White Nationalism and Economic Nationalism

This article appears in the Fall 2017 issue of The American Prospect magazine. Subscribe here.

In August, when Stephen Bannon called me out of the blue, I came away from that bizarre conversation impressed with the coherence of his grand strategy, and relieved that Donald Trump has embraced only part of it. As Bannon explained with surprising candor driven by braggadocio, the idea is first to racialize politics—to remind white people, especially those who feel beleaguered, of their whiteness. If race becomes a prime identity for downwardly mobile white people, well, there still are a lot more whites than other colors in the rainbow. And if Democrats can get baited into defining their prime mission and identity as defending the rainbow, the right wins.

“I want them to talk about racism every day,” Bannon told me. “If the left is focused on race and identity, and we go with economic nationalism, we can crush the Democrats.” The press coverage focused on the race part of that quote, but the economic nationalism aspect of the strategy is at least as interesting.

Combining white nationalism with economic nationalism was and is Bannon's plan. The racist part would rev up a latent sense of white grievance and identify the Trump administration with it. The economic nationalist part would deliver tangible benefits. Damned clever.

Concretely, cracking down on China's predatory industrial and trade policies would return jobs and industries to America. Likewise renegotiating trade deals like the North American Free Trade Agreement that have accelerated the outflow of jobs. A big public infrastructure program would produce blue-collar jobs directly and modernize made-in-America technologies. Bannon initially contacted me because I've long criticized our indulgence of China's mercantilism and have advocated a progressive version of industrial policy, a more symmetrical trade system, and lots of public investment—of course, minus the racism. Bannon thought he detected a kindred soul.

But

Trump wasn't buying the economic part of what Bannon was selling. Why not? Because the pocketbook part of Trump's economic populism was empty rhetoric.

His top economic hires, Gary Cohn and Steve Mnuchin, are from Goldman Sachs. His commerce secretary, Wilbur Ross, is a private-equity guy. Trump's version of infrastructure investment is privatization, in which Wall Street sells the bonds, and private corporations take over the services and profit by increasing charges to ratepayers and future generations of taxpayers. Trump even floated the idea of selling off FDR's crown jewels, the great dams and public power systems of the Northwest, which produce America's lowest-cost and greenest electricity for eight states.

As for China, you'd think that there would be a large corporate constituency for getting tough with Beijing's strong-arm trade policies. But think again. The essence of the deal you can't refuse is that China offers American corporations billions in subsidies for them to build state-of-the-art factories in China. Beijing also provides very cheap and docile labor. No worry about unions or strikes. In return, the American corporation agrees to transfer proprietary technology to China, take on a Chinese “partner,” and produce in China only for export, leaving the immense Chinese domestic market to the local firm.

And guess what—most American companies take the deal. That includes our biggest players in both tech and manufacturing—Intel, G.E., Boeing, and many more. They take the deal because there is so much money to be made. They take it because U.S. government trade policy fails to take a hard line on China's combination of extortion and bribery, so the best corporate option is to make a separate peace with Beijing. And Wall Street gets to finance a lot of these deals. When startups in emerging U.S. industries like solar cells go broke because they are underpriced by subsidized Chinese competitors, they either declare bankruptcy or move their factories to China where production costs are lower.

(AP Photo/Evan Vucci)

So while you might think there's a corporate constituency for getting tough with China, for the most part there isn't. A few niche industries complain. But many big companies that don't like the terms China has extracted are still reluctant to file complaints, because they don't want to offend the Chinese.

“We're at economic war with China,” Bannon told me. Bannon may have been exaggerating when he told a New York Times interviewer, “China right now is Germany in 1930,” but China is indeed a prime economic and geopolitical threat—not because China is so productive but because China defies the rules. Even Donald Trump, the ultra-nationalist pseudo-populist, won't take on China—because most of Trump's corporate allies are basically fine with the status quo.

Bannon got canned partly for upstaging his boss, partly for making some over-the-top comments in an interview that he forgot to put off the record, and partly for being totally at odds with the rest of the administration on economic policy. Now that he is free to speak even more loudly, he has doubled down on his critique.

