Susan Walsh/AP Photo
Vice President-elect Joe Biden listens attentively as National Economic Council Director Larry Summers speaks, back in 2008.
Last week, I reported that the Biden campaign is turning to many of the same people for advice on trade as his recent predecessors, people whose brand of corporate globalism has cost America jobs and Democrats votes.
Biden has sounded like a progressive in advocating major spending on infrastructure and public works, and the need to recapture U.S. production in vital areas such as medical supplies. He has also sounded a lot more supportive of unions than his recent Democratic predecessors. So far, so good.
But if we are serious about reclaiming American industry, especially in advanced technologies where China has been so successful at using state subsidies and coercive technology transfers from U.S. “partner” companies, then industrial policy bumps smack into trade policy.
It is here that Biden is at risk of being captured by the conventional wisdom.
It’s one thing to argue that we need to reclaim domestic supply chains and rebuild domestic manufacturing capacity for public health and for national security narrowly defined. But what about the need to rebuild U.S. manufacturing generally—especially in advanced technologies, were we risk losing not only today’s technologies but those of the future?
Standard free-trade doctrine holds that you should buy from the lowest-cost producer, e.g., China, even if those low costs are the fruit of many years of illegal subsidies, and even if the long-term cost is to keep the U.S. reliant on a less-than-friendly Beijing.
If we define national security properly, it includes manufacturing and technical capacity across a broad range of products and technologies that we are fast losing.
Suppose, for instance, that the U.S., under a future industrial policy, decides not only to build a lot of high-speed rail, but use the occasion to create domestic production capacity, with Buy American provisions. Ditto solar cells, where China’s subsidized industrial policy has made China the world’s low-cost leader.
Orthodox economics would ask for a cost-benefit test. If we re-create domestic production capacity, what’s the added cost per job created? Is it really worth the cost? Why not just buy from China?
But that is precisely the wrong question. The right question is: What’s the benefit over time of getting the U.S. back in the game? And what positive spillovers—what economists call “externalities”—are produced by creating middle-class jobs?
As Harvard economist Dani Rodrik observes, the negative externalities from the loss of good jobs included social and regional collapse, deaths of despair, and political backlash. The ultimate negative externality, one might add, was the 2016 election of Donald Trump.
Positive externalities from job creation and long-term benefits of cumulative innovation are harder to precisely quantify. Yet the Chinese regime knew full well, without conducting spuriously precise cost-benefit tests, that it made sense to target and subsidize the entire range of advanced technologies, most recently in the Made in China 2025 initiative.
The trouble is that nobody of real influence in the Biden campaign takes this more expansive view of trade and industrial policy. The closest we get is from the national-security side of his team. If we define national security properly, it includes manufacturing and technical capacity across a broad range of products and technologies that we are fast losing.
BIDEN’S CORE economic-policy team has been identified in press accounts as Larry Summers, Jake Sullivan, Jared Bernstein, Heather Boushey, and Ben Harris, as well as sometime participants such as Richard Cordray. This group includes some good liberals, but the obvious power player with the heft and craft to do end runs directly to Biden anytime he likes is Summers.
Above them is the Biden inner circle, which also reflects far too much corporate influence. This includes Steve Ricchetti, a longtime promoter of deals like NAFTA both in the government and on Wall Street, and former Democratic Leadership Council chief Bruce Reed. The one real progressive in Biden’s inner circle is his longtime Senate chief of staff, Ted Kaufman.
While there has been outreach and occasional conversation with individuals in the progressive community, nobody with real heterodox views on the nexus of trade, financial regulation, industrial policy, and antitrust has made it into the Biden inner circle. “Anybody in the old regime doesn’t understand when we talk about making supply chains and trade generally safe,” says Barry Lynn, who heads the Open Markets Institute, which has pioneered connecting the dots between supply-chain policy, economic concentration, and trade.
The fact that Biden came out strongly against the Trump White House’s floating of a proposal to have people draw today on future Social Security earnings, while at the same time Summers protégé and campaign adviser Natasha Sarin recently co-authored an academic paper with the same idea, shows the push and pull between Biden’s instincts and the policy advice that he’s getting. Late on Tuesday, Sarin renounced her position in a Bloomberg op-ed, stating that "tapping Social Security would be a big mistake." This gives at least some hope that Biden's expressed views are filtering down to his advisers, and that outside pressure (Sarin was getting an earful on social media) works.
Nobody with real heterodox views on the nexus of trade, financial regulation, industrial policy, and antitrust has made it into the Biden inner circle.
Are there counterweights to the usual suspects? One, presumably, is Elizabeth Warren, a leading prospect for VP, who recently wrote an op-ed with Biden that sounded like ten parts Warren and one part Biden.
I am a huge admirer of Warren. But she has to be a long shot for running mate—first, because her views on regulation are anathema to Wall Street Democrats; second, because power players like Summers abhor her; and third, because her independence has to be alarming to Biden.
