The Liberal Case
Tags: Future, Liberalism, Trade, Economy, Progressivism

The Liberal Case

Why We Need to Re-Invent How We Think About the Free Market

Construction amongst the fog in Zurich (Verstappen )

Unfortunately it seems that the political discourse on economic policy, globally but especially so in the United States, has become divided into two equally ineffectual factions. The so-called “Left” in America, comprised of the Democratic party and other sparring progressive and far-left groups, have tended to take a laissez-faire approach to economic policy, popularized by the Third-Way politics of Bill Clinton and Tony Blair. In recent times it seems that the Democrats have begun drifting towards a more populist approach under the influence of politicians like Bernie Sanders, with many in the party pushing towards sweeping changes like an expansion of the popular healthcare program, Medicare, and a reduction or removal of tuition in public universities. While seemingly far from realistic in a time with a skyrocketing national debt in America and Republican control of Congress and the Presidency, these policies if enacted sensibly along with an increase in income and capital gains taxes for the wealthiest Americans, may work at easing some degree of inequality in the United States but are far from a complete solution.

The right has too become increasingly splintered with the traditional old guard of the Republican party losing favor in exchange for a far more populist, isolationist, and erratic party led by Donald Trump. While Trump seemed to the appease the interests of the party by reducing income and corporate taxes through the 2017 Tax Bill as well as reductions on regulations and oversight towards smaller to mid-size banks in a recent regulatory upheaval, he has been equally controversial in his economic actions by igniting possible trade wars through his tariffs on American allies, like the European Union, Canada, and Mexico.

These approaches, both on the left and the right, are all short-term solutions to an otherwise long-term issue. Ultimately, capitalism has been a positive force in the world with less people living in poverty today than at any other time in history, based on data from Our World in Data. However, globalization while actually being a driving force in uplifting much of the developing world, has had devastating effects on the West, with the Economist’s own analysis showing that top 1% now control nearly 20% of the income in the United States. This astonishing level of inequality has naturally given rise to the aforementioned populism in the United States, along with much of the Western world.

Shipping containers about to be sent off (Frank McKenna)

Globalization is good for the world. Protectionist trade policies and isolationism seem appealing to a disaffected populace, but ultimately hurt economic growth and can hinder innovation. However, globalization as implemented by leaders over the course of the past few decades is far from effective. Trade deals like NAFTA, or the North American Free Trade Agreement, have devastated American manufacturing sectors in the Midwest, particularly in the automotive industry. Opening up business to Mexico, where labor is cheaper, is not wrong, but doing so while not acknowledging the discrepancies in labor regulations in the United States and Mexico is inappropriate. Trade deals of the future need to be cognizant of this and include clauses and protections that guarantee that all countries involved have an equal degree of respect for humane labor practices. This may raise the cost of labor slightly in the developing countries but could potentially even the playing field, making it less likely for corporations in the West to feel the need to shift their manufacturing bases to developing nations. Recent attempted trade agreements like TPP, or the Trans-Pacific Partnership, aimed to include environmental regulation in their bylaws. Agreements like this show that global, economic co-operation is possible while still heeding to positive, humane principles.

Individual nations need to pay attention to the challenges automation and artificial intelligence will bring. McKinsey Global Institute estimates that up to 800 million jobs will be replaced by automation by 2030. This drastic change will require economic adjustment if social upheaval is to be avoided. The effects of automation have already been seen in the manufacturing and agricultural sectors but the proliferation of artificial intelligence in other industries is yet to come. According to data from the US Census Bureau analyzed by NPR, the most common job in a majority of American states is truck-driving. If taxi and ride-sharing is accounted for as well, driving makes up a very significant portion of the American workforce. Self-driving cars are no longer just science fiction and will likely lead to the replacement of many of these jobs within the next two to three decades. From cost-effectiveness to safety, automation is bound to take over huge portions of the American workforce. Restaurants like eatsa, where there are no visible employees and all orders are taken via tablets and then received in a designated cubby are just the beginning, as human employees still have to physically prepare the food. Soon food preparation will too be taken over by automative technology as done by Silicon Valley start-up Zume Pizza, where robots make pizzas faster, cheaper, and with much higher quality control than competing humans.

Students at a school in the Philippines (Avel Chuklanov)

How countries react to these drastic economic changes is crucial. Low-skill jobs are almost guaranteed to be replaced by automation and so nations need to prepare future generations to be proactive and adaptable. STEM (Science, Technology, Engineering, and Math) can no longer be left to secondary education. Education systems need to overhaul primary education to include a strong focus on STEM education and get children excited about subjects like Computer Science. Exciting and cost-effective tools like Raspberry Pi, a miniature computer, and Apple’s Swift Playgrounds learning tools, are excellent ways to get kids involved with technology. This does not mean the humanities should be left behind. Some of the most important skills needed for the 21st century economy will come from a deep understanding of communication and leadership. Secondary schools should improve entrepreneurship education, offering bootcamps, pitch competitions, and leadership training to all students. Education is the great equalizer, but it is not effective if its not preparing students for the future. Students from low-income backgrounds can uplift their circumstances through STEM and entrepreneurship education, and in turn provide better competition to students from more privileged backgrounds. This ensures that wealth spreads rather than circulates within a select few. If you consider the benefits a wealthy student may have over a low-income student beyond just the quality of their schools, much comes down to the differentiation in their connections and post-secondary school opportunities. Wealthy students can often take internships and be in better positions to take risks due to their family support. Low-income students currently do not have this support and knowledge system. Providing everything from mentors to access to incubators and accelerators at a young age can change this dynamic and allow these students to flourish. Think of it as incubating the minds of the future, and in turn making capitalism work for the many, not just for the few.

Ultimately, capitalism has been and will continue to be a positive force in the world. However, in order for the free market to remain open and competitive in the 21st century, and for the negative effects of consolidation and monopolization to be avoided, radical and creative changes will be necessary. Trade agreements need to be adapted for the future, with clauses protecting labor laws and the environment. Education systems need to prepare students to be not just knowledgable with technology, but to be proactive and creative and to push the envelope forward with innovation. I have hope for the future; we just have to prepare a bit more for it.