Commentary on Political Economy

Friday 22 April 2022


American economists and politicians have long championed the benefits of free trade and globalization. Until Donald Trump's victory in 2016. The outsider's unexpected score in industrial states traditionally won over to the Democrats, convinced by his very critical speech against the trade treaties in force for twenty years, forced them to open the eyes faced with an uncomfortable reality. By allowing American companies to move their factories to Mexico, giving them access to a workforce paid $5 a day, by opening world trade to China from 2001, the United States not only massively exported their industrial jobs to these low-wage countries. They reaped in return an uncontrollable phenomenon of political polarization, as shown by MIT economist David Autor, a phenomenon that culminated in Trump's victory. Thus fueling a threat to their democracy.

 The challenge is not only that of industrial sovereignty, recalled by the health crisis. Industrial jobs are above all a factor of prosperity and social and political balance: well paid, they are protected by a history of social achievements and valued in the community. It was even industrial development that allowed the emergence of the Western middle classes in the post-war period: the economist Dani Rodrick sees in it the “fundamental condition for the democratic vigor of a country”.

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 There was therefore a significant political risk in exposing these jobs to competition from low-wage countries, when they were already exposed to innovation and technical progress. As the entrepreneur Denis Payre shows in his book The Global Contract (First, 2021), policymakers believed, in good faith, that free trade would lead to the convergence of emerging economies with the West, and thereby promote democracy. Without ever imagining that, by hitting the Western middle classes, deindustrialization would produce extreme voting.

 A certain fatalism

 A similar phenomenon has played out in France over the past thirty years. The shock of Chinese competition was less violent than across the Atlantic, but whole sections of French industry were exposed to Eastern European countries, whose social and environmental standards were lower, as well as in the Maghreb countries. Studies have shown the shift of European car production to Eastern Europe. And all you have to do is go to the industrial regions in the north or east of France to take the measure of it. The workers of the now famous Whirlpool factory near Amiens know it well: it was in Lodz, Poland, where the minimum wage barely exceeded 400 euros per month, in 2017, that their washing machine production line been relocated. Companies will never admit it, but they can't resist such a call for air.

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 The French political class, like the American one, has chosen to look the other way. Partly so as not to risk questioning the construction of Europe. She has chosen to highlight the gains in purchasing power for households and, with a certain fatalism, the need to "accompany" the populations exposed to these inevitable transformations - it is up to them to train, to be mobile and flexible. Thus leaving the field open to the extremes, which in France as elsewhere, have taken hold of the subject.

 In fact, the most exposed categories have turned to service jobs, which are more precarious and less well paid than in industry, and to which the term “proletariat” is more readily applied. “Employees” now outnumber “workers”. And share the same feeling of downgrading, which we also found manifestations of in Brexit.

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 Certainly, France enjoys a protective social model, which distinguishes it in particular from the United States, where full employment acts as a social safety net. But the "yellow vests" demonstrated to be able to live with dignity from their work, not for more benefits. The communities that suffer the consequences of factory closures or relocations understand very well the mechanisms involved, they know the wages of the countries where their employers have chosen to establish themselves, and show a disarming lucidity in the face of power gains. purchase of "made in elsewhere".

 Some economists dispute the figures, claim that the impact of free trade on industrial employment is difficult to assess, invoke technological innovations, the fact that deindustrialization started well before the 1990s. All of this is true. The progression of extremes too.

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