It was the end of two days of what many observers called unprecedented police vindictiveness and violence toward activists. Certainly, complaints about the police have become a standard ritual after each major globalization protest. But what happened in Miami, say protesters, lawyers, journalists and union leaders, was anything but routine.

Armed with millions of dollars of new equipment and inflamed by weeks of warnings about anarchists out to destroy their city, police in Miami donned riot gear, assembled by the thousand, put the city on lockdown and unleashed an arsenal of crowd control weaponry on overwhelmingly peaceful gatherings.

Videos taken at the scene show protesters being beaten with wooden clubs, shocked with Taser guns, shot in the back with rubber bullets and beanbags, and pepper-sprayed in the face. Retirees were held handcuffed and refused water for hours. Medics and legal observers, arrested in large numbers, say they were targeted. A female journalist, arrested during a mass roundup, was made to strip in front of a male policeman. A woman’s entire breast turned purple-black after she was shot there, point-blank, with a rubber bullet.

Afterward, many observers said the same thing: “This is not America.” Civil libertarians, though, worry that — in an era when legitimate homeland security fears have begun to edge over into hysterical paranoia about “anarchists” — it might offer a glimpse of where America’s response to protest is headed.

“There is a pattern developing cross-country with regards to the interaction between police and protesters,” says Lida Rodriguez-Taseff, president of the Miami chapter of the American Civil Liberties Union (ACLU). “That pattern sadly involves the police viewing protesters as terrorists and treating protest situations as crisis situations akin to war or combat.”

Protesters descended on Miami because they object to plans to create a free trade zone stretching from Alaska to Argentina, which they say will hurt poor workers, put downward pressure on wages and weaken environmental regulations. Police in Miami were determined not to permit a repeat of the chaos that has marked other trade summits worldwide. They were bolstered by an $8.5 million appropriation that President Bush tacked onto the $87 billion Iraq reconstruction bill to pay for FTAA security.

As a result, they fielded about 2,500 battle-ready police to face off against around 10,000 demonstrators, most of them union members and retirees. City officials have since congratulated themselves on the small amount of property damage in Miami. But protesters say that in making sure no Starbucks windows were shattered, police trampled their constitutional rights.

The scale of civil liberties abuses in Miami is just starting to reverberate outside the city and the activist community that flocked there. On Tuesday, Dec. 16, the AFL-CIO and the Florida Alliance for Retired Americans are holding a public hearing in Miami on “police repression of FTAA protesters.” The ACLU has received 134 reports of protester injuries, including 19 confirmed head injuries, and plans to file at least three and possibly as many as 12 lawsuits against the city.

The United Steelworkers of America is calling for a congressional investigation into how police turned Miami into “a massive police state.” Amnesty International and the Sierra Club are also demanding government probes. The Sierra Club issued an open letter to President Bush saying, “The fundamental constitutional rights of all Americans are in jeopardy if the intimidating tactics used by the Miami police become the model for dealing with future public demonstrations.”

And they could become exactly that. Miami Mayor Manny Diaz called the cops’ performance “a model for homeland security.” Officials from across the country, including members of the Department of Homeland Security and the FBI, showed up to observe how Miami handled the demonstrators.

According to Lt. Bill Schwartz, spokesman for the Miami Police Department, law enforcement officials traveled to Miami from Georgia and New York to learn tactics to deal with upcoming protests in their cities. In June, President Bush will host the G-8 summit — which brings together the leaders of Britain, Canada, France, Germany, Italy, Japan and Russia — on Georgia’s Sea Island. Then, on Aug. 30, the Republican convention begins in New York, bringing tens of thousands of protesters and “the highest levels of security this city has ever seen,” as a New York police spokesman told the Village Voice.

Upon his return from Miami on Thursday, Nov. 20, Bill Hitchens, director of Georgia’s Department of Homeland Security, told the Atlanta Journal-Constitution: “I certainly think this is a precursor for what we could see” at the G-8 summit. Speaking of the Miami police, he said, “We need to do much the same as they did.”

Meanwhile, John Timoney, the Miami police chief known for calling demonstrators “punks” and “knuckleheads,” is handling security for the Democratic National Convention in Boston. Timoney is already infamous among activists for his handling of the 2000 Republican convention in Philadelphia, where protesters complained of indiscriminate arrests and police violence.

How did such a small demonstration became such a bloody melee? And how did so many law-abiding people suddenly find themselves in a place that didn’t look anything like the America they thought they knew?

“I no longer consider Dade county to be part of the United States,” says Bentley Killmon, a 71-year-old retiree who was held handcuffed for 11 hours after he was swept up by the police as he wandered around downtown looking for his bus home.

The tensions in Miami began well before the first protester arrived. Unlike other American cities that have hosted large protests, Miami had a clear stake in the demonstration’s central issue: It is competing with Panama City, Cancun and other cities to become home to the FTAA’s secretariat. Thus, when Western Hemisphere trade ministers gathered at Miami’s Intercontinental for the November trade talks, police had to show they could handle the kind of anti-globalization activists who have often trashed cities hosting economic summits.

On Sept. 5, Lida Rodriguez-Taseff of the ACLU attended a briefing that the police held for local business leaders at the Intercontinental Hotel. Rodriguez-Taseff was shocked that Asst. Police Chief Frank Fernandez’s PowerPoint presentation openly endorsed the controversial trade agreement, telling the audience that it would bring 89,000 new jobs to the area and add $13.5 billion annually to Florida’s Gross State Product.

“In situations where the police don’t like the protesters’ message, they definitely treat protesters as the enemy,” says Rodriguez-Taseff.

“Essentially what happened,” she adds, “is that the police went from being the neutral protector of liberty and property and safety, which is what their job is supposed to be, to being the enforcer of a political goal of the political and business communities.”

