The President-elect’s chief-strategist, Steve Bannon, has a vision for remaking America in the wake of the Trump campaign’s upset victory. In Bannon’s view, laid out in remarks for a 2014 Vatican conference, modern capitalism has failed our nation, and the West generally. Specifically, capitalism has failed to fulfill the government’s responsibility to create a civil society—an economic and social order in which all citizens can expect to contribute and flourish. It is no surprise, then, that the working classes in Europe and the United States feel increasingly displaced and harbor a growing mistrust of elites.
In Bannon’s view, we are locked in a clash-of-civilizations that has been going on for thousands of years.
I have a great deal of sympathy for Bannon’s core observation. There is little doubt that over the last thirty years, globalization has exposed less-educated workers in the Western world to rapid social change, while denying them most of the economic gains.
David Einhorn's Greenlight Capital returned -2.9% in the second quarter of 2021 compared to 8.5% for the S&P 500. According to a copy of the fund's letter, which ValueWalk has reviewed, longs contributed 5.2% in the quarter while short positions detracted 4.6%. Q2 2021 hedge fund letters, conferences and more Macro positions detracted 3.3% from Read More
However, I break sharply with Bannon over his response to the problem. He sees a solution in turning inward. He advocates policies, ranging from restricted immigration to an adversarial trade strategy, that seek to slow and even reverse the forces of globalism. His preferred self-description, “economic nationalist,” makes this explicit. American policy, Bannon suggests, must advance the interests of American citizens first, our cultural counterparts second, and it must be prepared to do so at the expense of the interests of foreign civilizations. There is no room for a globalist, cosmopolitan end-of-history in this telling. Instead, we are locked in a clash-of-civilizations that has been going on for thousands of years, and can be expected to continue for as far into the future as anyone can see.
This Manichean disposition towards global affairs and international economics is dangerous. Not only has trade-driven growth lifted hundreds of millions of people out of crushing poverty but it has created an environment in which democracy is ascendent and totalitarianism is in retreat. Yet, this victory is nowhere near complete. Bannon’s economic nationalism risks destructive trade wars, self-defeating mercantilism, and corrosive industrial policy. To be clear, I don’t necessarily think Bannon is a mercantilist per se. His policy views aren’t laid out explicitly enough to be sure. His background as a Harvard MBA and a successful investment banker, as well as his caution in laying out specifics, lead me to suspect he is aware of some of the dangers of this type of policy.
What he seems unaware of, or unconcerned by, are the sentiments he is stoking, and the public choice dynamic he is setting in motion. In the best of times, isolationist impulses among the populace and rent-seeking by business must be aggressively resisted. Where the gains to economic liberalization are diffuse—cheaper products and more advanced technology—they are taken for granted. Where the gains are concentrated—intellectual property and supply chain efficiencies—they are the target of political manipulation. There is no natural constituency for a free, open, and level playing field. That consistency must be constantly cultivated through discourse, negotiation, and dedication to a humanitarian cosmopolitan vision.
Rapid improvement in living standards around the world may grind to a halt.
When that vision is directly attacked, when negotiation is replaced by confrontation, and discourse by demagoguery, the field of liberalization dries up. It’s all too easy to see the parallels to the turn of the 20th century when the cosmopolitan economy of the late 1800s turned inward in a wave of nationalization. Indeed, Bannon himself cites that parallel.
The worst version of that parallel presages a great-power war, but even in a more sanguine take our rapid era of technological progress is threatened. The global market upon which high-tech innovation depends will be threatened. Rapid improvement in living standards around the world may grind to a halt. This is a future we have a moral obligation to fight against.
Republished from the Niskanen Center.
Karl Smith is the Director of Economic Research at Niskanen Center.
This article was originally published on FEE.org. Read the original article.