Many fans of the new populism are trumpeting the death of neoliberalism. It is true that President Trump and many other leaders of the new right are opposed to neoliberalism. It’s also true that both the Democratic Party in the US and the Labour Party in the UK are moving away from Clinton/Blair-style neoliberalism.
But these political facts (which I do not contest) do not in any way mean that neoliberalism itself is in trouble. Let’s begin by looking at the year when Presidents achieve their major economic initiatives:
FDR (1933)
Johnson (1965)
Nixon (1971)
Reagan (1981)
Clinton (1993)
Bush (2001)
Obama (2009)
Do you notice a pattern? With the exception of Nixon in 1971, presidents rarely achieve their biggest economic initiatives after their first year in office. So what was Trump’s major initiative in his first year of office? Obviously the corporate tax cut, which is about as neoliberal a policy as one could imagine. Even the welfare states of Western Europe have adopted this sort of policy reform. We were late to the party (one of President Obama’s biggest mistakes).
Trump’s fans pin their hope on reversing “globalization”, by restricting the free flow of people, goods, and capital. But will Trump succeed? Consider:
The areas where Trump controls immigration (such as refugees) make up only a tiny percentage of all US immigrants. Most immigration is beyond his control. I expect legal immigration to remain at a level of just over 1 million per year, as during the Obama administration (albeit down slightly from the peak of fiscal year 2016.) I think Trump’s policies are harmful, but there will be no meaningful change in the way that immigration is transforming America. (Actually, I’d argue that immigration is not really transforming America as much as critics assume, just as the immigration from Eastern and Southern Europe had less of a negative long run impact than people feared at the time. Indeed the impact was probably positive.)
So what about illegal immigration? That’s hard to measure, but in 2017 the Trump people insisted that border arrests are the metric to look at. So I took a look at border arrests and noticed that they did indeed plunge in early 2017 (orange line). But I also noticed that they began rising again in late 2017, and are now back up to the average levels of the Obama administration—about 50,000/month (red line). So Trump seems to have failed to make a permanent mark on illegal immigration. Of course there are also lots of people overstaying visas, etc., but I see no evidence that that sort of illegal immigration has declined either. And again, the Trump people said border arrests are the metric to watch.
What about stopping the free flow of goods and capital? I expect Trump to also fail here, for several reasons. To actually stop globalization, Trump would need to do two things. First he’d need an all out trade war. And then he’d need to avoid resolving the trade war. I believe the probability of an all out trade war is less than 50%. And even if an all out trade war occurs, I think there is a 90% chance it would be resolved within a year, and there’d be some sort of face-saving agreement where all sides could claim victory (although of course everyone would actually lose, as little would change despite all the disruption.) The likelihood of both an all-out trade war and a failure to resolve the war is so low that I think it overwhelmingly likely that Trump will fail to reverse globalization. The US will continue to run massive trade deficits, indeed even bigger than under President Obama.
To conclude, neoliberalism is indeed rapidly losing support among intellectuals on both the left and the right. But there is almost no evidence that countries are going to actually walk away from neoliberal policy regimes. (Note that protectionism and opposition to immigration does not poll well in America.) Instead there will be a sort of kabuki theater show of resistance to neoliberalism, but the trends the anti-neoliberalism crowd worried about will just keep on happening.
PS. While some might argue that President Trump actually favors free trade, I see almost zero evidence for that claim. How would free trade help industrial workers in the rust belt (in the view of protectionists like Trump, Navarro and Bannon)? Yes, Trump once claimed that he favored zero tariffs all around, but I don’t count his public statements as “evidence”. Tariffs are already close to zero in developed countries—does Trump seem happy with that outcome?
PPS. I don’t believe that immigration will make America more diverse, nor do I think it will make the electorate vote more Democratic. That’s because immigration from Asia and Latin America has made earlier immigrants from southern and eastern Europe seem less different, more “white” than they seemed in 1924, when immigration was restricted because America seemed to be becoming extremely diverse. By the 1950s, that same ethnic mix was viewed as homogeneous. Intermarriage rates are now so high that the day will come when both Asians and middle class Hispanics will be viewed as culturally “white”. Fifty years from now America will still be about 75% “white”, in terms of people’s perceptions. (The black population will stay around 13%) Diversity is a state of mind.
And as immigration brings in people who don’t vote Republican, it makes existing residents more likely to vote Republican. Thus each party will continue to win roughly half of the vote.
Alex Tabarrok has a related post
READER COMMENTS
Alan Goldhammer
Jun 30 2018 at 5:30pm
Scott writes,
But Western European countries all (I think all) have VAT systems in place. Most have also eliminated tax preferences. The US did neither of those during the recent tax “reform” effort. I agree with you on the Obama mistake issue but I’m also pretty sure that Mitch McConnell would never have allowed it to happen.
mbka
Jul 3 2018 at 1:11am
Alan,
the European VATs had been in place long before the corporate tax cuts were enacted, so they are not replacing another tax.
