Dani Rodrik's weblog

The Walloon mouse

It appears Belgium's Wallonia has put a nail on the coffin of the EU-Canada trade agreement (CETA) by vetoing it. The reasons, The Economist puts it, "are hard to understand." 

Well, yes and no. Canada is one of the most progressive trade partners you could hope to have, and it is hard to believe that Walloon incomes or values are really being threatened. But clearly something larger than the specifics of this agreement is at stake here.

Instead of decrying people's stupidity and ignorance in rejecting trade deals, we should try to understand why such deals lost legitimacy in the first place. I'd put a large part of the blame on mainstream elites and trade technocrats who pooh-poohed ordinary people's concerns with earlier trade agreements. 

The elites minimized distributional concerns, though they turned out to be significant for the most directly affected communities. They oversold aggregate gains from trade deals, though they have been smallish since at least NAFTA. They said sovereignty would not be diminished though it clearly was in some instances. They claimed democratic principles would not be undermined, though they are in places. They said there'd be no social dumping though there clearly is at times. They advertised trade deals (and continue to do so) as "free trade" agreements, even though Adam Smith and David Ricardo would turn over in their graves if they read, say, any of the TPP chapters.

And because they failed to provide those distinctions and caveats now trade gets tarred with all kinds of ills even when it's not deserved. If the demagogues and nativists making nonsensical claims about trade are getting a hearing, it is trade's cheerleaders that deserve some of the blame.

One more thing. The opposition to trade deals is no longer solely about income losses. The standard remedy of compensation won't be enough -- even if carried out. It's about fairness, loss of control, and elites' loss of credibility. It hurts the cause of trade to pretend otherwise.

How to tell apart trade agreements that undermine democratic principles from those that don't

I discussed in an earlier post on Brexit how to think about international agreements and the constraints on state action they entail in terms of democratic legitimacy. Since that discussion has relevance beyond Brexit, I've pasted the relevant part here below. The basic point is this: the fact that an international rule is negotiated and accepted by a democratically elected government does not inherently make that rule democratically legitimate.

The optimistic argument has been best formulated by the political scientists Bob Keohane, Steve Macedo and Andy Moravcsik. They point there are various ways in which global rules can enhance democracy -- a process that they call “democracy enhancing multilateralism.” Democracies have various mechanisms for restricting the autonomy or the policy space of decision makers. For example, democratically elected parliaments often delegate power to independent or quasi-independent autonomous bodies. Central banks are often independent and there are various other kinds of checks and balances in constitutional democracies. Similarly, global rules can make it easier for national democracies to attain the goals that they pursue even if they entail some restrictions in terms of autonomy. Keohane at al. discuss three specific mechanisms: global rules can enhance democracy by offsetting factions, protecting minority rights, or by enhancing the quality of democratic deliberation.

However, just because globalization can enhance democracy does not mean that it always does so. In fact there are many ways in which global governance works in quite the opposite way from that described by Keohane et al. Anti-dumping rules, for example, augment protectionist interests. Rules on intellectual property rights and copyrights have privileged pharmaceuticals companies and Disney against the general interest. Similarly, there are many ways in which globalization actually harms rather than enhances the quality of democratic deliberation. For example, preferential or multilateral trade agreements are often simply voted up or down in national parliaments with little discussion, simply because they are international agreements. Globalization-enhancing global rules and democracy-enhancing global rules may have some overlap; but they are not one and the same thing.

More broadly, international commitments can be used to tie the hands of governments in both democratically legitimate and illegitimate ways. External discipline can be sought in two different kinds of settings--one of which is much more defensible on the traditional democratic delegation grounds than the other.

Consider first the case where the government faces a "time-inconsistency" problem. It would like to commit to free trade or to fiscal balance, but realizes that over time it will give in to pressure and deviate from what is its optimal policy ex ante. So it chooses to tie its hands through external discipline. This way, when protectionists and big spenders show up at its door, the government says: "sorry, the WTO or the IMF will not let me do it." Everyone is better off, save for the lobbyists and special interests. This is the good kind of delegation and external discipline.

Now consider the second kind. Here, the government fears not its future self, but its future opponents: the opposition party (or parties). The latter may have different views on economic policy, and if victorious in the next election, may well choose to shift course. Now when the incumbent government enters an international agreement, it does so to tie the hands of its opponents. From an ex-ante welfare standpoint, this strategy has much less to recommend itself. The future government may have better or worse ideas about government policy, and it is not clear that restricting its policy space is a win-win outcome. This kind of external discipline has much less democratic legitimacy because, once again, it privileges one set of interests against others.

It’s a war of ideas, not of interests

Mike Konczal has an interesting piece on how the progressives are unlikely to win over Trump’s base of white, male, working class voters – even if they take their concerns to heart and propose policies that will help them.  He thinks progressives lack specificity and clarity on the “specific approaches and programs [that] would convince Trump’s voters to join liberals.” More fatally, he believes the progressive agenda, if successfully implemented, would actually fail to bring these voters along.

Here is the gist of the argument:

“Yet any sufficiently important left project going forward is going to involve at least four things: a more redistributive state, a more aggressive state intervention in the economy, a weakening of the centrality of waged labor, and a broadening, service-based form of worker activism. These four points, essential as they are, will likely further drive Trump’s white working-class supporters away from the left, rather than unite them.”   

Konczal might well be right, but I want to entertain the possibility that he is wrong.

The progressives’ preference for specific policies is rooted in the view that voters’ “interests” – as they derive from their occupation, income, race, or gender – are fairly fixed. So policies are winners as long as they appeal to those “interests.”

But there is a complementary perspective in politics that says political competition is as much about shaping those interests. The politics of ideas is about activating identities that may otherwise remain silent, altering perceptions about how the world works, and enlarging the space of what is politically feasible.

If left-liberals take for granted that the white middle class is essentially racist, hate the federal government, oppose progressive taxation, don’t think big banks and dark money are a problem … and so on, then indeed many of the remedies that progressives have to offer will fail to resonate and there is little that can be done. But why should we assume that these are the givens of political life?

A large literature in social psychology and political economy suggests that identities are malleable as are voters’ perceptions of how the world works and therefore which policies serve their interests. A large part of the right’s success derives from their having convinced lower and middle class voters that the government is corrupt and inept. Can’t progressives alter that perception?

Note that what is required here is not one more well-designed program. It is a narrative, a marketing device – a bumper sticker.

Consider one of Konczal’s examples. He mentions Arlie Hochschild’s book Strangers in Their Own Land, which describes people living in the polluted “Cancer Alley” of Louisiana.

“They are people who are conscious of the environmental wreckage industry has brought to their area, yet they vote for people opposed to the Environmental Protection Agency and environmentalism generally.

Hochschild finds that her subjects don’t experience this as a tension because they view the federal government as something that is helping people ‘cut in line.’”

In other words, people dislike and distrust the government. And yes of course, conditional on that belief, the progressives’ agenda of enhanced environmental regulation will not draw the support of the people it tries to help. Same with dealing with the banks, creating more jobs, or progressive taxation.

Clearly, the progressives have lost the war of ideas here – on government as a force for good. Equally clearly, they will not win it by offering detailed policy proposals on each one of these areas.

Progressives need to shape the narrative that structures voters’ interests. They need to be able to appeal to identities beyond race and gender – occupation, social class, income status, and patriotism. They need to convince the electorate that it is their interests they have at heart – not those of bankers or of large corporations.  They need to forge a story line that will shape a package of policy proposals into a politically appealing whole.

Progressives need not give up on the white, male working class. But they need to understand that politics is as much about redefining perceptions of interests as it is about responding to those interests.