Debating The Bush Economic Record: How Should the Democrats Respond?

Having outlined some of the problems globalization posses, and the possible reasons for these problems in the previous post, how should Democrats respond?

On the technological and globalization side, I've encountered resistance to the "education and retraining" response to the problems arising from innovations in information technology and free trade initiatives. Many middle class families, especially those who have been affected negatively by global change, feel let down by the message from the Clinton years about education and the gains from trade.

But I am not ready to give up on the education message. Education does not guarantee that a job will never be outsourced or replaced by a machine, but it gives an individual the best chance to compete in the global marketplace. There is a clear difference in wages according to educational achievement. The evidence on retraining is mixed, but that shouldn't stop us from trying to do better to help displaced workers, and there are certainly other ways to help as well.

But while education and retraining are important, it's a mistake politically, I think, to try and sell them as the solution to the problems globalization brings to some sectors of the economy, not when so many families who went to college like they were told are still unable to escape outsourcing and other consequences of recent changes in the global distribution of production.

On the public policy side of the inequality debate there is more to talk about. For instance, I believe there has been a shift in market power in wage negotiations from workers to firms due to the decline in unionization, the rise of mega-stores, the forces of globalization, and other factors. I am not a Wal-Mart basher - companies do what our laws and regulations allow them to do. If there is a problem, it is with our policies and regulations, how they are set, and the watchdog agencies that enforce them, not with those playing by the rules that have been established. Democrats can and should address the issue of unfair bargaining power and unfairness in how the rules are set, but this does not require bashing a particular firm.

I believe changes in public policy help to explain stagnating wages, falling health care coverage, changes in safety and environmental regulations, and other workplace changes that enhance the firm's bottom line at the expense of workers. Workers alone have no chance against large, global firms who can use threats such as moving to other countries to hold down worker compensation.

It is up to the Democratic Party to step in and help to balance the distorted scales that are currently distributing the gains unequally. Besides a few politicians bashing Wal-Mart, illegal immigration, and our trading partners, where is the strong voice for working America? There is a lot to be gained by simply convincing working America that the Democratic Party is working for them rather than for competing interests such as big business or large contributors.

There are other areas besides market power imbalances where Democrats could improve public policy and level the playing field. Does tax policy have to favor the rich, or could we do better at using tax policy to help struggling families instead? As we balance the budget, whose needs will be paramount? Does every child, to the extent possible, have an equal opportunity for success in life? There is much that can be done in areas such as child care and work place rules to help working parents balance the needs of work and family in their day to day lives. Democrats should not simply accept that unequal gains is the inevitable consequence of globalization. There is enough for everyone to share, but the rules and political process needs to be directed toward that outcome.

As an economist, I believe in the gains from specialization and trade. Protectionist measures are not the answer, demonizing Wal-Mart will not solve our problems, and blaming immigrants for our problems deflects responsibility for the problems of workers and their families away from the public policy arena where it ought to be directed. The rules of the globalization game matter and help to determine how the benefits from globalization are distributed. For globalization's benefits to be fully realized and shared equitably, it is essential that we do a better job of promoting and enacting policies that support this outcome.

This is a guest contribution as part of NDN's ongoing debate about the economy. Read our new report The Bush Economic Record here.