Shane L
Jun 30 2018 at 6:39pm
I have wondered if Trump’s deep unpopularity on the left will lead to a revived interest among them in free trade. I feel like I am seeing the narrative shift since even just a few years ago, when left-wing friends grumbled that free trade allowed multinational corporations to employ low-wage workers in poor conditions. Today I see more of the narrative that a trade war will provoke retaliation, or worsen diplomatic ties with allies.
I think something similar happened with attitudes towards the European Union in the UK. In 1983 Labour promised to withdraw unilaterally from the EEC while the Tories were firmly in favour of remaining, indicative of the broad left-wing opposition to European integration. The rise of right-wing Euroscepticism may have caused large parts of the left to shift towards supporting it.
IVV
Jul 2 2018 at 11:45am
I think part of what’s going on is that “the left” isn’t nearly as monolithic as it is made out to be, mostly because of the urban/rural divide.
“The left” contains communist-leaning young more-or-less-urban Americans, who will grumble about international trade and claim that the strength of international corporartions is keeping them poor and hopeless. However, it’s argued that it also contains business-friendly neoliberals who are perfectly happy to continue to push the strength of multinationals.
The common factor in both groups is openmindedness as it applies to different cultures, religions, and other group-defining characteristics, such as sexuality. Whether it’s because of a desire to foster togetherness or the simple calculus of picking the top talent out of all groups and teaching them to work together, the urban mindset matters greatly: when you’re surrounded by people who aren’t you on a daily basis, but you’re still surviving and able to walk down the street safely, you tend to think that people outside your in-group are not an inherent threat.
However, I consider it folly to conflate neoliberals and progressives. They have different motivations and different goals, just with a similar goal of embracing out-group members. By considering the two groups a single, monolithic “left,” opposing out-group inclusion becomes the main battle cry, and it’s not going to put money in anyone’s pocket.
Benjamin Cole
Jun 30 2018 at 9:00pm
“Trump’s fans pin their hope on reversing “globalization”, by restricting the free flow of people, goods, and capital.”—Sumner.
Well, I am not a Trump fan (though not a TDS’er) so maybe I am not the right one to deny this premise.
I think the best-intentioned of Trump supporters (perhaps a distinct minority) are looking to alter the terms of globalization, not necessarily restrict cross-border flows.
When I look at the most successful of the globalized economies, say Singapore, I discover the government seriously (and I mean seriously) manipulates the terms of development and trade, and I would say positively for the residents of Singapore. On per capital GDP PPP basis the Singapore resident is at $90,500, and the US resident is at $59,500.
https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita
Within a comment section, there is no reasonable way to catalog the Singapore government’s comprehensive and complete intrusion in international trade and their economy, but suffice it say they built an entire island (Jurong) to house the largest petrochemical plants in the word—and the government owns all the land in Singapore. The government of Singapore also owns plants on the island, through its Petroleum Corporation of Singapore, usually in joint ventures.
Government-built apartments house 80% of the Singapore population.
The government imposes a sales of 7% on all goods and services, including imported goods and services (carefully, not called a tariff), but no sales tax on exports. Of course, this is a subsidy of exports. Exporters benefit from the extensive government infrastructure, housing subsidies, possibly sweetheart rent deals (remember, every business rents from the government) but escape sales taxes. Singapore exporters piggyback or freeload, to greater or lesser extent, the exact extent impossible to determine without years of possibly fruitless or ambiguous study.
There are gigantic government investment corporations and many government owned businesses in Singapore.
Oh, for laughs, here is one: “Singapore Airlines is majority-owned by the Singapore government investment and holding company Temasek Holdings, which holds 56% of voting stock.” And then, “The airline uses the Singapore Girl as its central figure in corporate branding.”
I am liking Singapore more and more!
Singapore is a window into the world of how real economies work. In this case, successfully.
To a greater or lesser extend, the world is Singapore.
(Europe’s VAT system also exempts exporters who export outside Europe. Ergo, exporters in Europe benefit from roads, fire and police, civil administration, national security and all the rest, but do not pay the their share of taxes. In this regard, Europe in fact subsidizes exporters).
But, globalists can be happy: There may be a worse spokesman for reforming US economic policies and participation in global trade than Trump, but who?
Globalists have been handed a gift: With Trump as the face of skepticism, you get a free ride for a few more years.
mbka
Jul 3 2018 at 1:21am
B Cole,
almost none of your items discussed have to do with trade per se – rather, it’s all about ownership of the means of production. It’s just a non sequitur to trade.
This:
is equally misleading. The goods and services tax (GST) is a VAT and hence a consumption tax. You produce locally and sell to the end consumer? You pay GST. You produce locally and sell abroad? You don’t pay GST. You import and consume locally? You pay GST. You import and re-export? You don’t pay GST.
