In normal times, Trump would never have been nominated by the Republican Party and would certainly not have been elected president of the United States. But these aren’t normal times. Far from it.
After decades of wage stagnation, de-industrialization and growing inequality, the American public is starting to rebel against the status quo – a status quo they believe has betrayed them.
What’s going on?
The Next System Project, a branch of the Democracy Collaborative, has published an Index of Systemic Trends. These indices document, amongst other damaging developments, growing public anxiety driven by persistent wage stagnation, rising student indebtedness and – most troubling – relative declines in middle-class living standards. These trends have endured despite the many changes in government over the years.
In other words, these trends are deep-seated systemic flaws. They’re not the result of any particular political party.
Capitalism – and globalization in particular – get plenty of well-deserved blame for creating this mess. Consider the longer-term consequences of the North American Free Trade Agreement (NAFTA), for example.
According to Leo W. Gerard, the international president of the United Steelworkers, over a million American and Canadian jobs have been lost to lower-wage Mexico. In the last year alone, General Motors, furnace-maker Carrier and United Technologies (UTC) have moved production from the United States to Mexico.
Rexnord did the same but – pathetically – offered to keep its Indiana-based bearing-manufacturing factory open if its American workers would accept Mexican wages. And the minimum wage in Mexico is $5,10 a day – yes, you read that correctly, a day.
Ironically, what NAFTA accomplished was the opposite of what was intended by the post-war designers of free trade.
Dean Acheson, U.S. secretary of state under President Harry S. Truman, believed that protectionism and vicious national economic competition were major contributors to the Second World War. He quoted Cordell Hull, wartime secretary of state, as saying, “free trade dovetails with peace; high tariffs, trade barriers and unfair economic competition with war.”
Sentiments like these were clearly evident at the 1944 Bretton Woods Conference, where the Allies made their plans for a freer-trading post-war world.
Importantly, despite committing to freer trade, the Bretton Woods participants also sought “to reconcile liberal international trade policies with high levels of domestic employment and growth.” Their goal was a balanced international system benefiting not just the world community as a whole, but also each of its parts.
In other words, globalization was about ensuring the peace through raising the living standards in the Third World, universalizing democracy and the rule of law. The logic was that the Western developed nations had created the modern middle class through empowering citizens and advancing workers’ rights. Developing nations should do the same.
The truth is, globalization worked pretty well for the first few decades. The Treaty of Paris (1951) established the European Coal and Steel Community, and in the process set an important standard in European co-operation. This was soon followed by the Treaty of Rome (1957), which established the European Atomic Energy Community.
With the success of these early supranational agreements, the road was cleared for more globalization initiatives, which accelerated the development of the European Economic Community and set the stage for the Canada/United States Free Trade Agreement in the 1980s.
Regrettably, in the early 1990s the monetarist-inspired Washington Consensus launched a new era in globalization with an unfettered free-market bias.
From that point, it was a race to the bottom for wages, as communist China and other developing nations maintained their authoritarian political systems and continued to oppress workers and their wages.
With international agreements in place that provided open access to Western developed economies, there was a compelling force at play for corporate decision-makers: reduce wages to Third World levels or get swamped by international competition.
No rational business strategy could ignore this new reality. The effect on workers in the developed nations, however, has been profound.
The political consequences are now bursting forth with predictable violence.
There are many rational, good-hearted people lining up on the Democrat side to challenge Trump in the next election. But systemic flaws in globalization continue to undermine the middle class, feeding growing anxiety and a wave of political resentment.
The odds are, Trump, feeding on this growing anger, will be home and dry in 2020.
Robert McGarvey is an economic historian and former managing director of Merlin Consulting, a London, U.K.-based consulting firm. Robert’s most recent book is Futuromics: A Guide to Thriving in Capitalism’s Third Wave.