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America’s Failed Response to the New Globalization

To sum up the findings of this chapter, America has failed to respond effectively to the challenges of the new globalization. The manufacturing sector has shrunk as factories and employment have been shifted overseas. The working class, especially, has been squeezed. Economic policies did not exactly stand still but in fact responded perversely: taxes on the rich were cut; the manufacturing sector was allowed to decline in the face of growing foreign competition; employment in construction was temporarily spurred by easy money from the Fed and subprime lending, but that expedient lasted only until 2007, when the subprime bubble burst. The 2008 financial crisis was therefore a crisis of utterly mismanaged globalization. The United States had responded to the long-term loss of manufacturing competitiveness by the temporary expedient of a housing boom. When the boom was followed by a collapse, U.S. unemployment soared and the emptiness of U.S. short-termism was exposed for all to see. What is remarkable is that even after the collapse of the bubble, Washington was still unable to come up with any long-term, serious responses to America’s waning competitiveness, instead turning again to the very same policy mix that had failed previously: easy money, tax cuts, large budget deficits, and, starting in 2011, cuts in government outlays on education, infrastructure, science, and technology, the very areas in which the United States needs to invest to regain its long-term competitiveness.

CHAPTER 7.

The Rigged Game

Here’s the conundrum: A healthy economy is a mixed economy, in which government and the marketplace both play their role. Yet the federal government has neglected its role for three decades. Just when the government was needed to chart a course through the twists and turns of globalization, it went AWOL. Or, more accurately, it turned the levers of power over to the corporate lobbies. America’s economic failures are therefore at least as much political as economic. This chapter examines the politics of America’s corporatocracy, a political system in which powerful corporate interest groups dominate the policy agenda.

We can see how the corporatocracy arose as the confluence of four big trends. First, the American political system has weak national parties and strong political representation of individual districts. This allows special interests to have a great say in politics through local representatives. Second, the large U.S. military establishment after World War II created the first of the megalobbies, the military-industrial complex. Third, big corporate money finances America’s election campaigns. And fourth, globalization and the race to the bottom have tilted the balance of power toward corporations and away from workers. Add up these trends, and we have the perfect political storm, in which Washington has been overrun, and overtaken, by the lobbies. The wealth/power spiral has continued to amplify the political disaster.

The main aim of this chapter is to explain how America’s money-drenched political system works today. Another is to shake us from a lazy habit: the unexamined notion that decisions made in Washington reflect the will of the American people and the public’s underlying values. The public has its main say on one day every two years: election day. The choice is between two political parties that cynically ignore their constituencies the very next day in order to carry out policies aimed at the rich and powerful rather than the voters.

The voters have a significant unmet responsibility, to be sure, in pulling Washington back to a true democracy. Yet most voters are poorly informed, and many are easily swayed by the intense corporate propaganda thrown their way in the few months leading to the elections. We have therefore been stuck in a low-level political trap: cynicism breeds public disengagement from politics; the public disengagement from politics opens the