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Overview
Real wages in North America have not risen since the 1970s. Union membership has collapsed. Full-time employment is beginning to look like a quaint idea from the distant past. If it seems that the middle class is in retreat around the developed world, it is.
Former CIBC World Markets Chief Economist Jeff Rubin argues that all this was foreseeable back when Canada, the United States and Mexico first started talking free trade. Labour argued then that manufacturing jobs would move to Mexico. Free-trade advocates disagreed. Today, Canadian and American factories sit idle. More steel is used to make bottlecaps than cars. Meanwhile, Mexico has become one of the world's biggest automotive exporters. And it's not just NAFTA. Cheap oil, low interest rates, global deregulation and tax policies that benefit the rich all have the same effect: the erosion of the middle class.
Growing global inequality is a problem of our own making, Rubin argues. And solving it won't be easy if we draw on the same ideas about capital and labour, right and left, that led us to this cliff. Articulating a vision that dovetails with the ideas of both Naomi Klein and Donald Trump, The Expendables is an exhilaratingly fresh perspective that is at once humane and irascible, fearless and rigorous, and most importantly, timely. GDP is growing, the stock market is up and unemployment is down, but the surprise of the book is that even the good news is good for only one percent of us.
Product Details
| ISBN-13: | 9780735279414 |
|---|---|
| Publisher: | Random House of Canada, Limited |
| Publication date: | 02/01/2022 |
| Pages: | 368 |
| Sales rank: | 1,169,208 |
| Product dimensions: | 5.22(w) x 7.99(h) x 0.97(d) |
About the Author
Read an Excerpt
You could see the pandemic coming. It wasn’t as though there was no warning. It started in China, but it hit 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. 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 dropped 20.7 percent, and the result was a global recession that seemed to come out of nowhere. More than 116,000 people died in the United States.
In other news, 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 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 GDP in the first quarter of 1958, by the third quarter growth had spiked to 10 percent—a 20 percent 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 that we have a model to predict what the recovery from COVID-19 will look like. Just look at 1958, and wait for the jobs and the markets to return to form, and the good times to resume—not quite the catastrophe we feared.
But if you’re 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 we’ve wandered into the Eisenhower (or Diefenbaker if you live in Canada) era, that is a dangerous illusion, especially if you are 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 actually measure only rich people’s economic health. And of late they haven’t been getting rich by making more Edsels or engineering more Arrows. Those cars and planes belong to a different world, when factory jobs paid a middle-class wage, when the products on the shelves came from factories down the road. When local labour was so essential to produce things that jobs were secure. And when 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. It’s much safer to be considered progressive. 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 in 1957, the Treaty of Rome was an important step in creating a common market. Up to 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 wouldn’t 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, was 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 26 countries. So, globalization was swirling in the air as the Asian Flu was making its way across the Pacific.
The other thing that happened in 1957 was another near miss. In 1986, it was revealed that a United States Air Force B-36 bomber had accidentally dropped a hydrogen bomb on New Mexico in May of 1957. In fact, it was the most powerful nuclear bomb ever built. At 10 megatons, it was bigger than anything in today’s nuclear arsenal, and about 625 times more powerful than the bomb that was dropped on Hiroshima. Though the 42,000-pound bomb did not detonate, it left a crater 12 feet deep and 25 feet wide. If it had gone off, it would have vaporized the air base where the bomber was scheduled to land.
An investigation revealed that a safety mechanism had been removed.
You would think the Air Force would be a little more careful with warheads by 1957. They had already jettisoned one bomb off the coast of British Columbia, and another in the St. Lawrence, in addition to crashes of nuclear bombers in the Atlantic and in the mountains of New Mexico. Another two nuclear bombs fell out of the sky in 1961 over North Carolina. Removing protections when so much is at stake, even to increase efficiency, can be more than dangerous. It can be apocalyptic.
None of those bombs detonated, but the slow fuse of GATT and globalization has left an industrial landscape every bit as cratered as the destruction left by a nuclear warhead. If a worker from 1957 could see Detroit today, what would he think? The shuttered factories across North America, the boarded-up main streets, the empty union halls—the physical toll of globalization would be inescapable.
Which brings us back to the flu.
Early on in the COVID crisis, the scale of the required government response was often compared to the Second World War. It was time for our ingenuity and industrial might to be put to good use and mobilized, much in the way it was a couple of generations ago. The United States built over 2,700 Liberty-class freighters between 1941 and 1945. That’s two 14,000-tonne ships every three days. (Or over 39 million tonnes of ship.) Surely, the world’s biggest economy could make some N95 masks.