The week of the protests, John Timoney, the Miami chief of police, socialized with the trade ministers and publicly taunted demonstrators. On Wednesday, Nov. 19, the day before the main protest march, Miami Herald reporter Oscar Corral followed Timoney onto a boat taking ministers to Miami’s Vizcaya park. After the ride, Timoney said, “If they [anarchists] don’t do anything by tomorrow night, pardon the expression, but they look like pussies.” (Or, “p—–,” as the Herald reported it.)

Taking a page from the Iraq war’s media strategists, Timoney had reporters covering the demonstrations “embed” with the police. Reporting for the Guardian newspaper, journalist and “No Logo” author Naomi Klein wrote, “As in Iraq, most reporters embraced their role as pseudo soldiers with zeal, suiting up in combat helmets and flak jackets.” Several reporters who didn’t embed were hauled off to jail in mass roundups during the protests.

Anger and fear about anarchists had been building up in the city all autumn. Al Crespo, a 61-year-old Miami photojournalist who specializes in covering demonstrations — he recently published a book of photographs called “Protest in the Land of Plenty” — says he first realized something was awry when his 87-year-old mother called him in hysterics weeks before activists began arriving in Miami.

“I’m Cuban, and my mother listens to a lot of these Cuban radio stations,” he says. “She knows what I do, and she called me up one day in a real panic, with the belief that I was going to be killed on the streets of Miami. She was hearing that it was communists coming, and these people were going to blow up the city.”

Meanwhile, the police were preparing to face off against a violent enemy. Asst. Chief Fernandez’s PowerPoint presentation listed three groups of protesters headed to Miami: “The Green Group (non violent, union based)”; “The Yellow Group (mostly non violent, fringe elements)” and “The Red Group (anti-government, anti-establishment).” The slides also identified the lime-green baseball caps donned by the legal observers who accompany most major protests. According to Rodriguez-Taseff, when the slide appeared, Fernandez said, “These are their lawyers. They’re there to antagonize police.”

Marc Steier, a New Jersey lawyer who works for the National Lawyers Guild — a kind of radical ACLU — arrived in Miami in mid-November to open a temporary office for Miami Activist Defense, a legal collective formed to represent demonstrators. He and a colleague were setting up their computers on Nov. 15 when they got their first phone call: Police, a woman activist reported, were hassling a kid walking down the street.

Just then, Steier says, a volunteer named Henry whom he knew from previous protests arrived, and Steier dispatched him to the scene with a camera, a tape recorder and a lime green hat. When Henry arrived, cops on bicycles were questioning a kid dressed all in black. He turned out to be a local goth who knew nothing of the FTAA.

Then the police crossed the street to where three men, part of a pagan group in town for the demonstrations, were watching. They were friends of the woman who called Steier’s office, and one of them was holding her backpack while she used the phone down the street.

“There was nothing about them that would give a casual observer any indication that they were anything but tourists,” says Steier, who later interviewed all of them after they were released from jail.

The police asked one man for I.D., which he gave them, and then demanded to search the backpack he was holding. He refused to consent, because it didn’t belong to him. At that point, a police vehicle pulled up. According to Steier, the uncooperative pagan was arrested and put in the patrol car, and his backpack was dumped out on the police car’s hood.

“The second male sees what’s going down, and he starts to be a little more compliant,” says Steier. The cops, Steier said, asked for “your name, where you’re from, how you got down to Miami, whether you’re an anarchist, whether you’re here to cause trouble and break things.” Finally, the second pagan asked if he was free to go. “‘Actually, you’re under arrest,’ said the police.”

The police proceeded to arrest the third man and the woman when she returned from the phone. All were charged with obstructing a sidewalk.

Throughout it all, Henry had been on his cellphone with Steier. Suddenly, he lost contact: Henry had been arrested, too — charged with obstruction of justice.

Between the 15th and the 20th, the day of the major protest, Miami Activist Defense received dozens of reports of people being arbitrarily detained, searched, photographed and questioned about their backgrounds and their connections to anarchism.

The most authoritative first-person story about such random seizures came from Celeste Fraser Delgado, a reporter for Miami New Times, who was arrested Thursday evening on Miami Avenue as she walked toward the protest’s welcome center with a group of protesters she was profiling.

“Throughout the day I’d witnessed police provoke protesters,” she wrote. “I’d seen young people cuffed and lined up along the street, but I thought they must have done something bad to be detained. Surely the police would see that we were doing nothing wrong and let us go. Surely they would recognize my role as a working member of the press.”

Instead, Delgado’s hands were cuffed behind her back. Her pleas to the police to check her credentials were ignored, though they took her black leather backpack with her press pass and notebook inside. She was told they would be returned to her. Instead, they were dumped out and left on the street.

She knows that because John de Leon, an ACLU lawyer, happened to be in the area after her arrest. He was on the phone with Rodriguez-Taseff when he noticed that the street was littered with backpacks, cellphones and wallets. He was collecting the protesters’ things when he found Delgado’s press credentials.

Delgado was released Friday afternoon, after the charges against her were dropped. Of the more than 90 arrests made at the protests on Thursday, the Miami prosecutors threw out 20 due to lack of evidence. Rodriguez-Taseff says it’s “unheard of” for so many cases to be dismissed as groundless.

The total number of arrests in Miami wasn’t particularly large — according to Lt. Schwartz, 231 people were taken in on FTAA-related charges the week of the summit, compared to 631 arrested at the Seattle anti-globalization protests in 1999. Then again, there were nearly five times as many protesters in Seattle as there were in Miami. There was also rampant vandalism during the 1999 demonstrations, and almost none during the FTAA. Indeed, since the protests, Miami officials have crowed about the lack of damage done to their city. That leaves the arrests looking like some sort of extralegal “preventive” or “preemptive” action.

