Working-class antiheroes

OXFORD: In both the United Kingdom and the United States, political parties on the left and the right are competing to show voters that they are on the side of working people. The question is whether prevailing approaches to protecting workers – which focus on a combination of industrial policy and restrictions on trade, investment, and immigration – are actually in workers’ interest.

Protecting workers has become practically synonymous with protectionism. In recent years, voters in many countries, concerned about their economic well-being, have turned against free trade, immigration, and inward foreign direct investment – and have rejected the leaders and parties who long promoted such policies.

Europe is a case in point. After the 2007-08 global financial crisis plunged even middle-class households into economic insecurity, voters began to look beyond mainstream political parties in search of greater support and protection, and were often attracted by those blaming immigration for their struggles. The COVID-19 pandemic, and the cost-of-living crisis that followed, reinforced this trend, and recent elections in Austria, Germany, Italy, and the Netherlands saw surging support for anti-immigration parties.

In the US, new political parties did not emerge, but a new kind of leader did. Donald Trump won the US presidency in 2016 partly by blaming free trade (particularly with China) for decimating jobs and investment in America’s Rust Belt. While criticising free markets and capitalism used to be the preserve of the left, even The American Conservative now runs articles pillorying trade, immigration, and the free movement of capital for the ravages of deindustrialisation.

One answer to such 'carnage' is tariffs, which Trump eagerly introduced while in office. But Joe Biden – who defeated Trump in the 2020 election – maintained and even built upon those tariffs. Earlier this year, Biden imposed a 100% tariff on Chinese-made electric cars – a very high rate, though it affects a very small percentage of US imports from China. Trump promises that, if re-elected, he will implement 60-100% tariffs on all Chinese imports.

The protectionist message is clearly one that workers want to hear. But tariffs are unlikely to work. For starters, they lead to retaliation and distrust among trading partners, as we saw in 2018 when Trump imposed tariffs on steel and aluminium from Canada, Europe, and Mexico. They thus reduce a country’s access to overseas markets while driving up prices. Because they disrupt supply chains providing vital components for domestic manufacturing, they might also lead to employment losses.

Those losses would not be offset by the “reshored” jobs the protectionists promise, as previously offshored (low-wage) jobs are increasingly filled by machines, not workers. This is already happening in China, where “smart manufacturing” is carried out in “dark factories” run entirely by robots. Protecting manufacturing jobs is thus no more a solution to China’s high youth unemployment rates than reshoring such jobs is a realistic means of revitalising the Rust Belt.

But, as US President Franklin D. Roosevelt’s administration showed in the 1930s, there is a better way to protect workers: domestic labour legislation that supports unionisation. Beyond ensuring a decent standard of living for workers, such legislation in the US and the UK gave greater political voice to working people, enabling them to rise through the labour movement into politics.

That changed when traditional labour parties came to be dominated by urban liberal professionals, rather than representatives of the working class. For example, the proportion of working-class members of Parliament representing the UK’s Labour Party plummeted from nearly 30% in 1987 to only 10% in 2010.

Fortunately, policymakers in the UK and the US increasingly seem to recognise the role of domestic labour legislation in protecting workers. In the UK, the new Labour government has put forward an Employment Rights Bill which would extend workers’ rights in areas like sick pay, flexible schedules, and protection against unfair dismissal. The bill paves the way for reviving trade unions, removing restrictions on workers’ right to strike, addressing the gender pay gap, and strengthening protections against sexual harassment in the workplace. Predictably, employer reactions have been mixed, and the government will now engage in extensive consultations as it works to turn the bill into legislation.

In the US, the Biden administration sought to include incentives for supporting unionisation in the Build Back Better Act, which aimed to create “millions of good-paying jobs”. But industry lobbyists pressed the US Congress to eliminate the bill’s proposed incentives for manufacturers to base their assembly plants in the US and to use unionised labour. Ultimately, the act’s passage came down to one vote – that of Democratic Senator Joe Manchin, who insisted that the support for unionised labour be removed.

Trade policy can also be used to protect labour – if we look beyond tariffs. The US-Mexico-Canada Agreement (USMCA), which the Trump administration negotiated as a successor to NAFTA in 2018, has the strongest and farthest-reaching labour provisions of any US free-trade agreement. Beyond placing labour obligations at the core of the agreement, and making them fully enforceable, the USMCA provides that countries can help workers adapt through domestic programmes such as the US Trade Adjustment Assistance programmes that have been helping workers transition away from jobs lost to import competition since 1962. The USMCA proves that worker protections are compatible with international competitiveness.

Political support for protectionist trade policies is easy to explain. A growing share of working people in industrialised democracies feel – and, in fact, are – less represented and less protected than previous generations, and both Chinese factories and immigrant workers are easy targets. So, when politicians acknowledge these voters’ frustration and promise to improve their lives with tariffs and immigration controls, they are easily convinced. Ultimately, however, this approach will do little for workers – or for the political leaders who embrace it.

Ngaire Woods is dean of the Blavatnik School of Government at the University of Oxford.

Copyright: Project Syndicate, 2024.

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