Donald Trump and Brexit Must Seek To Empower People and End the “Illiberalization” of the Global Economy

The United States and its policies draw a great deal of international attention due to the far reaching influence the world’s only superpower exerts on the economies, governments, and Peoples of the world.  Since the election of Donald Trump, the focus on the US has intensified to the point once-pressing issues like the Syrian Civil War, the Syrian Refugee Crisis, the Ukraine Crisis, and Bretix have been nearly forgotten.  As President Trump moves forward with his policy agenda, which includes undoing most of President Obama’s legacy, he gives more people greater reason to scrutinize his decisions.  Until Donald trump’s leadership becomes the “new normal,” the agony of not knowing will continue to draw attention away from other critical issues and invite heavy scrutiny.

​The world must wait for the impact of Trump’s policies to work through the global economy, but Americans have a right to demand the President only act in the collective interests of the American People.  Asking what the anticipated benefits of a policy shift is a good place to start, but a more pertinent question is how much does a policy empower people.  Only when people are empowered will the benefits of policies be protected. Looking beyond Trump’s politically-charged and far-reaching policies, the Brexit offers a less contentious example of a nation undergoing a major public policy shift.  The terms of the Brexit will determine the costs and benefits of the Brexit.  While businesses lobby for their interests to be addressed, the best measure is how much the changes empower the British People.

The European Union was formed during a time of plenty when fiscally irresponsible behavior on behalf of governments and individuals could be ignored.  Fed on debt-funded “development,” the EU was an economic bubble built for times of prosperity.  No longer providing cash and opportunities for growth, the high-valued EU only improvises poor countries by inflating costs while offering little more than added responsibilities.  Due to the uncertainty and struggles of today, the EU is little more than a weight on the largely prosperous economies of Germany, France, and Britain.  Consequently, the Brexit was predictable while there is a strong possibility of a Frexit and a Gexit.  

National interests change with time, thus treatises and treaty Law must be recalibrated to serve the shifting interests of allies.  In providing for the common defense and economic welfare of EU members, diplomatic institutions of the EU are rapidly superseding the authority of the democratically elected national governments of European countries.  Unfortunately, diplomatic and economic arrangements like the EU are perceived as permanent institutions of international governance.  Because their existence is seen as unshakeable, there is a tendency for the policies and roles of these international institutions to stagnant, even when they become misaligned with the interests of nations like Britain to the point they no longer serve the national interests of their member states. 

Globalization and “free trade” do open poorer countries to capital and opportunities from richer countries.  In turn, richer countries gain greater access to existing markets and emerging markets, thus enabling them to sell more products to more consumers.  This should mean the embrace of free trade agreements to accelerate globalization helps the economies of the world flourish.   By this logic, Britain’s exit from the European Union, which is feared to be the first step in the disintegration of the European Union, should, therefore, represent a threat to the prosperity of rich and poor countries alike. There are, however also costs and those costs create financial problems for average people.

The biggest issue with widespread, globalized tariff-free trade is that it deleverages workers and localized businesses by forcing them to compete as part of a global workforce struggling to provide for global demand.   Based on “supply and demand,” a massive global workforce without enough work means workers face downward pressure on their wages.  Conversely, the need to enhance global supply to meet global demand puts upward pressure on the cost of natural resources and goods. Because free trade essentially turns the global economy into a lowest bidder economy, the future bargaining power of workers in poor countries is undermined in the same way the leverage of workers in rich countries is undermined. 

Businessmen like Donald Trump see the world in terms of deal making and bargaining.  When the parties involved in a business deal have equal leverage and/or act to address each others’ interests, the most viable and mutually advantageous deal is likely to be produced.  When one party has greater leverage over the others, that party has an advantage.  When the advantage is too great and/or successive deals continually neglect the interests of the other parties, either the negotiations or the business deals will collapse.  A lack of adequate leverage prevents workers and localized businesses from pursuing their interests to the detriment of the whole economy.

