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Fareed Zakaria: The obvious Trump running mate? Bernie Sanders
The obvious Trump running mate? Bernie Sanders, of course
Fareed Zakaria
The Washington Post
Free trade is at the heart of free markets. Adam Smith’s “The Wealth of Nations” was in large part a critique of government’s regulation, manipulation and taxation of trade, all of which, Smith argued, undermine growth and prosperity. Ryan understands this well, which is why he has voted in favor of every free-trade agreement presented to him while in Congress: with Peru, South Korea, Central America, Australia, Singapore and Chile. Ryan also aggressively supported granting the Obama administration “trade promotion authority,” so that it could complete a trade deal with Asian countries.
The appeal of both Trump and Sanders has many politicians mouthing cliches about the deep problems with globalization. It is true that two gifted populists have been able to give voice to people’s fears about a fast-changing world. But this does not alter the truth. Their central charge is false. Free trade has not caused the hollowing out of U.S. manufacturing.
It is not surprising that Sanders embraces the policies of failed socialist and quasi-socialist governments from decades past. Nor is it that surprising that Trump, whose views on everything are a strange mishmash of gut reactions, prejudice and emotion, finds them appealing. But it is stunning that serious conservative Republicans who are devoted to free-market ideas are backing Trump, looking the other way and crossing their fingers. The cost of doing so is now clear: Trump will transform the GOP into a protectionist, nationalist party. The logical choice for this new party’s vice president is obvious — Bernie Sanders.
Fareed Zakaria
The Washington Post
Free trade is at the heart of free markets. Adam Smith’s “The Wealth of Nations” was in large part a critique of government’s regulation, manipulation and taxation of trade, all of which, Smith argued, undermine growth and prosperity. Ryan understands this well, which is why he has voted in favor of every free-trade agreement presented to him while in Congress: with Peru, South Korea, Central America, Australia, Singapore and Chile. Ryan also aggressively supported granting the Obama administration “trade promotion authority,” so that it could complete a trade deal with Asian countries.
The appeal of both Trump and Sanders has many politicians mouthing cliches about the deep problems with globalization. It is true that two gifted populists have been able to give voice to people’s fears about a fast-changing world. But this does not alter the truth. Their central charge is false. Free trade has not caused the hollowing out of U.S. manufacturing.
It is not surprising that Sanders embraces the policies of failed socialist and quasi-socialist governments from decades past. Nor is it that surprising that Trump, whose views on everything are a strange mishmash of gut reactions, prejudice and emotion, finds them appealing. But it is stunning that serious conservative Republicans who are devoted to free-market ideas are backing Trump, looking the other way and crossing their fingers. The cost of doing so is now clear: Trump will transform the GOP into a protectionist, nationalist party. The logical choice for this new party’s vice president is obvious — Bernie Sanders.
Is this supposed to be comedy? Satire? I can't tell. Also at fault here is Zakaria's reading of The Wealth of Nations, which is incorrect.
Here's Joseph Stiglitz' take on Adam Smith:
Q. What I find difficult to imagine is why a “superior authority,” such as the government or an international organization, would be able to regulate/decide what is the best trading strategy for any given country/region/community. Why shouldn’t we let the free market forces determine what is the best for the world? What is your opinion on the issue on free worldwide market forces vs. regulation? Guillermo Bona Switzerland
A. Adam Smith, the father of modern economics, is often cited as arguing for the “invisible hand” and free markets: firms... But unlike his followers, Adam Smith was aware of some of the limitations of free markets, and research since then has further clarified why free markets, by themselves, often do not lead to what is best. ... the reason that the invisible hand often seems invisible is that it is often not there.
Whenever there are “externalities”... markets will not work well. Some of the important instances have been long understood—environmental externalities. Markets, by themselves, will produce too much pollution. Markets, by themselves, will also produce too little basic research...
But recent research has shown that these externalities are pervasive, whenever there is imperfect information or imperfect risk markets—that is always. Government plays an important role in banking and securities regulation, and a host of other areas: some regulation is required to make markets work. Government is needed, almost all would agree, at a minimum to enforce contracts and property rights.