Well, not really. On March 19, Taiwan announced that it could spare 100,000 masks per week for the United States (their sole military ally, which has been protecting them from Communist China for generations at immense cost). That’s out of a weekly output of 7,000,000 masks. So the Taiwanese were willing to set aside 0.14 percent of their mask capacity for their much larger ally.
The EU also adopted a policy of “every man for himself.” In March, Brussels banned the export of medical equipment even to other European countries. Exasperated Serbian president Aleksandar Vucic stood in front of television cameras and said “European solidarity doesn’t exist. That was a fairy tale on paper.” Shortly thereafter, Serbia shut its borders. The only foreigners allowed to enter the country? Chinese doctors. Vucic called China “the only ones who can help.”
He did have a point (though Russia also sent several transport planes full of equipment and medical personnel). Before the crisis broke, half of the world’s masks were made in China. Since then, the country increased production 12-fold. By the end of March, factories in China were pumping out 115 million a day (which puts the Taiwanese gift in perspective). But there is more to the story than Chinese manufacturing output.
Because many of those Chinese factories are making masks for international companies. On paper, Canadian company Medicom was making 3 million masks a day at its Shanghai factory. But rather than being shipped to Canada, they were all claimed by the Chinese government. American chemical giant 3M also has mask plants in Shanghai, but according to American trade officials, the factories had effectively been “nationalized.” They may have been under contract to the American company, but when push came to shove, the Chinese government had priority. According to Canadian entrepreneurs on the ground in China, government officials had been posted to factories producing medical equipment like ventilators and protective suits to police where they are being shipped.
In other words, our companies still make things. It’s just that the factories are somewhere else. And the jobs are somewhere else. And, when we need them, the masks are somewhere else too.
While the Chinese government is controlling the world supply of crucial commodities, Canadian diplomats are reduced to sending out messages on social media, hoping that Chinese alumnae of Canadian universities will be willing to help find a few boxes of gloves and masks. Hardly the commanding heights of the global economy that globalism promised.
What the COVID crisis has shown us is that questions of economic theory aren’t just about economic health. They’re about health. Period. Because it’s not just masks and protective gowns the Chinese government effectively control. For years, lax regulatory control and low wages have made China a major source for the majority of component chemicals that go into generic drugs—that is, nearly all of the drugs Canadians and Americans are prescribed.
The same goes for antibiotics. In the 1980s, the United States had far-ranging emergency-response readiness, including antibiotic manufacturing capacity spread across the continent. The US produced 70 percent of the world’s supply. Now it is dependent on imports from China. North Americans face the same dependency for a wide variety of health-related products, from Vitamin C to chemotherapy drugs.
In a world described by globalization, that’s not supposed to matter. The magic of just-in-time-delivery, combined with efficient labour markets and economies of scale, are supposed to provide us with whatever we need, in abundance and at the best prices. But as it turns out, that may work for flip-flops and lawn furniture, or whatever globally sourced product you buy at Walmart, but it doesn’t work in an emergency. It doesn’t work when you absolutely need it to work.
It didn’t take a bat meeting a pangolin in Wuhan to teach us this lesson. The evidence has been piling up around us for years. But tragedy has a way of focusing one’s attention. Global deregulation was always a bad idea. It was always set up to benefit a small number of people, at immense cost to everyone else. Exactly what that cost is becomes clear when we compare today’s economy with 1957’s.
Table of Contents
Foreword Then and Now ix
Introduction 1
Chapter 1 The New Populism 13
Chapter 2 Changing the Rules 25
Chapter 3 Today's Worker: I Ain't No Fortunate One 36
Chapter 4 Left Behind 57
Chapter 5 Greater Global Equity (for the Rich) 77
Chapter 6 The New Economy: Non-Inclusive Growth 90
Chapter 7 Globalization and the Digital Revolution 101
Chapter 8 Duelling Giants: The Trade War with China 113
Chapter 9 Tariff Man 130
Chapter 10 Maybe What's Good for American Workers Isn't Good for GM 150
Chapter 11 From Free Trade to Managed Trade: The US-Mexico-Canada Trade Agreement 173
Chapter 12 Keeping China Away from America's Back Door 192
Chapter 13 Making China Great Again 208
Chapter 14 On the Move 226
Chapter 15 Déjà Vu 253
Afterword Will the Pandemic Bury Globalization? 283
Acknowledgements 297
Notes 299
Index 327
About the Author 351