It was Thursday afternoon that madness broke loose in Miami. There had been a scuffle that morning between demonstrators and police near the fence police had erected around the Intercontinental Hotel, and the city had been locked down since around 10 a.m. But things didn’t get really bad until about 4 p.m., when a few hundred people left the officially sanctioned union march to confront the police lined up along Biscayne Boulevard.

It’s not clear what made the police charge forward, rhythmically beating their big wooden clubs against their shields. Predictably, many protesters say there was no provocation, but Lt. Schwartz maintains that the police were pelted with “rocks, feces in plastic bags and bottles of urine.” Three officers were admitted to a nearby hospital for injuries sustained during the protests, and the Miami Police Department reports that a total of 18 were injured.

Al Crespo, the photojournalist, admits that some protesters “acted out,” but says that, in covering over 100 protests over the last six years, he’s never seen a police reaction as ferocious and disproportionate as what he saw in Miami.

“There’s a real parallel between these kind of events and the events in major American cities after championship football and basketball games,” he says. “A large number of people come out in the streets, and there’s always young people who, for whatever reason, just have a need to get in a cop’s face. Whether you’re rooting for the Chicago Bulls or you’re in Miami supposedly protesting against free trade, these kind of events always attract people who have a real need to act out some internal psychodrama, and oftentimes that’s what sets something off.”

Once the police were set off, though, it’s hard to justify what they did based on protester provocation. Several hundred policemen, armed with the latest crowd-control weaponry, were arrayed against a sparse lot of scraggly kids on the broad boulevard. Instead of batons, the police carried wooden sticks the length of baseball bats, and as they marched forward, they swung them at whoever couldn’t get out of the way in time. Video taken at the scene shows a boy in shorts being knocked down, and when his friends try to pick him up, they’re beaten back with the wooden sticks.

At one point, a young man kneels down a few feet in front of the phalanx, his hands in prayer position. Five or six police charge him with their shields, then shoot rubber bullets at him as he runs away.

That, says Crespo, is what was most unusual: the police firing on people as they retreated.

Before Miami, one of the more violent protests Crespo had seen was at the 2000 Democratic convention in Los Angeles. “What happened in Los Angeles, which had not happened in any other city up until then, is that the police came out, took a position and just opened up fire. It looked like reenactment of a Civil War battle,” he says.

“In Miami they did that, but then they proceeded to march down the street and chase these people, chase them for blocks,” he said. “These were people trying to get away, and they kept marching and shooting.”

Witnesses say that all protesters were targeted, not just those that were causing trouble.

When the violence started and the air grew thick with tear gas, Stewart Acuff, the AFL-CIO’s organizing director, organized a line of union peacekeepers to take everyone who wanted to avoid a confrontation with police up a hill toward the amphitheater where the march had begun.

“We had hundreds of people we were trying to move up near the amphitheater. There were seniors, unions members, young people, environmentalists. Every one of them made a conscious decision not to be in the stuff happening in the street.” But the police followed them. “The cops came up the hill, tear-gassed us and shot people with rubber bullets. They pepper-sprayed a senior citizen in his 70s who was sitting in a chair completely away from any kind of problem, without provocation.”

It was, says Acuff, “a police riot.”

“They had trained for six months and they were prepared for a fight and they wanted a fight,” he says. “They were hopped up and wanted to go.”

The ACLU is still working to tabulate all the injuries caused on Thursday and on Friday morning, when violence again broke out at a jail solidarity rally for those arrested on Thursday. (At that event, Crespo photographed a family being forced onto their bellies by a riot cop as they exited a nearby cancer center.)

Thirteen protesters were admitted to a local hospital, but many more sought treatment from the medics working at the protest. In an e-mail, Dr. Ron Rosen, a veteran street medic, reports, “On Nov. 20, I treated numerous patients including several with head wounds caused by pepper balls and rubber bullets, and several with wounds to the areas over the spleen, liver and kidneys also caused by rubber bullets and baton blows.”

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Seventy-one-year-old Bentley Killmon was unaware that Miami was becoming a war zone when he boarded a bus Thursday morning. Killmon’s father was a police officer, and he didn’t bear any grudge against cops. “I respected the badge until that morning,” he says.

A former flight navigator and engineer for Pan Am who retired after 36 years on the job, Killmon opposes the FTAA because he believes globalization creates a “race to the bottom” as industries move to find cheap labor, decimating the livelihoods of workers left behind. “I was protesting what has happened to the middle class and to the poor,” he says.

Killmon, who lives about 100 miles north of Miami, was on one of 24 buses chartered by the Florida Alliance of Retired Americans. The group’s state organizer, 34-year-old Larry Winawer, was responsible for getting Killmon and another 1,100 or so retirees to the protest and home again, and he’d arrived in Miami Wednesday night.

Right away, it felt wrong. “As you’re heading down Biscayne Boulevard” — the street where the union march took place on Thursday, and where police faced off with protesters — “you see swarms of police in riot gear,” Winawer says. “There were armored personnel vehicles, helicopters hovering at very low altitude with searchlights sweeping the area. Right away it felt like you were not in America but in some type of occupied city.”

Winawer didn’t sleep much that night, and was up on Thursday at 4 a.m. to make sure that all ran smoothly with the seniors he was responsible for.

The day’s official activities were centered around the Bayfront amphitheater. From 10 to 11:30 a.m., there was a seniors breakfast and rally scheduled, with speakers talking about the effects of the FTAA on American retirees and families. The official union rally and march began at noon, also at the amphitheater.

Winawer had negotiated with police beforehand to allow his buses to drop the seniors off near the escalators leading to the auditorium. Two early buses got through, but by 10 a.m., chaos had begun to engulf downtown Miami, and the area around the amphitheater had been shut down. Thus the buses had to drop their passengers off as much as a mile away. A few buses didn’t make it into the city at all — the police told them to turn around and go home.

