I gave my take on the former yesterday, in this post, but I want to call attention to comments on the election over at Maderblog, and a column by Jacob Weisberg appearing simultaneously in Slate and the FT. I think Weisberg nails it on the head. I am not going to be shedding tears for the departed Republican majority, but at the same time I think there are real worries that the incoming crop of Democrats could mean a significant turn away from the US commitment to free trade and other policies that undergird that spread of globalization. If the Democrats think they can fix structural problems in the American economy related to the transition from an industrial to a post-industrial society by scapegoating foreigners, whether in the form of Mexican illegal immigration or those scheming cadres in Beijing, they are in for a shock.
The US and other developed economies are in the midst of a major shift to an economic model that for the most part is not rooted in the production of tangible items. For people in developed countries still engaged in these activities, the shift is proving painful, as developing countries have out-competed them. But US economic policy must not be “Ohioized”; the only way is forward, with the federal government acting to limit the destructive impact of the reordering on citizens employed in sunset industries and easing the transition to the new economic order. Meanwhile, the US needs to maintain its liberal trade policy, using access to its market as a carrot to induce developing countries along the path to capitalism, and ultimately liberal democracy. (Daniel Drezner has more on this meme here.)
Congress alone may be unable to implement an agenda detrimental to economic openness, but it can stymie the administration’s effort to promote openness, most notably by withholding trade promotion authority from the president, as noted by Weisberg. This means that the White House must redouble its efforts to secure a multilateral trade agreement (with regional and bilateral trade agreements second-best options). And it means, as I’ve said before, that Henry Paulson will be the most important cabinet official during the final two years of Bush’s presidency, especially now that Rumsfeld has resigned.