One of the more pervasive habits of mainstream commentary is to mystify the origins of economic populism. This is most readily evident in the categorical vilification of whole swathes of the American population as bumpkin brownshirts. Yet it’s also reflected in discussions of trade and industrial policy. Even as leaders of both political parties now assert the need to revive the American industrial base, continuous efforts are made to minimize decades of ill-managed trade competition, a key catalyst of our ongoing political realignment, as a necessary cost of global progress offset by cheaper goods and new sectors.
Such equivocation plays down how the politics of protectionism speak to wider concerns about life chances and community wealth. It also obscures how liberals were once the country’s most vehement skeptics of globalization. When not dismissed as an exaggerated phenomenon, anger over trade policy is treated as a byword for something more sinister—and thus distinctly separate from American liberalism’s best traditions, which have long insisted on balancing regulation of the domestic economy and equal opportunity with greater global commerce. In this reading, trade integration can only ever be synonymous with the national interest.
Hence, even as our government lumbers toward reshoring crucial industries, it has become hard to dislodge a central narrative of our age: namely, that protectionist measures are a formula for stagnation and declining prosperity, not development, and thus reflect a provincial, even hostile posture on the world stage. Yes, analysts concede, Donald Trump mercilessly exploited real discontent over NAFTA and the China shock during his 2016 campaign, but such economic grievances were bound up with darker impulses across America’s once-enviable manufacturing belts. If the men and women who rallied to protectionist promises were reflexively hostile to a primary instrument of America’s alliances, perhaps they weren’t just ignorant of how expanding global trade has sustained the American way of life, but were luddite reactionaries willing to block world-historical progress for the sake of a few legacy industries.
That illiberal connotation—itself an inversion of what is, at root, a democratic impulse to exercise local control over economic life—has allowed old deceptions to persist in spite of President Biden’s industrial strategy. Two, in particular, operate in tandem. First, trade policy, we are told, isn’t that important politically (except, of course, when business-friendly expertise insists it is); second, its adjustment costs, to the extent they persist, say more about the disposition of the ordinary American worker than the genuine travails of blue-collar communities. An open trade system, in other words, would unequivocally beget new opportunities, if only industrial workers accepted the facts.
Undoubtedly, the temptation to link protectionist sentiment to an ignoble worldview stems from elitist notions of what modern progressives ought to stand for. But these notions themselves are more often expressions of revisionist partisanship than a well-examined philosophy or deep grasp of the party system. In fact, the decline of postwar growth in the early 1970s initially sparked a fierce debate among Democrats over the soundness of American trade policy. Once inclined toward Wilsonian internationalism, prominent liberals alarmed by trade shocks and offshoring sought to renew domestic production for the next generation of American workers, only to be stymied by a bipartisan establishment determined to advance globalization.
Much like today’s dilemma of whether to strategically decouple from China, this chapter in the trade debate concerned the future basis of American prosperity. At its center stood an AFL-CIO-endorsed bill that, for a brief period in the early 1970s, threatened to discipline a restive business establishment intent on disabling the regulatory architecture of the New Deal order. Sponsored by two Northern Democrats, Rep. James A. Burke of Massachusetts and Sen. Vance Hartke of Indiana, the Foreign Trade and Investment Act was primarily a response to the deindustrialization that was spreading from New England to the Midwest, driven in no small part by trade competition—first, from the anti-union Sunbelt, and then from US allies, particularly those in East Asia. For both its advocates and foes, Burke-Hartke, as the proposed bill was known, entailed aggressive and unprecedented means to bring about true full employment and stronger national wage standards.
The ramifications for long-term development—and specifically, capital liquidity—were startling. Rather than hastening the emergence of a polarized tech-and-services economy susceptible to speculative bubbles, as Reaganites and their New Democrat bedfellows would later accomplish, Burke-Hartke promised to test the potential of America’s productive capacity. The business media roundly deemed the legislation radical, and by and large, they were right. On core bread-and-butter issues, its Democratic authors were unlikely Yankee counterparts to Western Europe’s Old Left: defenders of economic planning on both sides of the Atlantic, who predicted the asset stripping that neoliberalism would unleash.
“The proposals set forth by this rebellion were remarkably dirigiste and left-wing.”
The proposals set forth by this rebellion were remarkably dirigiste and left-wing. At the same time, they invoked an older American tradition in which the “industrial arts” were central to both civic life and individuality. Now, however, critics decry similar ideas as a blueprint for national populism and extreme isolationism. But this is to be expected. Concepts and principles do acquire new meanings depending on the changing hegemonic interests in party politics. Burke-Hartke, long forgotten, was nevertheless the last formidable vision for reimagining democratic capitalism before the onset of stagflation and neoliberal austerity. As America confronts the task of again building self-reliance, revisiting its defeat may tell us something about the forces opposed to a new economic order.