A mile “may not seem like much,” says Winawer, “but we had people who were 85, 90 years old.” Then, he says, as they made their way to their rally, lines of police officers would detain them without telling them why.

Of the 1,100 seniors on his buses, Winawer says about 600 made it to their event.

When the rally was over, Winawer had to see the seniors back to their vehicles, which were all parked far away. Killmon was in the last group of people he escorted, but when they arrived, his bus had already left. So they headed toward the Holiday Inn, where Winawer was staying.

Winawer was wearing a bright orange vest and an Alliance for Retired Americans T-shirt, and had staff credentials around his neck. Yet several times, he and Killmon were turned back by police lines, and finally told to walk west along downtown Miami’s railroad tracks. There were about 10 other people going the same way.

“All of a sudden, heading east is a line of police in riot gear,” says Winawer. “There were at least 50 — they had guns drawn and were yelling at people to get down.”

He still sounds incredulous as he recalls it. “He’s a 71-year-old man and I’m wearing my orange vest and credentials. I said, ‘He’s a retiree and I’m trying to help him get to his bus.’ We each had three or four guns on us telling us to get down, facedown in the dirt. Ben didn’t get down fast enough and he got a knee in his back.”

Hands cuffed behind them, they were put on a bus and left for three hours, then driven to a parking garage where FTAA prisoners were being held in wire pens. “I’ve worked with livestock before, and these were like stock pens,” said Killmon.

In the pen with him, says Killmon, was a steelworker named Rick who had a bad shoulder, the result of an injury he’d sustained falling off a roof. “His hands being handcuffed behind his back was extremely painful,” Killmon says. “He kept asking to be released so he could bring his hands around in front of him, and they would not do it. The pain got to the point that he lost control of his bowels and urinary tract.”

“He’d asked at least two dozen different officers for help,” says Winawer.

After another three hours, they were taken to Miami’s TGK jail, where they were processed and put in holding cells. It was after 3 a.m. before either was allowed to make phone calls. Killmon says he went at least seven hours without a sip of water.

On Friday, the charges against Killmon were dropped. Winawer was charged with disobeying a police officer. They weren’t released until early evening.

Both were in handcuffs for between 11 and 12 hours. Three weeks later, Winawer’s hands were still bruised and partly numb. Killmon says he’s fine as long as he doesn’t try to lift his left arm higher than his shoulder.

“I believe in social justice issues, but I’m not a screaming radical,” says Winawer. Since Miami, he says, “some people have asked, ‘How do you feel about law enforcement?’ I feel fine about law enforcement. What happened to us was not anything resembling law enforcement. I respect the job that police have to do, but I have no respect for the job that they did.”

Both Winawer and Killmon are planning to join civil suits against the city.

“Ben and I are living proof that civil rights are being erased in this country,” Winawer says, still sounding astonished.

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While Winawer and Killmon were in prison, another confrontation was unfolding outside.

Crespo, expecting it, was there with his camera. “Just like there’s a morning and an afternoon, there’s always a jail solidarity, so we went to the jail,” he says. With him was a local public television crew who were doing a segment on him and his work.

“The protesters had gathered at the parking lot of the state attorney’s office,” he says, two blocks from the jail. “They’re just kids. There was nothing mean-spirited about them. Their friends are locked up and they wanted to show solidarity.”

There were between 150 and 200 people there, and Brenna Bell, a 28-year-old attorney from Oregon, acted as a go-between with the police. At first, she said, the commander seemed reasonable, but within 20 minutes, he told her that everyone had to disperse.

“At that time, most everyone started leaving the area,” says Bell. “I stayed behind watching to make sure that everyone left OK. I never heard the police give the order to disperse that they threatened to give, but people started walking.”

Yet as people left, she says, a huge line of riot police — as many as 300 — followed them. Then, about three blocks from the protest, seven or eight people sat down and announced they weren’t going anywhere. They were arrested, and 50 or 60 people stopped to watch. Then she and others started walking east, flanked on two sides by police.

At that point, the police finally issued an order to disperse, but at the same time, they started closing in. Video from the scene shows people chanting, “We are dispersing. We are dispersing.” But the police wouldn’t let them. “That’s when I knew it was going to be bad,” says Bell. The police rushed in, shooting pepper spray and rubber bullets. “It was utter chaos,” she says. She was sprayed and shot in the back of the leg, and sent off to jail. She wasn’t released until 2 a.m. on Sunday.

Still, it could have been worse: “I talked to a couple of women who were strip-searched by male officers,” she says. “It’s such a powerless situation.”

One of those women was Ana Nogueira, a producer for the radio show “Democracy Now!” Nogueira was rounded up at the same protest as Bell. Like Celeste Fraser Delgado, she kept telling the arresting officers that she was a journalist.

One cop was hesitant, she says, but then another told him, “She’s not with us.” He meant she wasn’t embedded.

At the jail, “When I got out of the patrol wagon, I repeated that I was a journalist and that I was wrongly arrested. I asked, ‘What do I do?’ The officer told me to shut the fuck up.”

Her clothes reeked of pepper spray, so the police made her stand under a huge cold-water outdoor shower.

Then she was taken into a tent with one female officer and one male officer. The back of the tent was open, and other male officers could see in. “They told me to take off all my clothes and put them in a trash can, and that I was not going to get them back.” She asked the male officer to leave first, but all he would do was turn around. Then, when she was naked, he turned back to face her.

“Then they put me in prison garb, and that’s when I was taken and processed,” she says. “I was one of the lucky ones. I know other independent videographers who didn’t get their cameras back.”

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While stories about the FTAA protests proliferate, the Miami police are showing no signs of remorse. In their view, even peaceful protesters had it coming for cavorting with anarchists.

