Should-Read: Dani Rodrik: What Does a True Populism Look Like? It Looks Like the New Deal

Should-Read: This seems to me like fuzzy thinking from the sharp Dani Rodrik. It is, I believe, the result of a failure to call things by their right names. There is “populism”: rallying broad political majorities behind their economic interest in a less unequal distribution of income and wealth in pursuit of a policy agenda—mixed wise and unwise—that boosts rewards at the bottom and the middle and increases opportunity. There is “fascism”: rallying ethno-cultural groups against cultural and ethnic enemies foreign and domestic, with economic cleavages within the ethnos elided and covered over as unimportant: proletarian peoples oppressed by others, not proletarian classes oppressed by the rich and by an unfair system. That it is considered impolite to use the F-word does not mean that one should confuse oneself by calling “populist” movements that are not so. And why the claim that it is “globalization” that is driving the extraordinary American income and wealth polarization? Yes, there are fewer manufacturing workers because of the trade deficit. But the trade deficit is largely a home-brewed consequence of government budget deficits and finance-friendly political economy, not of increasing volumes of global trade. And the overwhelming bulk of the manufacturing employment decline has nothing to do with the trade deficit. And the bulk of income stagnation below the top has little to do with the manufacturing employment decline. And a lack of national policy autonomy is not the problem with America—or the problem with the European Union as a whole. Both of those entities have all the national policy autonomy they could possibly wish for, and more: Dani Rodrik: What Does a True Populism Look Like? It Looks Like the New Deal: “When populism succeeds, it does so not by cosmetic gimmicks but by going after the roots of economic injustice directly…

…Populism in the 21st century is as much a reaction to globalization as its late-19th-century version…. Large segments of the workers in these advanced economies—older, less-skilled manufacturing employees and the communities they live in—have seen their earnings decline or stagnate and their relative social status take a big hit. These groups see governments as increasingly in the pocket of financial and business elites, the big winners of globalization. The discontent in turn fuels populist leaders who promise to wrest control from faceless global market forces and re-empower the nation-state…. Yes, globalization expands economic opportunities: There are gains from trade. But globalization also entails stark distributional consequences, with some groups almost always left worse off. Factory closings, job displacement and offshoring are the flip side of the gains from trade….

In principle, an active government can take the edge off the resentment produced by redistribution…. But often the response of the government has been to plead incapacity in the face of inexorable global economic realities: “We cannot tax the winners—the wealthy investors, financiers and skilled professionals—because they are footloose and they would move to other countries.” This reinforces populists’ yearning to reassert national economic control….

President Trump and his European counterparts have capitalized on the economic difficulties of the middle and lower-middle classes by wrapping them in narratives that exploit prevailing ethno-nationalist prejudices. In the United States, they attribute declining wages and job prospects to Mexican immigrants, Chinese exporters and the federal government’s preoccupation with minority groups at the expense of the white middle class. In Europe, they lay the blame for the erosion of the welfare state and public services on competition from immigrants and refugees. But none of this really helps the middle and lower-middle classes. Worse, the illiberal politics of the strategy undermines democracy….

If governments feel themselves powerless to institute the tax policies and regulations needed to address the dislocations caused by economic and technological shocks, the solution is not just to seek more national autonomy but also to deploy it toward such reforms…