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Benzinga
Benzinga
Vishaal Sanjay

America Has No Will To Help Its Middle Class, Says Economist Richard Baldwin: So Politicians 'Find A Convenient Scapegoat — Globalization'

Close,Up,Of,A,Stack,Of,Us,One,Dollar,Bills.

The United States’ growing turn toward protectionism isn't just about trade deficits or manufacturing jobs – instead, it's about political avoidance, says economist Richard Baldwin.

What Happened: On Tuesday, while speaking on The Big View podcast by Reuters, Baldwin argued that America's middle-class struggles have less to do with globalization and more to do with a chronic failure to provide adequate social policy.

“The American middle class really is suffering and has for decades,” Baldwin said. But unlike other advanced economies with universal healthcare, old-age pensions, or student debt relief, the U.S. hasn't implemented the policies needed to cushion economic shocks.

“To fix that, you need a social policy. And to do that, you'd have to raise taxes and have a bigger government,” he said.

See Also: Tariffs Propel US Customs Revenue To A Record $106 Billion Since Trump’s Inauguration

Baldwin, a professor at IMD Business School, however, believes that this path is now politically off-limits, thus making trade a convenient punching bag.

“They find a convenient scapegoat, which is globalization,” Baldwin said, pointing to both parties. “Some people blame trade, some people blame immigration, some people blame foreign capital, but it's the foreigners' problem.”

In his view, America's anti-trade stance isn't going away. “I think what we have now is a bipartisan consensus that globalization in general is something that's convenient to blame for all the problems of the American middle class. And that's locked in,” he says.

With no political appetite for structural reform, Baldwin warns, “Anti-trade or trade hesitancy at the very least is a placebo instead of real medicine.”

Why It Matters: Hesitancy towards trade is a recent phenomenon in American politics, with Republican Presidents such as Ronald Reagan having made a passionate case against protectionism in the 1980s, warning that tariffs would “hurt every American worker and consumer.”

Former Treasury Secretary Lawrence Summers has made similar claims recently, rejecting the narrative that China was cheating in trade.

Summers said, “if China wants to sell us things at really low prices and the transaction is we get solar collectors that help make there be less global climate change or we get batteries that we can put in electric cars and we send them pieces of paper that we print. Think that’s a good deal for us or a bad deal for us? Kind of think it’s a good deal for us.”

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