“Peaceful protesters in some cases made friends with the devil, knowing full well they were anarchists,” says Lt. Schwartz. “If someone says, ‘I came down to protest peacefully but yes, I’m aware there are anarchists in my group and I welcomed them in,’ they’re certainly putting themselves in an awkward position. If anarchists are starting to cause problems and throw things at cops, just because I’m a peaceful protester, but I’m standing right next to this anarchist, that I couldn’t be subject to police enforcement, I think that’s naive.

“You’d have to be deaf, dumb and blind not to see what was going on in the street, the confrontation between anarchists and police,” he says. “If you chose to stay in the midst of that and then felt your First Amendment right was hurt, you’re not being honest with yourself.”

Schwartz’s comments just compound Winawer’s outrage. “All his statements begin with ‘if,’” he says. “And I might agree with him if those things happened. But there are no ifs here. There’s reality. And the reality is that I and Ben Killmon were nowhere near any other individual, period. We were arrested for doing nothing except walking where the police told us to walk in an effort to find his bus.

“I’ve never been in trouble with the law before, and I have no ax to grind with the police, but this was just wrong,” Winawer says. “And the bombast, it adds insult to injury. It’s one thing to have done it. It’s another thing to put your head in the sand and deny that it ever happened.”

This is not just a French phenomenon, nor is it limited to immigration policy. In most of the world’s advanced democracies, the egalitarian left and the nationalist right are growing in strength among voters. After three decades in which apostles of financial deregulation, offshoring and immigration liberalization dominated the capitals of major Western countries, the pendulum is swinging in the other direction.

You would never know this from the prestige press, which is owned by billionaires and populated by upscale journalists, many of whom were able to begin their journalistic careers as unpaid interns thanks to affluent parents. According to the consensus in the elite media, history runs in one direction toward the merger of national economies in a single global free market, the elimination of borders for labor and the relaxation of restrictions on the free movement of capital. Any moves in the opposite direction represent dangerous backsliding that can only be motivated by racism and xenophobia and that threaten to produce new Hitlers and Mussolinis and trade wars leading to world wars.

But the voters of the industrial democracies are not listening to the elite transatlantic chattering class.  The late political scientist Samuel Huntington coined the term “Davos Man,” after the World Economic Forum at Davos, Switzerland, to symbolize the post-national, anti-populist global elite. Davos Man still exists, but he is in danger of going the way of Neanderthal Man. The Davos vision of a dawning post-national free market utopia was cracked by the al-Qaida attacks on Sept. 11, 2001, and then shattered by the global financial crash of 2008. Free market globalism continues to be the  orthodoxy in elite economic and journalistic circles, but in politics it has been in retreat for years. It is increasingly clear that libertarian globalism was never the wave of the future, but merely a temporary blip in history between the fall of the Berlin Wall in 1989 and the fall of the twin towers in 2001.

Consider the case of immigration policy. In every advanced nation, including the United States, governments under pressure from voters have moved to tighten up surveillance and control of immigrants, for reasons of national security and protection of the wages and cultures of their citizens from real or imagined threats. Parties of the center-left as well as of the center-right have adopted positions on immigration that would have been considered far-right in the globalist 1990s. America’s Democrats and the Labour Party of Gordon Brown have been forced by voter sentiments to carry out tough immigration policies that elite pundits of the left, right and center have denounced to no effect.

In the world economy, the major trend of our time is the rise of nationalist state capitalism, not the disappearance of national economic boundaries that was predicted by the prophets of globalization like Thomas Friedman following the end of the Cold War. When the world economy collapsed in 2008, leading industrial countries rushed to bail out national firms like America’s GM and Germany’s Opel, giving the lie to the claim that major corporations no longer had national identities. Instead of liberalizing its economy as it developed, China has made its state-owned companies more rather than less important. Most of the world’s energy companies, and a number of major shipping and aerospace industries, are state-controlled. The response in the U.S. has been growing economic nationalism, which is tapped by presidential candidates like Obama and Romney who call for defending and promoting American industry — at least when they are running for office.

It is true that protectionist policies have been limited during the Great Recession, compared to the Great Depression of the 1930s. But this arguably reflects the interests of working-class voters rather than the triumph of libertarian globalist ideology. A dwindling majority of wage earners in advanced industrial countries work in manufacturing industries that can be offshored to other countries. Most work in the nontraded domestic service sector. Only a few of them need to worry that their jobs will be sent abroad, but it is rational for many to worry about immigrant competition within their own countries for local service sector jobs. At the same time, the working class in Western democracies benefits from low prices for imports. It is perfectly rational, therefore, for working-class Americans or Europeans to be more concerned about immigrant competition than about trade. On another front, the deregulation of finance, the centerpiece of Clinton Treasury Secretary Robert Rubin’s global economic strategy, is being slowly but inevitably reversed, in the aftermath of the global crisis to which financial deregulation contributed. Unwilling to wait for global agreement on financial regulation, nations are unilaterally re-regulating the financial industry within their own borders. The result will be to reverse much of the financial globalization of recent decades and replace it with a patchwork of different national financial systems.

The Balkanization of global finance along national lines will be accelerated in the decades to come as many governments choose to deploy moderate inflation to burn away much of the public and private debt built up during the Great Recession, as the alternative to politically unpopular spending cuts and tax increases. What is known as “financial repression” — forcing national banks and, through them, national savers to accept government bonds whose value is being eroded by deliberate inflation — is a policy that is helped by a degree of segregation of national banking systems from the world economy. In the future, countries pursuing debt reduction by means of moderate inflation will find it attractive to partly re-nationalize their financial systems for this purpose alone. Most retirees in advanced industrial nations depend primarily for their retirement income on inflation-adjusted public pensions like Social Security, not on private savings. As a result, financial repression will hurt economic elites the most, while doing little harm to the working-class majorities in the U.S., Canada and Europe. Even as nationalism further fragments the global economy along national and regional lines, populism will redraw the map of domestic politics in one country after another, including the United States. Nationalist populists who break with the elite libertarian consensus, even those who, like Ross Perot, are centrist rather than far-right, are routinely demonized by the pundits of the mainstream press, whose moderate libertarian orthodoxy reflects the values and class interests of the owners of the media. But while populist outsiders are marginalized in the media and usually fail at the ballot box, their issues are often co-opted by mainstream conservative and progressive parties, the way that populist opposition to illegal immigration has been co-opted by establishment parties throughout the West in the last decade.   