A. Adam Smith, the father of modern economics, is often cited as arguing for the “invisible hand” and free markets: firms... But unlike his followers, Adam Smith was aware of some of the limitations of free markets, and research since then has further clarified why free markets, by themselves, often do not lead to what is best. ... the reason that the invisible hand often seems invisible is that it is often not there.
Whenever there are “externalities”... markets will not work well. Some of the important instances have been long understood—environmental externalities. Markets, by themselves, will produce too much pollution. Markets, by themselves, will also produce too little basic research...
But recent research has shown that these externalities are pervasive, whenever there is imperfect information or imperfect risk markets—that is always. Government plays an important role in banking and securities regulation, and a host of other areas: some regulation is required to make markets work. Government is needed, almost all would agree, at a minimum to enforce contracts and property rights.
And here's Noam Chomsky, pointing out that Smith was not an advocate of neoliberal policy:
On the contrary, neoliberal policy was a post-Smith development that takes some of his proposals to extremes; not a policy that he advocated.
To equate Trump and Sanders is as bad as saying there's no difference between Trump and Clinton. It's a lazy argument.
Zakaria is not just wrong on Adam Smith, but wrong on policy as well. The United States had followed the American School of economics until the 1970s, which was based largely on protection of key industry and public investment, and that's what lead to prosperity.
Ha-Joon Chang documents how a more heavy handed approach worked in South Korea in his book Bad Samaritans:
In 1961, eight years after the end of its fratricidal war with North Korea, South Korea’s yearly income stood at $82 per person. The average Korean earned less than half the average Ghanaian citizen ($179).
A country whose main exports included tungsten ore, fish and wigs made with human hair has become a high-tech powerhouse, exporting stylish mobile phones and flat-screen TVs coveted all over the world. Better nutrition and health care mean that a child born in Korea today can expect to live 24 years longer than someone born in the early 1960s (77 years instead of 53 years). Instead of 78 babies out of 1,000, only five babies will die within a year of birth, breaking far fewer parents’ hearts. In terms of these life-chance indicators, Korea’s progress is as if Haiti had turned into Switzerland.
This neo-liberal establishment would have us believe that, during its miracle years between the 1960s and the 1980s, Korea pursued a neo-liberal economic development strategy.
The reality, however, was very different indeed. What Korea actually did during these decades was to nurture certain new industries, selected by the government in consultation with the private sector, through tariff protection, subsidies and other forms of government support (e.g., overseas marketing information services provided by the state export agency) until they ‘grew up’ enough to withstand international competition. The government owned all the banks, so it could direct the life blood of business—credit. Some big projects were undertaken directly by state-owned enterprises—the steel maker, POSCO , being the best example—although the country had a pragmatic, rather than ideological, attitude to the issue of state ownership. If private enterprises worked well, that was fine; if they did not invest in important areas, the government had no qualms about setting up state-owned enterprises (SOEs); and if some private enterprises were mismanaged, the government often took them over, restructured them, and usually (but not always) sold them off again.
A country whose main exports included tungsten ore, fish and wigs made with human hair has become a high-tech powerhouse, exporting stylish mobile phones and flat-screen TVs coveted all over the world. Better nutrition and health care mean that a child born in Korea today can expect to live 24 years longer than someone born in the early 1960s (77 years instead of 53 years). Instead of 78 babies out of 1,000, only five babies will die within a year of birth, breaking far fewer parents’ hearts. In terms of these life-chance indicators, Korea’s progress is as if Haiti had turned into Switzerland.
This neo-liberal establishment would have us believe that, during its miracle years between the 1960s and the 1980s, Korea pursued a neo-liberal economic development strategy.