Another possible counterweight is Bernie Sanders. When Sanders agreed to suspend his campaign, he and Biden agreed that there would be six joint policy task forces—on the economy, education, criminal justice, immigration, climate change, and health care.
That was almost a month ago, and nothing further has been heard about them. Sanders himself, much to the consternation of his former senior staff, has been uncharacteristically quiet.
(UPDATE: After this article closed, the Biden and Sanders campaigns finally released names of people on joint policy task forces, including such progressives as Rep. Alexandria Ocasio-Cortez and economist Stephanie Kelton. Two people from Biden's own economic team, Jared Bernstein and Ben Harris, were named to the joint task force, but not Larry Summers. Despite pressure from progressive groups, he remains on the internal Biden team. It remains to be seen what role these Sanders people will actually play and how they will interact with Biden's internal policy operation.)
Nor has the Biden campaign made any notable outreach to the labor movement as a counterweight to the influence of the mega-donors. (UPDATE: The joint task forces include Lee Saunders, president of AFSCME, Randi Weingarten, president of AFT, and Mary Kay Henry, president of the SEIU.) The campaign’s director of labor engagement is Erika Dinkel-Smith, formerly legislative director of IATSE, the 150,000-member union of backstage workers in theater, film, TV, and the arts. IATSE is a fine union but not exactly a titan in the house of labor.
Trade union leaders who “engage” via Dinkel-Smith are connecting well below the true power centers in the campaign. My sources say it’s been months since Biden personally has reached out to major labor leaders.
Meanwhile, the Tuesday guest speaker at the AFL-CIO’s executive council meeting was one Robert Lighthizer, Trump’s trade chief, who sounds better on trade issues than any recent Democratic trade chief.
Another liaison for people looking to connect with the campaign is Alex Niejelow, identified in recent emails as “manager of the campaign’s policy committees.” He is former chief of cybersecurity for the National Security Council under Obama. His current day job is director of cybersecurity and public affairs for Mastercard. The vice chair and president for strategic growth of Mastercard is Mike Froman, former U.S. Trade Rep, architect of Obama’s trade policies, and a leading candidate for Biden Treasury Secretary. Nice how these circles intersect.
Trying to reconcile the nominal Biden campaign structure with its true power structure is like navigating a hall of mirrors. Returning to the question of trade, I was told by three sources whom I trust that there is a campaign working group on trade, chaired by two corporate globalists, Jennifer Hillman and Miriam Sapiro, and staffed by an influential trade lawyer named Sahar Hafeez. People interested in joining the working group were told to send materials to Hafeez.
I wrote about Hillman last week. Sapiro is a protégé of Mike Froman. She briefly served as acting USTR and then as Froman’s deputy. She now works for D.C. lobbying and strategy firm Sard Verbinnen & Co., where she has several corporate clients on trade issues.
Trying to reconcile the nominal Biden campaign structure with its true power structure is like navigating a hall of mirrors.
Trump’s initial reworked version of NAFTA, the U.S.-Mexico-Canada Agreement (USMCA), was not much better than the original. It took heroic efforts by the labor movement and progressive Democrats, as well as long negotiations between Speaker Nancy Pelosi and Lighthizer, to get a USMCA worth having, with stronger labor and environmental and enforcement measures, as well as less of a sweetheart deal for drug companies. In that epic fight, Sapiro was hired by a corporate coalition to promote the Trump version.
But despite the significant confirmation I’ve received on the trade working group, the campaign categorically denies that any such committee exists. This group seems to be the Schrödinger’s cat of policy panels; it both exists and doesn’t exist.
One possibility is that all manner of self-promoters, looking to exert influence or seek jobs, create informal advisory bodies. The campaign doesn’t discourage them, especially if they are useful to reassure donors, but can truthfully disclaim any formal connection.
Biden’s big donors and bundlers are disproportionately from the worlds of finance, tech, real estate, and pharma—industries that would lose from a drastic resetting of trade policy.
In a campaign, thousands of people and hundreds of interest groups diligently send in policy papers. The small group of people who actually run the campaign doesn’t begin to have the time to read all of these, much less winnow them down. When the campaign ends, there might as well be a large bonfire.
Look at the millions of words, some contradicting each other, in the campaign policy proposals of any recent president and you’ll find little resemblance to the policies actually carried out in office. As that great political analyst, Lewis Carroll’s Humpty Dumpty, sagely put it, in dialogue with Alice:
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master—that’s all.”
Who will be master in a Biden presidency? All the structural forces point to the usual suspects.
Biden lately has been gesturing left, especially on such issues as labor and public investment. What’s troubling is that when the dust settles, and the top officials are named, it’s likely that the corporate globalists will both control the process and end up in the power positions—unless some countervailing pressure gets through.