Votes clearly count, even in plutocratic America. If American public policy reflected the objectives of the 1 percent, then long ago there would have been relaxation of border enforcement and amnesties for illegal immigrants, the privatization or means-testing of Social Security and Medicare and further deregulation of finance. On all of these issues, however, the oligarchic consensus is losing at the ballot box, if not in the editorial pages.

Davos Man is not dead, but he is on life support.  The libertarian globalist moment in world history is over. Free market globalism peaked in the late 1990s, before the rise of al-Qaida and Chinese-style state capitalism, when it appeared briefly that the Reagan-Thatcher version of capitalism represented the future. Most of our politicians and pundits are still living in the mental world of the 1980s and 1990s, but the future has arrived and it is not what libertarian globalists predicted.

Here and there, trade and immigration liberalization will continue, when it serves the interests of particular nations or particular pressure groups. And it will always be important, even in a partly renationalized world, to resist nativist bigotry and misguided forms of protectionism. Even so, the fading vision of inevitable progress toward the free flow of money, goods and labor across national boundaries was never anything more than a utopian fantasy, like the Marxist dream of international fraternity in a socialist world.  Capitalism in some form, partly private and partly statist, will endure. But less than a generation after the fall of the Berlin Wall, libertarian globalism has joined communism on the dust heap of history.

The National Science Foundation has just released its biennial report on global investment in science, engineering and technology. The NSF warns that the United States is quickly losing ground to Asia, especially to China. America’s share of global R&D spending is tumbling. In the decade to 2009, it dropped from 38 percent to 31 percent, while Asia’s share rose from 24 to 35 percent.

One big reason: According to the NSF, American firms nearly doubled their R&D investment in Asia over these years, to over $7.5 billion.

GE recently announced a $500 million expansion of its R&D facilities in China. The firm has already invested $2 billion.

GE’s CEO Jeffrey Immelt chairs Obama’s council on work and competitiveness. I’d wager that as an American citizen, Immelt is concerned about working Americans. But as CEO of GE, Immelt’s job is to be concerned about GE’s shareholders. They aren’t the same.

GE has also been creating more jobs outside the United States than in it. A decade ago, fewer than half of GE’s employees were non-American; today, 54 percent are.

This is all good for GE and its shareholders, but it’s not necessarily good for America or American workers. The Commerce Department says U.S. based global corporations added 2.4 million workers abroad in first decade of 21st century, while cutting their U.S. workforce by 2.9 million.

According to the New York Times, Apple Computer employs 43,000 people in the United States but contracts with over 700,000 workers abroad. It makes iPhones in China not only because of low wages there but also the ease and speed with which its Chinese contractor can mobilize their workers – from company dormitories at almost any hour of the day or night.

An Apple executive says “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.” He might have added “and showing a big enough profits to continually increase our share price.”

Most executives of American companies agree. If they can make it best and cheapest in China, or anywhere else, that’s where it will be made. Don’t blame them. That’s what they’re getting paid to do.

What they want in America is lower corporate taxes, less regulation and fewer unionized workers. But none of these will bring good jobs to America. These steps may lower the costs of production here, but global companies can always find even lower costs abroad.

Global corporations — wherever they’re based — will create good jobs for Americans only if Americans are productive enough to summon them. Problem is, a large and growing portion of our workforce isn’t equipped to be productive.

Put simply, American workers are hobbled by deteriorating schools, unaffordable college tuitions, decaying infrastructure and declining basic R&D. All of this is putting us on a glide path toward even lousier jobs and lower wages.

Get it? The strategic responsibility for making Americans more globally competitive can’t be centered in the private sector because the private sector is rapidly going global, and it’s designed to make profits rather than good jobs. The core responsibility has to be in government because government is supposed to be looking out for the public, and investing in public schools, colleges, infrastructure and basic R&D.

But here’s the political problem. American firms have huge clout in Washington. They maintain legions of lobbyists and are pouring boatloads of money into political campaigns. After the Supreme Court’s Citizen’s United decision, there’s no limit.

Who represents the American workforce? Organized labor represents fewer than 7 percent of private-sector workers and has all it can do to protect a dwindling number of unionized jobs.

Republicans like it this way, and for three decades have been trying to convince average working Americans government is their enemy. Yet corporate America isn’t their friend. Without bold government action on behalf of our workforce, good American jobs will continue to disappear.

State-subsidized solar panel production in China crushed a U.S.-subsidized solar start-up, thereby igniting a Washington political scandal.

It is child’s play to find further examples. The underlying reality is that unexpected consequences make everyone nervous. Sensibilities are on hair trigger. Just two weeks ago, the New York Times captured the new jitteriness in a single quote. In a story reporting how U.S. stock traders were increasingly setting their alarm clocks for the middle of the night, in order to absorb the latest news from Europe as soon as it started to break, one stock analyst, Michael Mayo, complains in a tone of bemused wonder: “Who would have thought we would have to be looking at Italian sovereign debt yields to figure out what Morgan Stanley’s stock will do?”

For those who haven’t been living and dying on every twist and turn of the European financial crisis, some unpacking of that sentence may be in order. Most modern governments routinely auction some form of state-backed bonds or other securities in order to raise cash. If the bond investors aren’t excited about the opportunity — let’s suppose, just for argument’s sake, that they’re afraid the Italian economy is about to collapse — then Italy must offer a higher interest rate, or yield, on those bonds to attract buyers. The higher the yield, the more negative the bond market’s judgment is assumed to be.

