap with Brown and Ryan’s emphasis on the “dignity of work” is inescapable, even though Lighthizer, who has made a fortune as a lawyer and lobbyist for domestic steel firms, has little to say about the merits of strong unions and the welfare state.

With few exceptions, commentators have seen protectionist sentiment before Trump’s 2016 campaign as a holdover from the days when the Democratic Party was much more a coalition of liberals and organized labor. A recent column by New York Times journalist Thomas Edsall, for example, implies a historical relationship between New Deal–style liberalism and qualified support for trade barriers. As Edsall’s summary of recent studies of party realignment and trade policy makes clear, when more and more national Democrats unreservedly embraced globalization under Bill Clinton, Bush, and Obama, the ensuing trade shocks cratered the party’s support and state-level infrastructure across the Midwest and South.

Yet an analysis of this kind is often mistaken about the history of the two parties’ changing positions on trade, which has had a pronounced sectional and cross-class basis. In the decades before the Great Depression, the Republican Party dominated the Northeast and Midwest via a sprawling tariff complex that accelerated the country’s industrialization. Despite frequent hardship, a decisive number of Northern workers accepted the premises of the Republican Party’s staunch defense of protectionism in most elections, delivering votes to Republican representatives and presidential candidates even as they battled Republican-aligned manufacturers for higher wages, greater safety, and shorter workdays.

By contrast, the most consistent economic position of the Democratic Party — still dominated overwhelmingly by Southerners through the mid-1930s — was support for free trade. Both the planter elite and agrarian populists had grasped the link between the tariff regime and deepening economic inequality between the North and South; overtures to newer immigrants in the urban North frequently invoked their purchasing power, which suffered as a result of exorbitant tariff rates.

While the New Deal order subsequently laid the groundwork for the gradual liberalization of world trade in the postwar era, it intensified factional disputes in both parties over trade policy. Ironically, beginning in the mid-1950s, Southern Democrats leaned toward protectionism; having either lured or successfully underpriced low-input Northern firms with low-wage and nonunionized workers, industrializing Southern states suddenly feared the job losses that cheaper imports portended. When the stagflation of the 1970s further accelerated deindustrialization from the Northeast to Midwest, several Northern Democrats correspondingly reconsidered the trade openness that the John F. Kennedy and Lyndon Johnson administrations had pursued.

With neoliberalism ascendant, however, progressive skeptics of greater free trade — Bernie Sanders, Paul Wellstone, and Jesse Jackson among them — were kept on a back foot in the Democratic Party after Bill Clinton signed the North American Free Trade Agreement (NAFTA) and the party hemorrhaged labor allies in the 1994 midterms. Between arch nationalist Patrick Buchanan and the conservative business pundit Lou Dobbs, the critiques of globalization that mainstream media aired during the 1990s and 2000s were mostly relegated to nativists and China hawks.

For anyone following the tensions brewing on the Right over the wisdom of free trade, it was not a shock to see Trump’s abrasive denunciations energize a swath of wayward independents, irregular voters, and nominal Democrats. Like Marine Le Pen in France, Trump’s shrewd appeals to producerism were targeted to cut across class lines — at least in the regions where there remained a residuum of the old, industry-specific labor-capital compromise or a simple desperation to save manufacturing and energy jobs.

Despite the fact that the ensuing trade war exacerbated a downturn in manufacturing while also imploding agricultural exports, Lighthizer and Trump fundamentally changed the US posture on trade. Besides tariffs, requirements for federal procurement to “Buy American” comprise part of Biden’s strategy to re-shore domestic supply chains, and US Trade Representative Katherine Tai has affirmed an expansive approach to “defending [US] economic interests.”

A Vital Bridge

Those on the Left who consider the Biden administration’s industrial strategy to be dismal or misguided should remember that developmental policy regimes take time to implement but can forge powerful coalitions in service of transformational societal goals. For all the administration’s risible errors, including its failure to salvage Build Back Better, it appears to have realized that the stealth industrial policy in computer technology of the late twentieth century delivered uneven economic benefits that contributed to today’s regional polarization between blue and red states.

Rhetoric about China’s unfair practices aside, the hope is that strategic protectionism can buy time for projects that should, in theory, foster or rehabilitate domestic linkages that spread growth in a manner neoliberal globalization failed to. This would help rectify the divergence between high-growth cities and languishing postindustrial areas.

Given the extremely volatile political environment, optimizing this strategy in time for the 2022 and 2024 elections remains a tall order. In ordinary times the tight labor market might provide some insurance against the usual midterm vulnerabilities that hobble the incumbent party. But these are not ordinary times.

The structural advantages that most blue state metropolises enjoyed before the pandemic remain, leaving Rust Belt regions, with their poorer infrastructure and less diversified economies, more vulnerable to disruptions and price spikes related to the pandemic and the war in Ukraine. Democrats like Ryan have little use in parsing the challenges of the recovery as they court the thorny, anxious nexus of blue-collar workers, local businesses, and middle-class suburbanites that will determine the midterms.

On this score it is disappointing but not surprising that Ryan has sounded a Klaxon over a putative external threat to the national interest. But as much as the recourse of Ryan and others to a competitive Cold War logic is regrettable, it is imperative to defeat Vance and the antidemocratic network of family capitalists and post-libertarians seeking to entrench their power over public policy. Acting strategically to increase the number and leverage of labor-friendly Rust Belt Democrats should be a pillar of any leftism committed to transcending the repressive red state–blue state tribalism that solidified with globalization.

It is increasingly the case, moreover, that the alternative is not between a climate-focused industrial strategy and the anti-government intransigence of yesteryear’s GOP. The choice is between a bridge to more democratic control over the economy and an industrial policy restricted by the demands of globalized capital. As much as climate change denialism and far-right extremism have consumed the Republican Party, individual Republican politicians such as Brian Kemp, the conservative governor of Georgia (a right-to-work state), are quietly influencing energy and industrial policy through enormous state-level subsidies to green technology firms.

Progressives should therefore learn and apply the lessons of political-electoral geography well-understood by past developmental coalitions, Democratic and Republican. The faction of capital eager to grow climate-adaptive industries can be harnessed in ways that mitigate regional inequalities, the surfeit of minimum wage jobs, environmental racism, and lack of funding for local public services, seeding support for a more thoroughgoing Green New Deal.

To the extent trade weakens or supports these priorities, the Left must be flexible but mindful of the political damage excessive trade liberalization has inflicted. The reality is that the interregnum in globalization is transforming into a new phase in which discussions of national economic security and greater self-sufficiency are no longer verboten.

Rather than cede the debate to the nationalist right, the Left should recognize trade policy for what it is: a soft form of capital control which can provide progressive forces with the breathing room for targeted reindustrialization and, most importantly, planning and building a new mixed economy.

In this respect, the Left should embrace the unintended legacy of Lighthizer’s protectionism: a re-politicization of economic policy that demonstrated that the “free market” is as much a construction of specific combinations of class and political power as any other form of economy.