Trump is so in bed with corporate America and Wall Street that even when two hurricanes were heaven-sent to allow him to redefine himself as the Infrastructure President, Trump demurred. Irma and Harvey will cost Florida and Texas upwards of $300 billion, and that doesn't include long-deferred costs of protecting coasts against storm surges and rebuilding antiquated basic infrastructure.

George W. Bush found a purpose for his feckless presidency after the attacks of September 11. America ended up spending over $3 trillion on self-defeating wars in Afghanistan and Iraq. You can bet that if a terrorist attack by ISIS rather than retribution by nature had devastated Houston and several cities in Florida, Trump would be maximizing his advantage. Fortunately, he is too compromised and confused to maximize the infrastructure opportunity.

ONCE YOU APPRECIATE THAT the white nationalism was a deliberate grand design and not just casual racism, a lot of seemingly dumb and random stuff falls into place. In Trump, Bannon had the perfect pupil. Though Trump’s racism did not begin with Bannon—Trump was on his birther kick long before his alliance with Bannon and Breitbart—it was Bannon who fused white nationalism into a deliberate strategy.

Consider the several elements that leave many white people of modest income in the American heartland so aggrieved. First, their economic lives and prospects have gone straight to hell, and it's even worse for their kids. Thus the populist rhetoric. Second, the Latino influx does produce lots of eager workers, willing to take jobs for low wages. Thus the hateful slogans about Mexicans as rapists and the wall.

When Trump devised the diabolically brilliant slogan “Make America Great Again,” he was evoking a time that middle-America whites remembered, either from their own lives or from memories of their parents or grandparents.

It was a time when blacks knew their place. It was a time when the only Mexicans were tightly regulated braceros imported as cheap labor for the harvests, who then went home and didn't come back with their extended families. It was a time of all-white public schools and neighborhoods, and a time of plentiful blue-collar jobs sufficient for one (white, male) wage-earner to enjoy a middle-class standard of living. The little wife was home raising the kids and putting a hot supper on the table, not juggling jobs, not hectoring her man to find a way to bring in more income and to share housekeeping duties as well. Those days were great—and America was great—at least compared with the lives of much of the working class and downwardly mobile middle class today.

The gender piece is a key part of this, and insufficiently remarked upon. When Trump made outrageous remarks about women, when he loomed over Hillary Clinton like the Incredible Hulk, the dog-whistle message was not the coarseness. It was that he knew how to put women in their place. Like when America was great.

This message is why Trump's popularity among his base stubbornly refuses to fall, despite his sheer weirdness, his blunders, his failure to deliver. He taps the rage. Though Trump can sometimes seem an incoherent mess, all of this was deliberate and strategic.

OBVIOUSLY, DEMOCRATS ARE NOT going to match Trump’s appeal when it comes to white nationalism, anti-immigrant policies, and sexism. Indeed, Democrats are at severe risk of falling into Bannon’s trap on the politics of identity. The events at Charlottesville widened the potential schisms in the progressive coalition. It left many black Americans feeling that too few whites had done enough to maintain even the partial gains of the civil rights era; that too few whites have joined blacks in combating racism; that working-class whites may have some grievances, but whites remain privileged compared with blacks; that whites still have a lot to do in confronting a racial privilege of which most are unaware.

(Photo by Shay Horse/NurPhoto)(Sipa via AP Images)

All sadly true. But try telling a white worker who faces declining wages and job security, lousy health coverage, rising housing costs, and unaffordable college for the kids to “Check your privilege.” Are you kidding? As the Prospect keeps writing in different ways, we need a politics of class uplift and solidarity to overcome the schisms of race, even as we continue to battle racism. There is, of course, a group that is supremely privileged, and it should be the object of common ire—corporations and the wealthy.

