Well the moderator story is a good story because nobody’s was a town of that time of about 4000 people, including 3900 Republicans and a Jewish guy from Brookline and in New England as some of you may know, the legislative authority is vested in the town meeting which is everybody who’s a registered voter who comes together once a year in March at town meeting. And the guy who presides at the town meeting is called the moderator who’s elected. And I ran against Jeremiah F. Mahoney the Third, who had been planning board chairman for many years and he thought he had the election sewn up so he didn’t bother campaigning.
And I got in good with the with the garden club… which was mostly women over the age of 70. At the time I had a very full hair, I know it’s hard to imagine, of curly blond hair and a beard and they thought I was really cute. And anyway the garden club got me elected and Jeremiah F. Mahoney the Third never realized what hit him, I got 66 percent of the vote and was twice re-elected. And the reason I was a good moderator is that I really did not care what went on in the town of West Newburg, so I could be very impartial.
Secretary Gutierrez, Ambassador Schwab, Congressman Meeks, Bill Reinsch, members of the council, ambassadors whoever you are, I’m honored that you’ve asked a scribbler to speak to you tonight, to a group with such deep roots in Washington and such a long, distinguished history and such a high median income. Some of you maybe have come to town specially for this and I want to tell you that I hope you noticed the weather out here tonight cause I want you to know it’s like that all the time here, everyday. Bill has arranged for me to be served up here between the main course and the dessert, so I’m sort of something liked a digestive, but I’m not sure that I’m going to settle your stomach so I apologize for that in advance.
Obviously we meet here at a difficult time for a group that’s interested in furthering the cause of free trade. We meet here at a time of financial crisis of an unknown dimension, of a domestic slowdown in economic growth not only here but through much of Europe and Japan and even in the fast developing world. And we meet here only a few years after the Washington consensus had thought that it had achieved success, a consensus which is now frayed both here and abroad and at a time when bipartisan support for the free flow of goods and people and capital across borders has evaporated.
But then you didn’t need me to tell you that. The way I think I’d put it is that globalization is taking a timeout, a timeout in terms of policy anyway even as globalization continues on the ground in the real economy. I realize that the council and its members would like dearly for the timeout to be over and that you think that if we could only get our views and our facts across that the consensus would reemerge and the globalization’s pace would resume. My message to you tonight is that that’s not going to do it. These several things need to happen and I have listed three of them since when you give a speech you’re always supposed to say three things.
So let me suggest what the three things that need to happen are. One is that the huge and destabilizing and unsustainable macro economic imbalances that have…we’ve lived with, have to be corrected. Currencies have to be better aligned, mercantilist policies in China and other Asian countries have to be reined in and the United States most importantly has to learn to live within its means. Only then can record trade deficits be brought under control. Obviously fixing those kinds of problems is complicated and difficult, we’ve been trying to do it for a decade now and we haven’t made very much progress.
And in the meantime we now see the consequences of running a global economy on a basis that you might call no money down, seller financing. The consequences are asset bubbles, runaway inflations, and in a large part of the world, volatile and unstable financial markets and now decelerating growth. We can’t just keeping keep kicking the can down the road in terms of currency misalignment, on fair trading practices, huge current account deficits and surpluses. And suggesting and having more globalization is not going to cure those things, in fact, I think what we know now is that having more globalization will tend to make them worse and contribute even more to the erosion of the political support for globalization, not just here, but elsewhere.
Second point I’d make is that is more focused here in the United States and that is that we need to find mechanisms so that the costs and the benefits of globalization are more widely shared and disbursed. There’s nothing in macro-economic theory that predicts that this kind of more even sharing will occur naturally, that I think what we know about markets is that markets don’t care about the fairness and sharing things equally, that’s not something markets produce, not something they’re supposed to produce. And indeed our experience of the last 30, 30 years is just that.
Obviously the costs of globalization are born by workers and companies and communities that find themselves disadvantaged by the rearrangement about of how work is done, while the benefits are spread quite widely to all consumers. But the benefits are also enjoyed disproportionately by those who gain commercial or market advantage of the companies and their employees and their shareholders and the communities in which they operate. And I don’t think it’s really saying anything extraordinary to note that we don’t have very good mechanisms yet for capturing the benefits now enjoyed by the biggest winners of globalization and redirecting at least some of them to the biggest losers.
And until we do, I think it’s fair to say the timeout will continue, not because that required by anything about economics, but it’s sort of a practical political reality. The answer seems to me is a new social contract particularly with workers, a contract that provides them with a credible economic safety net. I think you probably know what’s on that list, guaranteed portable and affordable healthcare, safe and guaranteed and portable pensions, a more generous and flexible unemployment insurance program that covers more then one-third of the workers in the United States, wage insurance that takes the sting out of taking a new job at a lower wage, a better system of public education right through the university, including lifelong learning and training.