Introduced in September 1971, Burke-Hartke symbolized a major change in the labor left’s view of global trade integration. The experience of the Great Depression and World War II had taught that protectionism was an ineffective and retrograde tool to stoke employment; for a generation of working-class households, the 1931 Smoot-Hawley Act’s notoriously high tariff rates had proved the exhaustion of Republican economic doctrine. In tandem, mainstream economics held that free trade assured three unambiguous—and inalterable—benefits: It opened foreign markets to America’s advanced manufacturing, thereby boosting the country’s most innovative sectors; it allowed workers to enjoy a broader range of goods and a higher share of national consumption; and it promoted peaceful international relations and global development. In effect, trade liberalization, long sought by the Democrats’ Southern wing, came to constitute a major pillar of modern welfare capitalism, one that counterbalanced the New Deal’s domestic regulatory reach with pro-market principles.
By the end of the 1960s, however, multiplying pockets of long-term joblessness in Northern industrial districts had prompted workers to reconsider these propositions. Trade shocks that had forced plant closures in textiles were spreading to other light manufacturing sectors. Legacy firms weren’t the only casualty. Production stages for electronics, appliances, and other consumer durables had already been steadily globalized, leaving low-income Americans, including blacks and Latinos, with fewer opportunities to acquire steady employment outside menial services. Meanwhile, trade assistance programs passed under the Kennedy administration were barely operative. With welfare rolls exploding, America’s self-image of constant upward mobility was beginning to crack.
After years of deflection, workers seeking trade controls finally caught the ear of the AFL-CIO’s leadership and influential Democrats like Hartke and Burke. Their arguments forced a quiet reckoning with one of the New Deal’s underlying weaknesses. The linchpin of the New Deal order—developmentalist policies for the South—had entailed a de facto compromise that fell disproportionately on Northern unionized workers in import-sensitive sectors. Lower tariffs, when combined with collective-bargaining rights, may have strengthened purchasing power in some urban regions, but they primarily benefited agrarian interests and competitive smokestack industries in the low-wage, nonunion South. Simultaneously, lower tariffs encouraged export-intensive growth in developing countries that sought deeper ties with the United States. These dynamics eventually combined to put downward pressure on many unionized workers who had loyally delivered Democratic votes in the hope that the New Deal would protect their right to a family wage.
“Anxiety over trade policy mounted amid other signs of fracture and decline.”
Anxiety over trade policy mounted amid other signs of fracture and decline. Despite the breakthroughs of the civil-rights movement and the promises of President Lyndon Johnson’s War on Poverty, the country was suffering its first great crisis of postwar confidence. Faltering growth, creeping inflation, aging infrastructure, and the spread of violent crime undermined the myth that America enjoyed a flourishing “people’s capitalism.” Disagreements in Washington over the Vietnam War and foreign policy more broadly were also intensifying. Once-proud internationalists began to voice strong doubts about the enduring logic of America’s various overseas commitments.
Against this backdrop, it was no coincidence that two Northern Democrats came to believe that trade policy was interlinked with a host of challenges that threatened the long-term welfare of their constituents. To some extent, their apostasy had already raised eyebrows. Hartke, a crucial architect of Johnson’s Great Society, had publicly broken with the president over Vietnam in 1965 before the war’s senseless escalation; he was also an early critic of foreign dumping practices in steel and other sectors. Burke, for his part, held JFK’s old congressional seat and had previously trumpeted the slain president’s idealistic view of trade integration. But before decade’s end, he had swung in the opposite direction. Having witnessed successive blows to the country’s manufacturing core at the apex of postwar growth, these veteran politicians had reason to draft a new course for liberalism’s ship of state. In effect, Hartke and Burke had evolved into left Hamiltonians determined to scale back foreign entanglements and shore up prosperity at home.
For the most part, trade revision was a policy reversal that was theirs for the taking. While President Richard Nixon had evinced a taste for unorthodox policies, his use of temporary tariffs and wage-and-price controls were political devices that didn’t speak to a fundamental change in America’s strategic posture; compared to his postwar predecessors, Nixon may have been a realist, but as his overtures to China demonstrated, he wasn’t, at bottom, an anti-globalist. Burke-Hartke, on the other hand, augured a systemic overhaul of trade policy that would have likely reverberated across other regulatory, labor, and social-welfare policies.
Hence, the ire Burke-Hartke generated. The US Chamber of Commerce swiftly denounced the bill, and business lobbies that had specially formed to quash protectionist sentiment in Congress mobilized to halt its momentum. The bill’s fiercest opponents may have actually underestimated how radical it was. The purview of economic intervention granted by the bill far exceeded traditional tariffs. Among its key features were a sprawling set of import quotas and a provision to fully tax multinational profits earned abroad, rather than the fraction repatriated; the goal was to eliminate corporate incentives to engage in labor arbitrage and clamp down on the use of overseas tax shelters. A new agency would have been tasked with managing the quotas, monitoring import competition in underemployed sectors, and limiting multistage supply chains.
