Book Review: The Expendables: How the Middle Class got Screwed by Globalization

I just finished reading this book by Jeff Rubin. I found it a bit of a slog because in several places he got basic facts wrong. For example, he states that those migrants who crossed at Roxhan Road in Quebec and then asked for asylum entered the country illegally. That is simply false. The vast majority of those who crossed were in the US legally but doubts about a change in their status during the Trump presidency convinced them to move north. They came to a designated border crossing, crossed the border, presented themselves to Canada Customs officials and then asked for asylum. None of that is illegal either domestically or internationally

It is hard to take a book seriously if it cannot get simple facts like that correct.

However, the central argument of the book is valid. The era of globalization, with its love affair with free trade agreements has certainly kicked the stuffing out of the middle class in the West. This book looks at the situation the United States, Canada and the European Union but its primary focus is the US experience. The author goes into great detail just how much of a negative impact that globalization has had on the middle class. There is no denying that central argument.

The problem lies in his proposed solution which is to introduce more protectionism into the international trading system. Anybody who has read this blog before knows that I am no fan of free trade agreements. They have never lived up to their promises. However, the historian in me also knows that when countries or trading blocks establish high trade barriers they protect their domestic industries but at the price of making their economies more brittle and less able to handle economic shocks. This was true almost a century ago and it is doubly true in the integrated world economy we have now. When I say integrated I mean the fact that everything is now done by computers. When you can transfer ridiculous amounts of money with just a few key strokes and you no longer have to worry about transferring the currency or precious metal to cover that transfer the level of economic integration is way too high to create economic islands.

That does not stop Mr. Rubin from trying to argue just that. He does so by arguing that President Trump's tariffs on China, the EU, Canada and Mexico brought back jobs to the US. There is some truth to that but the jobs brought back are a mere fraction of the ones lost. As well, when those jobs returned they usually did not return to the old locations, they returned to US states that have "Right-to-work" laws on the books so most of those returning jobs are not as high paying as the ones that left.

Mr. Rubin touches on one of the big problems caused by globlalization. Namely, the level of unionization in the West falling off a cliff in the last 50 years. That is exactly right. That situation created the condition where workers could not stop business from siphoning off the financial benefits of increased productivity over the last five decades from workers to themselves and their stockholders. However, Mr. Rubin fails to make that connection.

The promise of free traders has always been that there would be more winners than losers and programs to assist the losers would be created to make certain they were not left behind. That promise was broken from the start but that hardly matters because it was the wrong promise. Most of the jobs that have been lost in the West as a result of globalization have been manufacturing jobs. What has been left behind are mostly service jobs. They are the jobs that were supposed to replace the manufacturing jobs but they did so at much lower wages and benefits. So the promise should have been that Western governments would make it easier for service workers to organize to allow those jobs to really compensate for the lost manufacturing jobs. The level of unionization does not need to be high. As Mr. Rubin points out at the height of unionization in the US less than one-third of jobs were unionized but that was enough to create upward pressure on wages economy wide. If we reach those same levels we would probably see a similar result.

The simple fact is Westerners cannot compete on wages for the manufacturing jobs that have been offshored and while higher tariffs might change that it will not do so to the extent of bringing all of those jobs back and certainly not at the wages and benefits that workers in those industries used to enjoy. The solution lies in making the jobs that replaced those manufacturing jobs better paying and with more benefits. The true failure of globalization and free trade proponents was not doing that. Until they and Western governments are willing to facilitate that process the outlook of the ever shrinking middle class in the West will grow increasingly bleak.

That is the connection Mr. Rubin failed to make which is unfortunate because otherwise he made a good case for what is ailing the middle class and the fact that something needs to be done about it.