But for most of November and December, the health of Italy’s debt sales became not merely a judgment on Italy’s economic health and fiscal stability, but a swiftly translated proxy for investor sentiment about the state of all Europe. If Italy ran into real trouble, so the theory went, France and Germany would soon be swept into the vortex. And a European recession would obviously be bad news for the rest of the world. So one unsuccessful auction in Rome becomes immediate cause for bearish sentiment in New York and Tokyo and Shanghai.

And no one wants to be caught more than one nanosecond out of the loop. If the orders go out to sell or buy, you want to get there first. Since now, more than ever, bad news travels fast, everyone’s got to be quick on the trigger.

It doesn’t seem healthy, but we’re going to have to get used to it. Volatility and vulnerability are built into the infrastructure of our modern world. The jury may still out on the chaos theory question of whether a single butterfly flapping its wings in Botswana can cause a typhoon in the Philippines, but we now know without a shadow of a doubt that the relative success or failure of a troubled European government’s attempt to raise cash can send instant shock waves across financial markets across the globe.

And we know, intimately, that it doesn’t take much to set off a cascade of trouble — after the great global crash of 2008, traders everywhere are in a state of permanent PTSD. Beyond the obvious surface connections between markets — that European recession slowing U.S. economic growth — there are abundant linkages beneath the scenes that are obscure and hard to unravel, interconnections woven by complex derivatives and hedging strategies and computer-driven high-speed trading algorithms that instantly translate woe in one market to panic in another.

The inescapable conclusion: Our modern high-tech markets, in which more money than ever before swirls around the globe in a blink of an eye, are better at transmitting panic and fear than anything heretofore created by humans. If civilization is supposed to imply progress, then something has gone very awry: In the second decade of the 21st century, our infrastructure is increasingly fragile, increasingly prone to disruption. The sword of Damocles hangs above everyone’s head, and the thread that keeps it from falling is fraying perilously thin.

What is perhaps most fascinating about this state of affairs is how it has arisen as a consequence of global capital’s relentless quest for lower operating costs and greater efficiency and flexibility. The better we get at extending supply and production chains across the globe, the more vulnerable those chains become to a disruption at any given point. The faster we enable the transmission of information around the world and through the financial markets, the more volatile those markets become, as every new headline sends a different trading signal.

The marvelous shipping ports of the West Coast, able to transport unthinkable quantities of goods from ship to train or truck via their state-of-the-art cranes, offer a perfect example. We’ve never been so good at moving stuff around. But shut down one of those ports for a week, and we’re suddenly stuck. There’s nowhere else for all that stuff to go!

We’re going to see more of this in the future, rather than less. Climate disruptions will increase in frequency and severity, influencing commodity prices and immigration flows and insurance-industry profit margins. Higher prices for fossil fuels will complicate those transportation logistics — a single shock in Saudi Arabia would blast through economies everywhere. The temptation to hit the panic button will become increasingly irresistible.

Our systems need more redundancy, and our temperament would benefit from a heaping dose of prudence. But it’s hard to see where the encouragement to change our ways will come from. Because if there’s one thing that’s even more clear than the emergence of a constantly-on-the-verge-of-a-nervous-breakdown global economy, it’s that, for the most part, our political systems are not up to the task of dealing with these challenges.

Which, of course, just increases our overall sense of antsy powerlessness. As individuals, we’ve never been so much at the mercy of events that play out thousands of miles away, and we are remarkably unable to do anything about it.

And here comes 2012, which will witness a U.S. presidential election, crunch time for the European fiscal union, a potentially slowing Chinese economy, more weather disruptions, and a whole bunch of stuff that we have no idea is coming. If 2011 was the year when globalization’s downside became impossible to ignore, then 2012 will likely raise the ante by another order of magnitude.

Anyone claiming to divine the existence of genuinely Big Change Happening Now should, therefore, do so with a sense of modesty and circumspection, recognizing the possibility that unfolding events may reveal a different story.

All that said, the present moment is arguably one in which the international order is, in fact, undergoing a fundamental transformation.  The “postwar world” brought into existence as a consequence of World War II is coming to an end.  A major redistribution of global power is underway.  Arrangements that once conferred immense prerogatives upon the United States, hugely benefiting the American people, are coming undone.

In Washington, meanwhile, a hidebound governing class pretends that none of this is happening, stubbornly insisting that it’s still 1945 with the so-called American Century destined to continue for several centuries more (reflecting, of course, God’s express intentions).

Here lies the most disturbing aspect of contemporary American politics, worse even than rampant dysfunction borne of petty partisanship or corruption expressed in the buying and selling of influence.  Confronted with evidence of a radically changing environment, those holding (or aspiring to) positions of influence simply turn a blind eye, refusing even to begin to adjust to a new reality.

Big Change Happening Now

The Big Change happening before our very eyes is political, economic and military.  At least four converging vectors are involved.

First, the Collapse of the Freedom Agenda: In the wake of 9/11, the administration of George W. Bush set out to remake the Greater Middle East.  This was the ultimate strategic objective of Bush’s “global war on terror.”

Intent on accomplishing across the Islamic world what he believed the United States had accomplished in Europe and the Pacific between 1941 and 1945, Bush sought to erect a new order conducive to U.S. interests — one that would permit unhindered access to oil and other resources, dry up the sources of violent Islamic radicalism, and (not incidentally) allow Israel a free hand in the region.  Key to the success of this effort would be the U.S. military, which President Bush (and many ordinary Americans) believed to be unstoppable and invincible — able to beat anyone anywhere under any conditions.

Alas, once implemented, the Freedom Agenda almost immediately foundered in Iraq.  The Bush administration had expected Operation Iraqi Freedom to be a short, tidy war with a decisively triumphant outcome.  In the event, it turned out to be a long, dirty (and very costly) war yielding, at best, exceedingly ambiguous results.

