Jeff Rubin - The Expendables: How the Middle Class Got Screwed By Globalization

FOREWORD
Then and Now

CHAPTER 1
The New Populism

CHAPTER 2
Changing the Rules

CHAPTER 3
Todays Worker: I Aint No Fortunate One

CHAPTER 4
Left Behind

CHAPTER 5
Greater Global Equity (for the Rich)

CHAPTER 6
The New Economy: Non-Inclusive Growth

CHAPTER 7
Globalization and the Digital Revolution

CHAPTER 8
Duelling Giants: The Trade War with China

CHAPTER 9
Tariff Man

CHAPTER 10
Maybe Whats Good for American Workers Isnt Good for GM

CHAPTER 11
From Free Trade to Managed Trade: The US-Mexico-Canada Trade Agreement

CHAPTER 12
Keeping China Away from Americas Back Door

CHAPTER 13
Making China Great Again

CHAPTER 14
On the Move

CHAPTER 15
Dj Vu

AFTERWORD
Will the Pandemic Bury Globalization?

You could see the pandemic coming. It wasnt as though there was no warning. The virus emerged in China but arrived in North America before we were ready, and it landed with the destructive force of a tsunami. Record-setting consumer spending hit a brick wall as shoppers stayed home. New car sales went over a cliff. And following just like clockwork, unemployment went through the roof as shops and factories shut down. An unprecedented bull run on the stock market quickly turned into panic selling, and the Dow cratered, seemingly overnight. The S&P 500 dropped over 20 percent into bear market territory, and the result was a global recession that seemed to come out of nowhere. More than 116,000 people died in the United States.

Elvis Presley appeared on the Ed Sullivan Show that year, the Frisbee was invented, Ford introduced the Edsel with great fanfare, Canada unveiled the Avro Arrow jet fighter, the USSR launched Sputnik, and Dwight D. Eisenhower was sworn in as president of the United States. It was 1957.

By the way, the world recovered almost immediately from the Asian flu, as that pandemic was known. After a staggering 10 percent decline in gross domestic product (GDP) in the first quarter of 1958, by the third quarter growth had spiked to 10 percenta 20 percentage-point swing. So, no big deal, right? The economy got the flu, it took some time off, and it went right back to churning out jobs and profits. In fact, when economists and historians talk about the Eisenhower Recession, they seldom even mention the Asian flu as a cause.

It would seem to follow, then, that we have a model to help us predict what the recovery from COVID-19 will look like. Just look at 1958, and then wait for the jobs and the markets to return to form and the good times to resumenot quite the catastrophe we feared.

But if youre thinking that what was true in 1958 is true today, this book is for you. Because while consumer spending, consistent GDP growth and a record-breaking bull run on the stock market may make it feel as though weve wandered into the Eisenhower (or Diefenbaker, if you live in Canada) era, that is a dangerous illusion, especially if youre a member of the rapidly shrinking middle class. Because consumer spending, GDP growth and stocks have almost nothing to do with your economic health.

In fact, as you will see, those things measure only rich peoples economic health. And of late, these folk havent been getting rich by making more Edsels or engineering more Arrows. Those cars and planes belong to a different world, a world in which factory jobs paid a middle-class wage and products on the shelves came from factories down the road. A world in which local labour was so essential that their jobs were secure. And a world where taxes were so progressive that the rich actually paid their freight. That was a long time ago.

Looking backward in politics is usually considered poor form. Its much safer to be considered progressive and look ahead. But the fact is that the late 1950s and early 1960s may have marked the greatest economic equality in history. And that economic health was like immunological health. The economy got better quickly because it was already healthy.

But two other things happened in 1957 that give us some sense of why the recovery from the COVID-19 recession might be a lot harder than shaking off the Asian flu.

First, the Treaty of Rome was signed in March of that year, establishing the precursor of the European Union (the European Economic Community). Though the tight political and economic integration of a United States of Europe was still just a dream, the Treaty of Rome was an important step in creating a common market. Up until that point, each country had the ability to impose tariffs to protect key industries and the associated jobs. From that moment on, France, West Germany, Belgium, the Netherlands and Luxembourg would give up that ability in exchange for the right to sell in each others markets without facing tariffs. The hope behind lifting tariffs was that in a world of economic expansion, workers and industries wouldnt need protection: there would be so much wealth to go around that everyone would be better off.

In other words, it was a form of free trade and a precursor of what was to follow. Free trade was an idea that was sweeping the world. As we will see, the General Agreement on Tariffs and Trade (GATT), a treaty designed to increase international trade by removing protections for industry and labour, had been signed into law in 1947, and went through several rounds of updates, each slashing more tariffs. In 1956, the so-called Geneva Round (because it was negotiated in Geneva), eliminated $2.5 billion of protections between twenty-six countries. So, globalization was swirling in the air as the Asian flu was making its way across the Pacific.