The reality, however, was very different indeed. What Korea actually did during these decades was to nurture certain new industries, selected by the government in consultation with the private sector, through tariff protection, subsidies and other forms of government support (e.g., overseas marketing information services provided by the state export agency) until they ‘grew up’ enough to withstand international competition. The government owned all the banks, so it could direct the life blood of business—credit. Some big projects were undertaken directly by state-owned enterprises—the steel maker, POSCO , being the best example—although the country had a pragmatic, rather than ideological, attitude to the issue of state ownership. If private enterprises worked well, that was fine; if they did not invest in important areas, the government had no qualms about setting up state-owned enterprises (SOEs); and if some private enterprises were mismanaged, the government often took them over, restructured them, and usually (but not always) sold them off again.
China's growth has also been largely driven by exporting while protecting domestic industry:
How China Protects Its Auto Industry
Edward Niedermeyer
Bloomberg View
Since it opened its market to outside automakers, China has sought to build its own champions by requiring foreign firms to partner with domestic automakers for local production. With few exceptions, the hope that sales of Chinese brands would surpass that of their foreign partners has vanished, as forced partnerships have failed to produce genuine innovation. With Chinese brands holding just 34.6 percent of the passenger car market through July of this year and global automakers enjoying huge profits in China, the country seems to have recognized that its own automakers are unlikely to catch up without additional help.
As a result, China's regulators appear to be taking further steps to protect their auto industry by bringing antitrust investigations against foreign competitors. In light of investigations by China's National Development and Reform Commission, Audi AG, BMW and Mercedes-Benz AG have all recently announced cuts to spare-parts prices. The Chinese government insists that it "does not specifically target foreign multinational enterprises," as a China Daily article put it, but going after excessive profits in the luxury car business hurts foreign firms -- which seem all too willing to reduce their healthy margins to maintain access to the Chinese market.
Edward Niedermeyer
Bloomberg View
Since it opened its market to outside automakers, China has sought to build its own champions by requiring foreign firms to partner with domestic automakers for local production. With few exceptions, the hope that sales of Chinese brands would surpass that of their foreign partners has vanished, as forced partnerships have failed to produce genuine innovation. With Chinese brands holding just 34.6 percent of the passenger car market through July of this year and global automakers enjoying huge profits in China, the country seems to have recognized that its own automakers are unlikely to catch up without additional help.
As a result, China's regulators appear to be taking further steps to protect their auto industry by bringing antitrust investigations against foreign competitors. In light of investigations by China's National Development and Reform Commission, Audi AG, BMW and Mercedes-Benz AG have all recently announced cuts to spare-parts prices. The Chinese government insists that it "does not specifically target foreign multinational enterprises," as a China Daily article put it, but going after excessive profits in the luxury car business hurts foreign firms -- which seem all too willing to reduce their healthy margins to maintain access to the Chinese market.
Chinese government imposes tariff on EU steel imports
Rob Davies and Heather Stewart
The Guardian
China has risked raising tensions over its role in the UK steel crisis by imposing a 46% import duty on a type of high-tech steel made by Tata in Wales.
The Chinese government said it had slapped the tariff on “grain-oriented electrical steel” imported from the European Union, South Korea and Japan. It justified the move by saying imports from abroad were causing substantial damage to its domestic steel industry.
The tariff move by the People’s Republic is likely to anger steelworkers and unions, who blame China for much of the industry’s recent troubles. Steel firms say one of the key reasons for the UK industry’s woes is that state-subsidised firms in China are “dumping” their product on the European market, due to flagging demand at home.
Rob Davies and Heather Stewart
The Guardian
China has risked raising tensions over its role in the UK steel crisis by imposing a 46% import duty on a type of high-tech steel made by Tata in Wales.
The Chinese government said it had slapped the tariff on “grain-oriented electrical steel” imported from the European Union, South Korea and Japan. It justified the move by saying imports from abroad were causing substantial damage to its domestic steel industry.
The tariff move by the People’s Republic is likely to anger steelworkers and unions, who blame China for much of the industry’s recent troubles. Steel firms say one of the key reasons for the UK industry’s woes is that state-subsidised firms in China are “dumping” their product on the European market, due to flagging demand at home.