Celebrities and CEOs are routinely able to extort millions of dollar in pay for their services. The average person cannot do this. The reason is that affluent people have greater leverage when they are seeking compensation, i.e. the potential revenue they can make their employers affords them leverage. For most other individuals, education, expertise, union membership, professional affiliation, and a whole host of other factors give them varying degrees of leverage.  Reflecting on America’s Golden Age, the much of the Twentieth Century was spent empowering the masses with greater leverage.  Some of this was accomplished by government bolstering the leverage of individuals with legislation that helped protect workers with regulation and unions.   

Given that domestic governments must tax businesses at uneven rates and regulate industries according to their capacities and needs, while government involvement in the economy is unavoidable and workers must be paid in line with their cost of living, free trade policies do not create “free trade” and cannot offer the predicted benefits of free trade.  In other words, free trade in practice does not equate to free trade in theory.  The removal of tariffs through free trade agreements distorts the economy in favor of imports, thereby catering to special interests, instead of fostering sustainable trade; whereas, the removal of technical barriers fosters trade by making it easier.

With that in mind, the “illiberal” concept, which was popularized by Fareed Zakaria, describes nations that embrace superficial democracy, yet lack true democratic institutions and a legal system that protects the civil liberties of individuals. Although “illiberal” typically describes civil liberties and the rule of Law, countries can be illiberal in economic terms as well. This writer has argued “ill-democratic” better describes situations where authoritarian-minded leaders hijack democratic institutions to legitimize, solidify, and consolidate every form of power in their countries.  The “illiberal” term should be reserved for situations where the unimpeded freedoms of the affluent allow them to suppress the interests of others, which is exemplified by pre-Civil Rights Movement America.

The US is a liberal democracy, because the US Constitution prioritizes individual rights above cultural rights and government authority while all individuals, without regard to their socioeconomic status, are supposed to have the same legal rights, i.e. civil liberties.  Because women and minorities did not have civil liberties in a practical sense, America was an illiberal democracy before the Civil Rights Movement resulted in laws that protected the disenfranchised from discrimination.  Although the US was founded as a liberal democracy, it has continued to liberalize, e.g. the Civil Rights Movements. Just as discrimination based on gender, race, and ethnicity translated into a lack of civil liberties in a practical sense, an unhealthy economy, which caters to the wealthy at the expense of the majority, translates into a lack of economic freedom.

Just as government interference was required to ensure all people enjoyed the same legal rights, proper government interference in the economy is required to ensure economic freedom.  Economic liberalization describes decreasing government interference in the economy and the opening of an economy to foreign investments and goods, yet illiberal policies can hinder so-called free market economies by undermining the interests of the majority.  In a world defined by immense economic disparity, great pockets of inescapable poverty, decreased opportunities for average people, and increased costs, economic liberalization is increasingly seen as a means of enriching the already rich.

The formation of the Europe Union helped give the US a stronger economic partner and allowed the Europeans to balance American influence in the global economy.  Unfortunately, it also created layers of bureaucracy that put distance between the Peoples and their democratically elected leaders, thereby undercutting the democratic authority of individuals. In all, the over "illiberalization" of international trade undercut the ability of governments to tax, regulate, and protect their national economies, thus neutralizing the leverage governments had once extended to their Peoples.  In other words, countries outsourced their economic sovereignty and deleveraged their Peoples.

​The terms of the Brexit must, therefore, focus less on economic benefits to consumers and more on the empowerment of individuals.  Proper regulation empowers people.  The removal of technical trade barriers, including disparities in regulatory burdens, help empower people as consumers and employees to engage in greater international business as long as high regulatory standards are adopted among trade partners.  The easing of tariffs can also empower individuals as consumers; but the removal of tariffs must be targeted to industries where Britain cannot already provide for its needs in exchange for the removal of tariff on goods Britain can better supply the EU.  Above all, negotiators must recognize that people are both employees and consumers whose competing interests must be addressed while adopting mechanisms to calibrate British-EU trade relationships.