And this safety net would have to be available not just for those directly effected by a plant closing but for everybody, a universal program because globalization’s effects as we know, are not just direct, but they’re also very indirect. Trade by its nature, by its… by its very nature is disruptive. It means rearranging where and how work is done and disruption makes people feel insecure. As long as trade is connected in people’s minds with the risk of loosing their jobs… and the risk of loosing your job means loosing your healthcare, draining your pension account, telling your kid that she may not be able to go to college, well people will be unenthusiastic about any plan for more trade.
And no matter and that’s true no matter how cheap the towels are down at the Wal-Mart. So how do we move ahead, how do we move ahead to correct the macro-economic imbalances and how do we move ahead to insure that the costs and benefits of globalization are more evenly spread?
Well that brings me to my third point, which is particularly relevant to those of here…to those of you who are here tonight. I don’t know whether you like what I’m going to say, but I think it’s important for me to say it. The business community, it seems to me, needs to resume what had always been a crucial role in this town. The role is as a trusted political broker on an economic policy.
Over the last decade maybe a little longer then that, much of the business community has been lulled into the fantasy that by joining themselves at the hip with the Republican leaders in Congress and with the Republican administration, you could realize your entire policy agenda while ignoring the other party and their legitimate interests and concerns that they represent, not just the legitimate interests and concerns that they represent, but even some of the illegitimate interests and concerns that they represent. After all Republicans delivered to you the regulatory relief and the tax relief that you asked for.
And they invited you and this is literally true, they invited you into their weekly strategy sessions at the White House and at the majority leader’s office at the Capitol, right down the street there. But in return it turns out that they demanded uncompromising loyalty and fealty. They didn’t want you to give money to Democrats, they don’t want you to hire Democrats, they don’t want you to support them, they don’t even want you to talk to them. And what happened is that business and by that I mean really big business and the major business associations here in Washington, lost their ability to become the honest broker on these issues.
Democrats came to see business as part of an uncompromising, ideologically driven opposition that was not only determined to push a pro-business agenda which you would expect, but which was also determined to starve government of funds for domestic programs and initiatives.
I should be clear here that I’m not talking about the National Foreign Trade Council, but I am talking about the US Chamber of Commerce, the National Association of Manufacturers and a number of this city’s largest trade associations. And here’s the problem which is a political problem, not an economic problem. As companies blindly supported the Republican cause or are perceived to have supported the Republican cause, when you show up at the office of the centrist Democrat, good evening Congressman, and you say hey, you know we really need your support on Doha, it’s going to really help this company and that company in your district and it’s good for consumers.
It turns out that you don’t have any credibility and you don’t have any leverage with them. Why? Well to be blunt about it, because they think you’ve given up your traditional bipartisan neutrality, which was very carefully maintained for many years here through the ‘50s and the ‘60s and the ‘70s and that you’ll be there with the Republicans to try to beat them in the new, in the next election even if they do support you on Doha or on trade. They also know that you’re going to oppose them on everything else because the majority leader insists on that. They’re also not going to be with you because by being seemed as blindly supportive of Republican leadership you’re supporting a party that not only won’t do anything to strengthen the social safety net that would make trade a little bit more easy for them to sell to their constituents. But in fact, the party that’s rather eagerly set about trying to destroy that safety net even to the degree that it exists. So they say to themselves, why should they follow your advice and risk getting the stuffing kicked out of them by their own left wing party, left wing of their own party, to help guys that aren’t going to help them? It’s really not that complicated.
I think it’s great that you’re tonight going to give an award to Greg Meeks. I think it’s great that you support organizations like the NFTC which along with the Business Roundtable, another good organization, came very close to laying the foundation for a grand bargain about trade this past spring, that involved Secretary Paulson of the Treasury and Charlie Rangel, the Democratic chairman of the Ways and Means Committee. And it was the AFL-CIO that cut the legs out from under that one, not the business community. That’s too bad, but I think it’s also crucial that you take a next step and make clear to the Republican leadership that they no longer have your proxy, that you don’t accept the idea that the only domestic policy priority is to cut taxes and privatize everything and that it’s not acceptable to go another decade without doing something about healthcare and unemployment insurance and the minimum wage.
Even if that’s not what you want but because that’s what the deal is, that’s what the political deal is. And that you won’t allow organizations, like the Chamber or the NAM, that supposedly represent you in Washington and your shareholders, align themselves with just one party, cause guess what, it doesn’t work, irrespective of whether it’s their right or not, it doesn’t work. I’m not saying these things because I am a Democrat, although that is actually true. And I’m not saying these things because I think you should… be Democrats or support Democrats. I’m saying these things because hyper bi-partisanship is the enemy of what you seek to accomplish, which is continued globalization.
Hyper partisanship has poisoned the politics of this town, it’s poisoned Washington policymaking and it’s poisoned the Washington consensus that you’re seeking to restore. The business community, it turns out, is not only in a good position, it’s in the best position that I know of, to bring this era of hyper partisanship to a close. You have the money, you have the muscle, you’re articulate, you can get what you say put in the newspaper and on the television and you have a good reason to do it. So I wish you well with that and I hope you do it. Thanks.