So, we have numerous examples of national wealth being built via protecting and investing in key industries. Where exactly are all the neoliberal success stories? We certainly have some counter examples. Take a look at the Gini index (which measures inequality) for the USA:
Notice how inequality shoots up as we embrace neoliberal policies. (Source: The Crises)
You can see the same pattern in the UK:
(Source: The Crises)
More from The Economist:
Unbottled Gini
Inequality is rising. Does it matter—and if so why?
Jan 20th 2011 | The Economist
Greater inequality can happen either because the wealthier are getting wealthier, or the poor are falling behind, or both. In America it has had more to do with the rich. The income of the wealthiest 20% of Americans rose 14% during the 1970s, when the income of the poorest fifth rose 9%. In the 1990s the income of the richest fifth rose 27% while that of the poorest fifth went up only 10%. That is a widening income spread, but not a drastic one. Robert Gordon, an economist at Northwestern University in Illinois, reckons that for the bottom 99% of the population, inequality has not risen since 1993.
The problems at the bottom are reasonably well understood: technology enables the automation of blue-collar trades; globalisation lets unskilled jobs move to poorer, cheaper countries; shrinking trade-union membership erodes workers' bargaining power. But inequality is rising more sharply at the top, among what George Bush junior called the “haves and have-mores”. Here the causes are more mysterious.
Inequality is rising. Does it matter—and if so why?
Jan 20th 2011 | The Economist
Greater inequality can happen either because the wealthier are getting wealthier, or the poor are falling behind, or both. In America it has had more to do with the rich. The income of the wealthiest 20% of Americans rose 14% during the 1970s, when the income of the poorest fifth rose 9%. In the 1990s the income of the richest fifth rose 27% while that of the poorest fifth went up only 10%. That is a widening income spread, but not a drastic one. Robert Gordon, an economist at Northwestern University in Illinois, reckons that for the bottom 99% of the population, inequality has not risen since 1993.
The problems at the bottom are reasonably well understood: technology enables the automation of blue-collar trades; globalisation lets unskilled jobs move to poorer, cheaper countries; shrinking trade-union membership erodes workers' bargaining power. But inequality is rising more sharply at the top, among what George Bush junior called the “haves and have-mores”. Here the causes are more mysterious.
We're thirty-five years into the neoliberal experiment and the results are not good. Mr. Zakaria is correct that both Mr. Trump and Mr. Sanders are offering visions of how to move past neoliberalism, but the comparison ends there. Mr. Trump is offering borderline fascism, while Mr. Sanders is promoting a return to the American School, and beyond with European style social democracy.
The democratic party, which is still fighting over taking a stand on TPP or catering to policy dead enders, needs to wake up and smell the Brexit. The people know neoliberalism is a failure, and they're likely to pick the side that offers a solution.
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leaders to appear on his show than any other. No other even comes close.
And it seems the OP mischaracterizes much, although I only skimmed once I hit the first large distortion of reality. Adam Smith's market theories bear at best only accidental resemblance to the rationalizations for today's "neoliberal" anti-government opportunists, but everyone who ever took Econ 101 knows that.
And yes, he was being facetious--and correct, like others who have raised this tongue-in-cheek idea. In a number of ways Trump and Sanders and their followers are each others' closest analogs, though in others not. Enough to base a good joke on, tho.
"Oh, wow. That's a great question," Trump said after panelist Nicolle Wallace broached the possibility.
The difference between Trump and Sanders, according to Trump: "I do have much bigger crowds than him, but that's OK," and on trade, "the difference between Bernie and myself is that I know how to make those trade deals fantastic and he doesn't. He has no clue."
The difference between Trump and Sanders, according to Trump: "I do have much bigger crowds than him, but that's OK," and on trade, "the difference between Bernie and myself is that I know how to make those trade deals fantastic and he doesn't. He has no clue."
Read more: http://www.politico.com/story/2016/05/trump-bernie-sanders-running-mate-223401#ixzz4DNAKL5LZ
