Bill Black’s irony is intentional. Tyler Cowen not so much.
Theoclassical Economists’ Dogmatic Hate for Only One Form of Unfair Competition
by William Black, New Economic Perspectives
November 2, 2016
The uber-right wing economist Tyler Cowen, has written a column entitled “TPP Is Exciting. Let’s Make the Case for It.” Cowen’s column is remarkable for his inability to even get himself excited about TPP, much less his readers. He begins with what should be an important warning – there will be a major effort by President Obama and the largest corporations to pass the Trans-Pacific Partnership (TPP) during the lame duck session after the election.
Cowen’s effort to excite his readers to support TPP is so weak that I will comment on only a few points. First, he says that Americans should be overjoyed that TPP would produce 18,000 tax cuts – for corporations!
18,000 corporate tax cuts are an excellent reason to reject the TPP.
Second, Cowen he is reduced to citing Pete Peterson’s infamous institute for his assertion that TPP will produce huge gains. But in the last clause even Cowen admits it’s likely a typical Pete Peterson scam.
If the huge job and GDP gains Peterson always claims these deals were real, we would have had – for three decades – a booming economy with huge gains for the working and middle-classes. The promised gains of these deals to American workers have always proved to be false.
Cowen then relies on the familiar claim by economists that we should ignore the reality of TPP – it is not a “trade” deal much less a “free trade” deal. The actual corporate goal of TPP – corporate lobbyists largely drafted TPP in secret – is to extort nations not to effectively regulate corporations and protect consumers and investors. Cowen urges his readers to ignore that fact.
Who is the expert that Cowen is citing for the proposition that the kangaroo non-court Investor-State Dispute Settlement (ISDS) panels “shouldn’t be a major problem?” That’s Cowen citing Cowen as if Cowen were an authority on law and regulation. Yes, ISDS provisions are “common” – that’s the problem. ISDS should be a fatal problem – the panels are exceptionally pernicious, one-sided, and biased.
Cowen admits that theoclassical economists like him are delighted that TPP will allow businesses to bring actions under ISDS to try to impose fines so large that they will destroy state-owned enterprises (SOEs) because he claims that unique private right of action is essential to make it harder for SOEs “to compete unfairly against U.S. companies.” He also admits that theoclassical economists are hostile (“under-enthused” is his euphemism) to clauses in the TPP that supposedly make it harder for foreign firms “to compete unfairly against U.S. firms” by using production methods that endanger workers and non-workers lives and health and ruin the environment. That logical inconsistency reveals that theoclassical economists’ praise for deals like the TPP is the product of logically incoherent theoclassical dogma.
Theoclassical economists hate SOEs – passionately – and their worst nightmare is successful SOEs because that success falsifies their dogmas. SOEs = socialism. If an SOE succeeds, therefore, a theoclassical economist is certain that its success must be due to the SOE’s ability “to compete unfairly.” Theoclassical economists, and private businesses, want to destroy SOEs. Business lobbyists have increasingly used these international deals’ ISDS provisions as their means to destroy SOEs. Business lobbyists secretly draft the key ISDS language in each of these international deals and the language keeps ratcheting up in its hostility to SOEs. SOEs and governments cannot bring actions under ISDS against privately-owned foreign firms that “compete unfairly” against SOEs or domestic firms. But privately-owned foreign firms can bring actions against governments that have SOEs, and the kangaroo-non-judicial ISDS panel can impose unlimited, fatal fines on any government that dares to have a competitively-successful SOE.
Cowen does not reveal to his reader something critical about the limits of his clause: “The Obama administration touts the labor and environmental standards in the [TPP] deal to progressives….” There are two things essential to understand about those “labor and environmental standards” that Cowen correctly notes that the Obama administration “touts” (endlessly) to progressives. First, no one can use ISDS to enforce those so-called “standards.” No one can use ISDS to enforce those standards because corporate lobbyists drafted the ISDS language and TPP in secret to ensure that no one could do so. TPP explicitly denies any private right of action to victims of firms violating TPP’s “labor and environmental standards.” Even a U.S. firm, despite being an “investor” under ISDS, cannot bring a claim under ISDS to fine a nation that signs TPP on the basis that the nation failed to enforce those labor and environmental standards on its domestic firms, thereby allowing them to compete unfairly with the rival U.S. firm that bear the costs of meeting those standards.
Second, the non-ISDS TPP provisions that allow a country like the U.S. to complain about a TPP-signatory nation not enforcing the labor and environmental standards applicable to its firms are convoluted, time-consuming, and useless. In the great majority of cases the nations that signed the TPP have been subject to those same standards for many years, often decades, and have studiously refused to enforce those standards. The Asian signatory nations that the Obama administration and American TPP supporters cite to progressives as the places where business practices will be cleaned up under TPP’s “labor and environmental standards” are precisely the nations that have refused to enforce those standards. No one rational expects that to change under TPP. TPP was secretly drafted by the lobbyists to ensure that these standards could be used to con progressives while ensuring that the standards would remain unenforceable and routinely violated in the countries that allow their firms to compete unfairly with U.S. firms.