Similar applies to your comment on VAT in Europe. It has nothing to do with trade and everything with taxing the production of value at the point of the end consumer. Hence you are effectively taxing consumption regardless of where the item was produced.
Benjamin Cole
Jun 30 2018 at 10:34pm
Add on, worth pondering:
Okay, so the government of Singapore owns petro-refineries on Jurong Island (land which it built and also owns) and it owns Singapore Airlines, and it owns Singapore Changi Airport.
Gee, jet fuel is the major expense of airlines. Getting landing gates and times is also key to airline survival.
Gee, do you suppose Singapore Airlines gets jet fuel at favorable terms? Do you suppose Singapore Airlines wangles the best gates and times at the Singapore-government owned airport? Maybe the “Singapore Girls” (stewardesses) get cut-rate rents on government-built apartments.
Of course, Western orthodox macroeconomists and globalists do not know the answers to the above questions, and mostly likely finding out is nigh impossible without a lot of investigative reporting, at which economists are manifestly feeble.
We we view “global free trade” we are watching a World Cup soccer (football) game in a thick fog, with myopic and sometimes biased or bribed referees.
“I see no fouls on the field,” say the globalists, from seats high in the stadium, selected for the view.
shecky
Jun 30 2018 at 11:02pm
It certainly will make America more genetically diverse. I shudder to think this is really a concern among anti-immigration conservatives.
Assimilation seems to be a key issue expressed. Opponents of immigration are keen to prop up the idea that immigrants will not assimilate. As unclear what that my be. A curious concern given that in America, one is free to not assimilate as one sees fit. Even so, there’s little reason to believe that any particular wave of immigrants will not assimilate. Evidenced by every previous distinct wave of immigrants to come to the US.
Sadly, conservatives have not generally been terribly welcoming toward immigrants, sabotaging the speed of assimilation. And then point to lack of assimilation to prop up concern about immigration. At the same time, giving up potential voters to the Democratic Party. Hint to Republicans: if you want to stop immigrants from voting for liberals, first thing to do is stop treating them like crap.
Regarding neoliberal policies, I have noticed a little more consideration among the left crowd about the value of various issues like NAFTA and TPP. Before Trump, they were considered broadly evil policies, for vague and often poorly supported, almost instinctual, reasons. Though mostly curiously different reasons than those held by Trump and his supporters. In the Trump era, however, there seems to be far more open mindedness toward such issues. Sure, “if Trump likes it, it must be bad” reasoning isn’t terribly smart (even if it’s true alarmingly often), it is an effective way of deflating these kinds of automatic ideological balloons.
Scott Sumner
Jul 1 2018 at 12:57pm
Ben, As I’ve told you before, you are wrong about Singapore. It is a highly neoliberal free trading nation. Your list of government programs is meaningless. I can produce a list 100 times longer for the US state and federal governments, and yet you seem to imply the US is a free market. I don’t think you have any idea how much every single developed economy government intervenes in the economy.
Singapore is number 2 in the world in multiple rankings of economic freedom.
You are also wrong about Europe; the VAT system does not subsidize exporters. That’s a EC101 level error, as I’ve explained to you many times. It’s not even debatable. You need to stop saying these things if you want people to continue responding to your comments.
Evan Smiley
Jul 1 2018 at 1:25pm
It’s interesting, since I feel like, as a libertarian, I’ve recently done somewhat of a 180 WRT neoliberalism. Previously (and especially post-Cold War) I’d basically taken it for granted that the corporate state was the preeminent threat to liberty. However, the rise of the Trump/Sanders populist movements changed all that. It’s positioned neoliberalism as the lesser of two evils. It may be true that the neoliberal elites only value economic freedom because it furnishes them with a larger quantity of available plunder, but at least they value it, rather than being beholden to the wealth-destructive nationalist/classist superstitions of the populists.
It’s still almost unbelievable to me on the still-rare but somehow-more-frequent occasions when I catch myself agreeing with Bill Kristol or George Soros, but I guess these are unbelievable times.
Hazel Meade
Jul 2 2018 at 5:19pm
I wonder if the position help by Trump’s supporters are as much shaped by conformism to the perceptions of their opponents as to the beliefs of their own in-group.
Perhaps the notion that Trumps fans are in anti-globalization in some coherent way mistaken. Trump drew his support from an coalition cobbled together of anti-immigrationists on the right and old school protectionist labor on the left. Did that coalition pre-date Trump, or did it only coalesce into something we might liken to an right-wing form of the anti-globalization movement *after* Trump came into office. By attempting to define Trumps base as a single unified organism, I think we might be encouraging people to define themselves as anti-globalist in a way they never would have thought of had we not chosen to do their thinking for them are try to encapsulate their positions in a coherent ideology.
Hazel Meade
Jul 2 2018 at 5:20pm
Argh. Sorry for the typos. Need edit feature.
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