Taken together, these mechanisms would have seriously inhibited offshoring. But more than warding off a trade deficit in vulnerable sectors, Burke-Hartke’s purpose was to keep manufacturing central to the home market. As Hartke explained in a 1972 op-ed in The New York Times, “the bill empowers the president to limit capital and technology flows where they would have an adverse effect on domestic employment.” Notably, the quotas also sought to return targeted import categories to their 1965-1969 levels and prevent, from thereon, the ratio of imports to domestic production from significantly changing. This may very well have created headwinds for fledgling economies abroad, yet it implicitly challenged the entire premise of wage restraint in the Global North and Global South alike. Import competition, after all, had a history of tempering wage demands, while excessive dependence on underpriced exports muzzled household consumption in emerging markets.
In sum, Burke-Hartke represented an extraordinary negation of the expanding postwar trade regime. The postwar labor-capital compromise had depended on sufficient wages and broad access to a decent standard of living; lower tariffs, policymakers and economists assured, would make the dollar go even further. Yet instead of raising consumption and economic well-being in any definitive sense, freer trade seemed to accompany looser labor markets and cuts to wages and benefits, either by workplace agreement or under the veiled threats of anxious employers. As the 1970s progressed, trade liberalization was becoming the velvet glove of labor-market discipline from the industrial core to the periphery.
Amid the withering 1973-1975 recession, Burke-Hartke stalled in Congress. It probably never stood a chance of passing. Its implications for capital’s investment prerogative were stark enough, but, perhaps more fundamentally, the bill risked destabilizing the Cold War’s bipolar system. Western allies were sure to be rankled and spooked. Its implementation would have sparked numerous diplomatic and logistical issues. Precisely because of the scope of America’s global commitments, Burke-Hartke’s feasibility was even more questionable than earlier visions to organize and direct the American economy. At the philosophical level, the bill signaled unchartered waters that were no less troubling to the Washington Consensus: It smacked of autarky, a tradition that not even the most protectionist Republicans nor the most militant Jacksonians had ever truly embraced. And it did so in a manner that extended organized labor’s leverage over matters beyond benefits and workplace conditions. For all these reasons, the bill had to be stopped.
The result was an insidious cycle that mainstream economics denied was unfolding and that political commentators generally excluded from consideration. To wit, trade policy quietly encouraged dependence on cheap goods, often of dubious quality, while substituting for real wage growth, thereby sapping whatever demand remained for American-made products. By the turn of the 21st century, any semblance of the good life for most Americans became inextricable from “free trade.” This dynamic encouraged yet more mergers, acquisitions, and liquidations while neoclassical economists declared the global economy to be headed in a more competitive direction.
Corporate America’s insistence that profits on domestic goods weren’t robust enough to stay competitive and support reinvestment became a self-fulfilling prophecy. Alongside the growth of oligopolistic retailers and distributors, the China shock further eroded the manufacturing networks of regional economies, all but eliminating any economic rationale for surviving firms to maintain, let alone expand, domestic operations; most would-be producers correspondingly had no way of fathoming how to get new plants online. New frontiers in digital services touted by Big Tech and Wall Street similarly reinforced the notion among America’s educated elite that domestic production of durable goods was largely anachronistic. These services, of course, furnished irresistible rents in the form of data-mining and fees in an economy puffed up by social-media hype and the cultural capital of “superstar cities.” In the meantime, China’s growing monopolization of innumerable sub-sectors was seen as a utilitarian good that had negligible downsides, even though full-time jobs with benefits vanished in many parts of the United States.
Today’s conflict over safeguarding American industry unmistakably recalls the spirit of Burke-Hartke and the sporadic battles that followed. But there are important differences between that time and ours. Among the most significant changes since the 1970s—besides the diminished breadth of America’s manufacturing base—are the politics of protectionism and China’s power and influence in the global economy. Through the mid-aughts, a cohort of labor-aligned Democrats, mostly from the House of Representatives, could be counted on to beat the drum against offshoring, defend fair-trade principles, and warn about the dangers of a neglected industrial base. They wanted other countries to develop and believed in cooperation with competitive allies like Japan, but they discerned that globalization was failing to spread the opportunities it promised. By the early 2010s, these voices were regarded as inconvenient relics by a party elite that believed its own propaganda about the “rising American electorate” and the virtues of continued trade integration with China.
