The Populist President Goes To Davos

Against the backdrop of a paralyzed government at home, Donald Trump is planning to attend the World Economic Forum at Davos, Switzerland, this week, where he’ll be the first American president to address the gathering since Bill Clinton spoke in 2000. What on earth can we expect him to say?

The annual event has become an elite gathering of the very people responsible for the perverse version of globalization that has undermined the livelihoods of ordinary people the world over and that stimulated a mass nationalistic backlash that has brought people like Trump to power.

Rhetorically, Trump is anti-globalization America first! He is for renegotiating trade deals that outsource American jobs and bringing back American manufacturing. A few of his officials, notably U.S. Trade Representative Robert Lighthizer, are taking this vow seriously and trying to fashion policies to match. 

There are, however, three problems. The first is that trade issues are blindingly complicated, and Trump has no patience for detail or nuance. Mainly, he is intuitively brilliant at channeling the discontent.

Second, Trump’s top economic officials (who outrank Lighthizer), namely Goldman Sachs veterans Gary Cohn, who heads the National Economic Council, and Treasury Secretary Steven Mnuchin, epitomize the Davos club and the goal of dismantling a nationally regulated form of capitalism. Trade Representative Lighthizer may win a few skirmishes, but the Trump administration as a whole is as corporate and as globalist as they come. The recent tax bill, which gives giant corporations a huge tax break for bringing home profits stashed overseas, actually creates new incentives for moving jobs abroad. The Trump administration’s regulatory officials are systematically repealing the remaining rules that make it possible to regulate the abuses of finance when big banks hide their frauds offshore.

Third, while a very different set of global rules is possible, Trump is unlikely to advocate it. The very term, globalization, is widely misunderstood.

The issue is often framed as “protectionism” versus “free trade.” But that’s not the real choice at all. Obviously, we are going to have a great deal of trade, technology exchange and cross-border investment. The real question is: globalization on what terms?

The Bretton Woods Agreement of 1944, brokered by Franklin Roosevelt’s  administration, created a global financial system that allowed individual countries to strictly regulate financial institutions, to run full-employment economies and to have tough social protections that would not be defined as violations of somebody’s private property rights.

FDR understood that the global system needed to make room for domestic New Deals. But since the 1980s, as the Davos view has gained power, the norms have been reversed. Managed capitalism, of the sort that once produced balanced prosperity, has been redefined as protectionist.

Reverting to raw capitalism was supposed to spur economic growth, benefiting all. But growth rates in the West are well below those of the postwar golden era. Meanwhile, the nations that have violated the principles of free markets, like China, South Korea, and Japan, have emerged as the world’s export powerhouses.

So what is Trump likely to say, and what should he say?

Trump could view Davos as yet another platform to tell the rest of the world to go to hell, knowing that such rhetoric plays well with his base. But with Trump, you never know whether you are going to get insult or flattery. Indeed, Trump himself probably doesn’t know until the words come out of his mouth.

Actually, Davos is Trump’s sort of crowd, a kind of Mar-a-Lago in the Alps. He may well opt for a mix of bluster and reassurance, telling the assembled notables that they have nothing to fear from the U.S. as long as they play by balanced rules and if they don’t, he has the biggest button.

But even if Trump is in a rare, well-modulated mood, this is likely to be a missed opportunity. Some future American president could demand changes to the world trading system more in the spirit of Bretton Woods. That would mean plenty of room for nations to have labor and social protections, as well as industrial policies, without violating the World Trade Organization. It could mean insisting that nations like China, which really is protectionist, play by roughly the same rules as the rest of the system, or face high tariffs.

This shift would require clear thinking, deft diplomacy and a break with global financial elites. None of which describes Donald Trump.

Robert Kuttner is co-editor of The American Prospect and a professor at Brandeis University’s Heller School. His forthcoming book is Can Democracy Survive Global Capitalism?

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