THIS BRINGS ME BACK TO economic nationalism. One of the indicators of the absolute hegemony of the Wall Street view of the world is the standard account of a straw man called “protectionism.” You know the liturgy. You can’t work for a mainstream newspaper or most academic economics departments without internalizing and regurgitating it: Free trade promotes economic efficiency. If we are concerned about income inequality, the remedy is to improve skills, not to seal up our borders. (Who exactly is proposing to seal up our borders?)

Here, for example, is the estimable Eduardo Porter, a senior economics writer for The New York Times, and one of the best. His July 4 piece had the title “Trump's Trade Choice: Follow the Postwar Order or Blow It Up.” Porter begins, “It seems President Trump is ready to start rolling back globalization. Let's hope he doesn't blow up the postwar economic order.”

According to Porter, Trump might turn his back on the World Trade Organization, as “he retreats from prior American commitments to global trade.” Porter asks, rhetorically, “Will he eschew the multilateral framework in pursuit of a set of bilateral deals, turning his back on a long history of trade diplomacy?”

In fact, the postwar economic order was all about a form of managed capitalism that combined economic dynamism with broad prosperity—but it was blown up about four decades ago. We are now in a whole other global order that serves mainly elites.

The postwar order was destroyed when the Bretton Woods system of fixed exchange rates and limits on speculative global capital flows was killed in the early 1970s, in favor of a more classically liberal global system, followed by trade deals crafted by and for corporate and financial elites. Bretton Woods was the work of John Maynard Keynes and thoroughly anomalous radicals temporarily in charge at the U.S. Treasury, led by Harry Dexter White. Keynes intended Bretton Woods to be the international counterpart to his design for a full-employment domestic economy. It would have a built-in bias toward expansion rather than austerity. With limits on international financial speculation, each country could pursue high growth and full employment without worrying about the bond market destroying them.

In 1945, when Britain came out of the war with a staggering national debt equal to 240 percent of British GDP, the newly elected Labour prime minister, Clement Attlee, did not pursue a program of austerity to reassure international creditors. He increased public outlays and built a welfare state. Full employment in Britain ensued for three decades. But in 1981, when the newly elected French Socialist President François Mitterrand tried similar policies, the franc was crushed by the newly liberated global bond market, and Mitterrand had to reverse course. By 2009, when the financial collapse punished innocent bystanders like the Greeks, austerity became axiomatic.

Funnily enough, during the postwar boom there was no far-right backlash. No Trump, no Brexit, no neo-fascist parties as the second-largest in longtime social democracies like Sweden, Denmark, the Netherlands, and Austria. It was the carefully contained brand of globalism that allowed progressive politics to housebreak capitalism in each of the democracies; and the neoliberal brand of globalism that hamstrings the ability of nations to manage a just economy—seeding ugly nationalist reaction.

It is neither coincidence nor contagion that this is occurring throughout the West. The post-1980 brand of globalization destroys the security and the livelihoods of the common people. The fact that so-called center-left leaders in the 1990s—Bill Clinton in the United States, Tony Blair in Britain, and Gerhard Schroeder in Germany—were complicit in the slide to global deregulation has deprived the Democrats, the British Labour Party, and the German Social Democrats of credibility as opposition parties, opening the door to the far right.

The point is that there is more than one brand of globalization. The architecture of globalization that was created after World War II deliberately left plenty of room for each nation to pursue a form of managed capitalism and full employment. If you wanted to specify “buy American,” that was legit. If you wanted to have an industrial policy, no problem. Trade deals were not used as a form of deregulation, as they were beginning with the creation of the World Trade Organization in the 1990s.

Nations were free to run economies pretty much the way they liked. There was no international competition to cut taxes, to liberate speculative finance, or to weaken labor standards. In that era, the economy turned in history's highest sustained rate of economic growth, and the economy also became more equal. With finance well regulated, there were no financial crises.

This economy was not protectionist in the sense of discouraging trade, which steadily increased throughout the postwar boom, but leaders were serious about protecting worker rights and living standards. And government, deservedly, had a lot more prestige and support than it does today.