Protectionism is now considered by many to be a noxious Trumpian idea that President Biden errantly embraced for dubious political gain. There is something odd about the pervasiveness of this political amnesia on both sides of the aisle. The striking policy reversals of the Biden era—on trade, domestic manufacturing, and the untenability of “Chimerica”—should have at last encouraged a more fair-minded view of the populist revolt against the Washington Consensus and its origins in postwar liberalism. Instead, Biden’s actions, arguably tamer than Burke-Hartke, have become another source of friction, even cognitive dissonance, among progressives and aspiring Democratic leaders outside of industrial-policy circles.
In particular, Biden’s expansion of the tariff regime erected by Robert Lighthizer, Trump’s US trade representative, has dismayed commentators who never imagined that a Democratic administration would seriously deviate from the economic logic of Wilsonian internationalism. But while it appears to be a long-sought victory for organized industrial labor, the strength of the “New Washington Consensus” may be overstated. When critics of China’s authoritarian developmentalism aren’t accused of stoking fears of a new “Yellow Peril,” their policy recommendations are treated by influential voices as unsound and misguided. Measures to reshore supply chains and shield domestic renewables have been met with predictable arguments about efficiency, innovation, and short-term consumer welfare. The contention is that startling advances in China’s automotive sector, robotics, and quantum computing, among other leaps, have already shown that Washington’s “costly” industrial strategy will fail to impede China’s dominance of key fields and commercial networks. The upshot is to let Chinese electric vehicles, solar panels, and whatever else penetrate the domestic market in the hopes that proper competition will expedite the energy transition.
One gets the sinking feeling that a class interest lies behind this willful naïveté about what is required to change America’s social contract for the better. It’s easier to blame workers’ social distrust on nativism and misinformation than to grant the prescience of a previous generation’s warnings about globalization.
To advocate for industrial policy, including tariffs and other trade restrictions, isn’t to endorse a reckless approach to China nor embrace autarky over sensible forms of interdependence in the world economy. But serious revisions to the global trade order are necessary if we are to conserve a form of globalization worthy of democratic ideals. The reality is that China has already signaled its determination to become more self-reliant, but it has done so in the context of extending its Belt and Road Initiative and debt traps across the Global South. Put another way, China effectively no longer needs the American consumer market to develop further, raising the question of how much longer America and its technology transfers will be relevant to developing countries—even those which end up regretting their dependence on the People’s Republic.
“There are few signs China will relent.”
Accordingly, we need to examine how “Chimerica” and the free-trade illusion may have shrunk the long-term developmental possibilities of the rest of the world. Free trade’s first and best defense—that, in the aggregate, it enhances consumer welfare in advanced economies, while boosting global economic growth—may no longer be borne out by the evidence. On top of lasting trade shocks in the Global North, China’s dominance of several sub-sectors has enervated export diversification in parts of Africa and quite probably aggravated the middle-income trap in which other countries find themselves caught. There are few signs China will relent: It continues to flood the world market with underpriced goods, while suppressing its internal consumer demand—a recipe for ruinous competition and widespread stagnation. While “friend-shoring” by the United States may help remedy some of these issues, past experience indicates that any boost to American households will prove short-lived. America has fine reasons to cultivate deeper partnerships with countries such as India, Indonesia, and Vietnam, but this strategy shouldn’t substitute for domestic R&D and investment in American workers.
In the end, a new outlook on trade is inseparable from confronting how avaricious and irrational our economy has become. In a society as unequal as ours, it is somehow normal to spend a Christmas-sized budget on myriad food-service conveniences, fast fashion, bank fees, and subscription plans—to say nothing of shady medical bills, large insurance premiums, and extortionary credit-card interest rates. By contrast, experts have insisted it is patently “uneconomic” and coercive to ask consumers to spend a bit more on domestically produced goods, whether they be clothes, machine tools, toys, appliances, or furniture. As ever, we are urged to disregard the living standards and relative security of workers when trade was more controlled, to equate today’s one-click “abundance” for a life well-lived. The service-cum-servant economy continues to explode, with few asking why and for whom, while it is taken as an irreversible fact that we can neither aid domestic textiles hit by e-commerce giants like Shein and Temu nor assemble a whole computer from American-made parts.
Fifty years ago, Democratic leaders like Hartke and Burke sought to avoid the desperate situation in which American industries and policymakers now find themselves. While they were depicted as fools and economic illiterates willing to undo America’s expansion of the West’s “open system”—and of trying to extend Fordism past its prime—they were, in fact, motivated by a holistic view of economic freedom. Indeed, what some may view as a contradictory philosophy made perfect sense to these staunch liberals. Faithful to the American yearning to make one’s own way, they understood that American social democracy had to tend to the Jacksonian spirit—to help realize what is, at root, a democratic and very human desire to make things. Perhaps the best measure of our current industrial strategy will be whether that tradition is at last renewed for future generations.