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The Broken Promises of Neoliberalism

Trade Politics and the Battle for the Soul of the Democratic Party

by MARK ENGLER

"Free trade" has produced some of the most contentious political debates of our times. In a famous April 2000 article in the New Republic, economist Joseph Stiglitz argued, "Economic policy is today perhaps the most important part of America’s interaction with the rest of the world. And yet the culture of international economic policy in the world’s most powerful democracy is not democratic." During the Bush years, economic policy has received far less attention in political discussion than before; the use of military force took center stage. However, the trade and development debate went on, and it continues to affect fundamental questions of global poverty, inequality, and opportunity. Under a new Democratic administration-or under a Republican administration that demotes the neocons in favor of the more traditional, realist foreign policy establishment-it is likely that economic policy will again become the most important part of America’s interaction with the world. And it is likely that it will remain profoundly undemocratic.

The injustices of neoliberal trade policy and the hypocrisy of U.S. stances in international negotiations have produced an upheaval in multilateral institutions like the World Trade Organization, and this has helped to transform the debate about the global economy. But trade is also an important domestic issue. Today, trade policy plays an important role in the battle for the soul of the Democratic Party.

One of the major accomplishments of the Clinton administration was to move to the fore of the Party a faction led by the centrist, corporate-friendly Democratic Leadership Council. Working with pro-"free trade" Republicans, Clinton and the DLC made passing the North American Free Trade agreement (NAFTA) in 1993 and approving U.S. entry into the World Trade Organization (WTO) in 1994 into bipartisan crusades. The coalition in favor of corporate globalization was always tenuous, however. In recent years, especially as the Bush administration implemented an increasing belligerent foreign policy, the "free trade" coalition has frayed.

 

Shifting Center of Gravity

The center of gravity around trade issues has been slowly shifting in the Democratic Party throughout the Bush years, as candidates have found that popular disaffection with "free trade" deals can be a potent political force. As a result, trade debates have grown increasingly contentious. The Bush administration’s need to resort to desperate measures in order to pass CAFTA in 2005-and the fact that it squeaked through Congress with the smallest possible, 217-to-215 majority-reflected the conflict.

When the Democrats swept the November 2006 elections and regained control of Congress, many of the victorious campaigns featured prominent pledges to oppose pro-corporate trade policy. In an excellent post-election analysis, Public Citizen’s Global Trade Watch documented a major defeat for the "free trade" coalition. Its report tracked seven senate races and 28 House contests in which "fair trade" advocates ousted "free trade" incumbents or won open seats previously held by advocates of neoliberal deals. In contrast, no fair trade incumbents were unseated.

Whether the wave of revulsion against corporation globalization will propel a lasting change in Democratic policy-making will depend largely on figures like Representative Charlie Rangel (D-NY), House speaker Nancy Pelosi (D-CA), and Max Baucus, the Montana Democrat who became chair of the Senate Finance Committee. These political chiefs certainly do not represent the fair trade activists at the base of their party. In late 2006, President Bush visited Vietnam the week before Thanksgiving, and he hoped to bring with him news of Congressional approval of Permanent Normal Trade Relations with that country. This measure would have served as a stepping stone to a free trade deal and an endorsement of Vietnam’s entry into the WTO. It didn’t happen. The bill failed to secure the two-thirds majority it needed to pass, with many emboldened Democrats rallying to defeat it. The New York Times declared that the vote, which was supposed to be an easy victory, instead signaled "a deep disappointment and embarrassment for the White House."

It may prove a temporary setback, however. Both Pelosi and Rangel voted in favor of the Vietnam trade legislation, and promoters of the measure would like to see it resurrected. In May 2007, Democratic leaders announced that they had brokered a deal with the White House to resume the bipartisan push for "free trade" agreements, ostensibly with stronger labor and environmental provisions attached. True to form, the deal was negotiated in secret, without input from environmental, labor, or public interest groups-or even participation from the majority of Democratic lawmakers who view the "free trade" agenda with suspicion. What the agreement will mean in practice, and whether opposition lawmakers and the citizens who put them into office will accept the Bush-Rangel deal, is still being determined.

Congress passed a trade deal with Peru in late 2007 over the opposition of labor and environmental groups, and discord has flared up once again over a possible agreement with Colombia, although election year politics make its passage unlikely.

The Costs of ‘Free Trade’ At Home

Debates over international trade and development policy can often seem distant to most people. Yet the battle within the Democratic Party shows that these issues matter a great deal to Americans as well as citizens overseas. Under the market fundamentalist policies of neoliberalism, the international economy has been managed for the benefit of a very narrow slice of the population. It has placed the U.S. Treasury and the International Monetary Fund in positions as economic overseers on a global plantation. This type of domination goes against the values of all those who decry sweatshop economics abroad.

It also has costs at home. The interests of Wall Street are not the same as our national interests or the interests of working people. As successive administrations in Washington have enforced a type of market fundamentalism in foreign affairs, they have too often pursued a parallel set of policies domestically. Since the days of Ronald Reagan, Americans, too, have been locked into the trickle-down economics of the "golden straightjacket," which has been a lot more golden for billionaire families like Thomas Friedman’s than it has for typical citizens. For some, like those left behind after Hurricane Katrina–when a stripped-down government did little to help those in New Orleans who could not afford to evacuate themselves-the results have been tragic.

Sadly, neoliberal economics are not the exclusive purview of Republicans. Indeed, given the Bush administration’s international recklessness, an increasing number of corporate elites are turning to the Democrats to implement their economic agenda. In a front-page story entitled, "GOP Is Losing Grip On Core Business Vote," The Wall Street Journal reported in October 2007 that the party could be facing a brand crisis as "[s]ome business leaders are drifting away from the party because of the war in Iraq, the growing federal debt and a conservative social agenda they don’t share." Their defections will only increase tensions within the Democratic Party.

The ongoing battle in Washington has made clear that many centrist Democrats who denounce Bush’s imperial globalization would be all too eager to return to Clinton’s pro-corporate vision for the global economy if given the chance. But it also indicates that their position may not be as politically viable as it once was. A decade and a half after NAFTA moved the trade debate to the fore of political discussion, the broken promises of "free trade" agreements are making neoliberalism’s "clouds of gold" ever harder to sell.

The majority of Americans have reason to cry foul at such deals and to pressure their leaders to enact a truly democratic economic agenda. Citizen demands for good jobs, for full employment, and for investment in the public good go hand in hand with the call for fair trade and economic human rights throughout the world.

This essay was drawn from MARK ENGLER’s new book, How to Rule the World: The Coming Battle Over the Global Economy, published by Nation Books.

MARK ENGLER, an analyst with Foreign Policy In Focus, is author of How to Rule the World: The Coming Battle Over the Global Economy (Nation Books, April 2008). He can be reached via the web site http://www.DemocracyUprising.com