The economist Dani Rodrik, a well-mannered critic of the current brand of globalization, has written: “Democracies have the right to protect their social arrangements. And when this right clashes with the requirements of the global economy, it is the latter that should give way.” Amen! Government needs to explicitly assert its right to prevent global laissez-faire forces from undermining its capacity to devise and broker a decent social compact.

The economists and economics writers who deliver simplistic canned lectures should be given remedial reading to do, starting with Rodrik and Joseph Stiglitz. The debate is not something called “protectionism” versus something called “free trade.” All commerce is predicated on rules, and laissez-faire is not a state of nature.

The issue is whether to have a form of global commerce that makes room for a decent brand of economy, as we did in the three decades after World War II.

For a century, domestic politics has been about insisting that capitalism treat workers with minimal decency, accord them some bargaining power, make room for needed social investments that markets won't provide, limit the toll on the environment, and prevent speculative finance from destroying the rest of the economy. The current brand of globalization, quite deliberately, hoses all of that away.

Progressives can never compete with the right in supporting white nationalism. But progressives can and should put forth a program of economic nationalism in the spirit of the postwar boom. Republicans, given their close alliance with global capital, are never going to support the kind of domestic prosperity program that the country needs—one that would be exceptionally popular.

WHAT WOULD SUCH A PROGRAM include? For starters, it needs to deliver tangible benefits in the form of good jobs. The back-to-back hurricanes were a serious wake-up call. The damage repair from Harvey and Irma doesn’t count the cost of providing communities with more storm-resistant infrastructure, including surge barriers. In addition to shifting to renewable energy, America needs a massive infrastructure program, in three parts: modernizing basic infrastructure; converting to an economy based on renewable energy; and making communities more resilient to nature’s retribution.

This will cost well into the trillions of dollars. As a program of constructive nationalism, it has multiple benefits. It produces lots of good jobs directly, all of them domestic. These include not just construction jobs, but engineering and design jobs, as well as jobs in entire new industries. If these projects are underwritten by American taxation or American public-sector borrowing, it is totally legitimate to demand that the elements be made in America.

Let Trump try to trump that. He can't and he won't because his brand of infrastructure spending is a fake, and he and his corporate cronies are more interested in cutting taxes on the wealthy than in using public resources to put Americans back to work at good jobs. And if the WTO doesn't like it, too bad.

A massive public investment would have an ideological benefit as well as partisan and economic ones. It would demonstrate the value of the public sector and restore some faith in it. It would signal, to coin a phrase, that we are putting American workers first.

On the trade front, the United States needs to become a lot more assertive with China and other nations that practice neo-mercantilism at our expense. China currently benefits from a double standard. It is a developed country in its export sectors but it is given an exemption from trade rules that require open markets, on the premise that it is a developing country. Sorry, but China is sufficiently developed to steal much of America's industry. Deals that require transfer of proprietary technology and prohibit U.S. companies from selling in China's domestic market need to be illegal under U.S. law. The exports back to the United States that result from such deals should be subject to substantial tariffs.

Regarding other trade deals, we should simply cease promoting agreements like NAFTA and the Trans-Pacific Partnership, which are not about trade at all. These are about deregulating capitalism, to undermine labor, consumer, environmental, and financial protections, for the benefit of large multinational banks and corporations.

We should also include labor, social, and environmental standards in trade deals. If we have domestic laws against child labor, or against pollution, it makes no sense to pretend that those standards are waived just because products are imported. When we take foreign products made with what is effectively slave labor, or with dirty processes that poison the planet, we import the lower standards along with the products. “Free trade” has never been either axiomatic or even efficient. If we need to regulate capitalism domestically, to compensate for its tendencies to boom and bust and its failure to accurately price both positive and negative externalities (education, research, pollution, financial crashes), markets do not become magically efficient just because products and financial transactions cross borders.

These are the elements of salutary economic nationalism. Trump will never offer them. And purely racist nationalism, unable to remedy the economic problems it exploits, will lose—if progressives offer compelling alternatives.