Books, Film, Music

Why America Should Stay Open

New book by Prof. Kim Clausing lays out the case for free trade.

By Anya Schiffrin ’84 | May 24, 2019

It’s a sign of the times that a standard defense of globalization is now viewed as coming from the left. But sometimes it’s worth taking to the barricades to proclaim the obvious. Reed economics professor Kim Clausing’s new book, Open: The Progressive Case for Free Trade, Immigration, and Global Capital , argues forcefully that the urgent problems facing many low-income Americans—problems that drove many to vote for Donald Trump—will not be solved by retreating from open markets or clamping down on immigration.

In the wake of the 2016 elections, urban, progressive intellectuals scrambled to understand what was happening in the heartland. Sociologists like Nancy Fraser, Arlie Russell Hochschild, and Jennifer Sherman examined the anger and frustration felt among parts of the white working class. A viral essay in the Harvard Business Review by law professor Joan Williams described the contempt that some white working-class voters feel for doctors, lawyers, and managerial elites—and by extension for Hillary Clinton. Political scientist Katherine Cramer explained how Wisconsin—a formerly progressive and unionized state—moved so far to the right. These scholars described how the loss of manufacturing jobs, combined with distrust of government and fear of immigration, fueled Trump’s popularity. A similar phenomenon took place in the UK, where scholars now believe that the groundswell for Brexit was driven in part by decades of tabloid portrayals of incompetent Brussels bureaucrats and migrants who sucked up resources, combined with lies about imaginary savings that would be used to support the National Health Service.

In an age when nationalistic narratives have become so powerful, it is more important than ever to separate fact from fiction. In clear, simple language, Prof. Clausing lays out how the global economic system works, explains what the problems are, and presents ideas about how to solve many of them.

She begins by reminding us how bad inequality has gotten in the United States. In the last 20 years, corporate profits have surged, wages have stagnated, and household debt has soared, especially for low-income families. The disappointment has resulted in votes for politically polarizing candidates. But Clausing warns that closing down the global trade system would result in higher prices for U.S. consumers and would not bring jobs back. “Thirty percent tariffs would make almost every item at Gap or Walmart 30 percent more expensive. Steel tariffs harm workers in industries using steel as an input, such as construction.” There is no evidence that countries with more closed trading systems have higher employment—if anything, the opposite is true.

She also points out that blaming immigrants for job losses is wrongheaded. In fact, immigration provides economic benefits to the United States. Much of the innovation at companies like Google is thanks to immigrant entrepreneurs. Rather, what is needed is for the government to help communities so they can adapt to deindustrialization and other shifts in the economy. “The best response to economic disruption is to help those individuals who are directly harmed,” she argues.

Clausing, who teaches international trade, international finance, and public finance at Reed, is an expert on combating tax avoidance, and her strongest chapters explain the problem of US multinationals that simply don’t pay taxes (think of the notorious case of Apple in Ireland). Taxes are an essential part of the solutions she proposes, such as increased government investment in education and infrastructure. Unless large companies and the 1% do their part, there is little hope that government will be able to help society adapt to future deindustrialization and the job loss likely to result from the spread of artificial intelligence. Truck drivers, waitresses, and boilermakers will still need health insurance and schools even after their jobs are killed off by automation. Companies will have to pay taxes so government can afford to take care of its citizens. A 2015 article in the New York Times reported that even small increases in taxes on the 1% could pay for an annual $176-billion investment in major urban highways or the roughly $47 billion cost of eliminating tuition at public universities.

Clausing lays out the debates and the complexities of calculating what companies owe. She also discusses an initiative of the Organization for Economic Cooperation and Development (OECD) and G20 for country-by-country tax reporting so it becomes clear how much tax multinationals are paying in which countries. “While companies would resist the scrutiny that such disclosure would generate, tax transparency is a big step toward a more honest tax culture,” she notes.

Clausing joins many policy makers and economists who have called for an expansion of the earned income tax credit and the imposition of a carbon tax.  Her point is that a stable and prosperous society benefits the business community and that business has much to gain from access to an open global economy. Fair and transparent tax laws, robust antitrust regulations, and more transparency on pay structure and labor inclusion will benefit everyone.

Throughout the book, her tone is clear, reasonable, and fair. It’s telling that she uses the word “concern” 50 times while the word “anger” does not appear once. Her common-sense analysis is hardly radical—before the Republican party moved so far to the right, her ideas would have been considered center of the road. Indeed, her jacket endorsements from Larry Summers, former US treasury secretary, and Jason Furman, former chair of the Council of Economic Advisors, demonstrate that this is not incendiary stuff. But in these turbulent times, with demagogues in the ascendant globally, the need for logic, reason, and common sense has never been more urgent.

Anya Schiffrin is the director of the Technology, Media, and Communications specialization at Columbia University’s School of International and Public Affairs.

Tags: Books, Film, Music, International, Professors