Well before he left office in January 2009, President Bush himself had abandoned his Freedom Agenda, albeit without acknowledging its collapse and therefore without instructing Americans on the implications of that failure.  One specific implication stands out: we now know that U.S. military power, however imposing, falls well short of enabling the United States to impose its will on the Greater Middle East.  We can neither liberate nor dominate nor tame the Islamic world, a verdict from the Bush era that Barack Obama’s continuing misadventures in “AfPak” have only served to affirm.

Trying harder won’t produce a different result.  Outgoing Secretary of Defense Robert Gates caught the new reality best: “Any future defense secretary who advises the president to again send a big American land army into Asia or into the Middle East or Africa should ‘have his head examined,’ as General MacArthur so delicately put it.”

To be sure, Freedom Agenda dead-enders — frequently found under K in your phone book — continue to argue otherwise.  Even now, for example, Kagans, Keanes, Krauthammers and Kristols are insisting that “we won” the Iraq War — or at least had done so until President Obama fecklessly flung away a victory so gloriously gained.  Essential to their argument is that no one notice how they have progressively lowered the bar defining victory.

Back in 2003, they were touting Saddam Hussein’s overthrow as just the beginning of American domination of the Middle East. Today, with Saddam’s departure said to have “made the world a better place,” getting out of Baghdad with U.S. forces intact has become the operative definition of success, ostensibly vindicating the many thousands killed and maimed, millions of refugees displaced, and trillions of dollars expended.

Meanwhile, al-Qaeda in Mesopotamia remains in the field, conducting some 30 attacks per week against Iraqi security forces and civilians.  This we are expected not to notice.  Some victory.

Second, the Great Recession: In the history of the American political economy, the bursting of speculative bubbles forms a recurring theme.  Wall Street shenanigans that leave the plain folk footing the bill are an oft-told tale.  Recessions of one size or another occur at least once a decade.

Yet the economic downturn that began in 2008 stands apart, distinguished by its severity, duration and resistance to even the most vigorous (or extravagant) remedial action.  In this sense, rather than resembling any of the garden-variety economic slumps or panics of the past half-century, the Great Recession of our own day recalls the Great Depression of the 1930s.

Instead of being a transitory phenomenon, it seemingly signifies something transformational.  The Great Recession may well have inaugurated a new era — its length indeterminate but likely to stretch for many years — of low growth, high unemployment and shrinking opportunity.  As incomes stagnate and more and more youngsters complete their education only to find no jobs waiting, members of the middle class are beginning to realize that the myth of America as a classless society is just that.  In truth, the game is rigged to benefit the few at the expense of the many — and in recent years, the fixing has become ever more shamelessly blatant.

This realization is rattling American politics.  In just a handful of years, confidence in the Washington establishment has declined precipitously.  Congress has become a laughingstock.  The high hopes raised by President Obama’s election have long since dissipated, leaving disappointment and cynicism in their wake.

One result, on both the far right and the far left, has been to stoke the long-banked fires of American radicalism.  The energy in American politics today lies with the Tea Party Movement and Occupy Wall Street, both expressing a deep-seated antipathy toward the old way of doing things.  Populism is making one of its periodic appearances on the American scene.

Where this will lead remains, at present, unclear.  But ours has long been a political system based on expectations of ever-increasing material abundance, promising more for everyone.  Whether that system can successfully deal with the challenges of managing scarcity and distributing sacrifice ranks as an open question.  This is especially true when those among us who have been making out like bandits profess so little willingness to share in any sacrifices that may be required.

Third, the Arab Spring: As with the floundering American economy, so with Middle Eastern politics: predicting the future is a proposition fraught with risk.  Yet without pretending to forecast outcomes — Will Tunisia, Egypt and Libya embrace democracy?  Can Islamic movements coexist with secularized modernity? — this much can be safely said:  the ongoing Arab upheaval is sweeping from that region of the world the last vestiges of Western imperialism.

Europeans created the modern Middle East with a single purpose in mind: to serve European interests.  With the waning of European power in the wake of World War II, the United States — gingerly at first, but by the 1980s without noticeable inhibition — stepped in to fill the void.  What had previously been largely a British sphere now became largely an American one, with the ever-accelerating tempo of U.S. military activism testifying to that fact.

Although Washington abjured the overt colonialism once practiced in London, its policies did not differ materially from those that Europeans had pursued.  The idea was to keep a lid on, exclude mischief-makers, and at the same time extract from the Middle East whatever it had on offer.  The preferred American MO was to align with authoritarian regimes, offering arms, security guarantees and other blandishments in return for promises of behavior consistent with Washington’s preferences.  Concern for the wellbeing of peoples living in the region (Israelis excepted) never figured as more than an afterthought.

What events of the past year have made evident is this: that lid is now off and there is little the United States (or anyone else) can do to reinstall it.  A great exercise in Arab self-determination has begun.  Arabs (and, arguably, non-Arabs in the broader Muslim world as well) will decide their own future in their own way.  What they decide may be wise or foolish.  Regardless, the United States and other Western nations will have little alternative but to accept the outcome and deal with the consequences, whatever they happen to be.

A Washington inhabited by people certain that decisions made in the White House determine the course of history will insist otherwise, of course.  Democrats credit Obama’s 2009 Cairo speech with inspiring Arabs to throw off their chains.  Even more laughably, Republicans credit George W. Bush’s “liberation” of Iraq for installing democracy in the region and supposedly moving Tunisians, Egyptians and others to follow suit.  To put it mildly, evidence to support such claims simply does not exist. One might as well attribute the Arab uprising to the 2010 Deepwater Horizon oil spill in the Gulf of Mexico.  Those expecting Egyptians to erect statues of Obama or Bush in Cairo’s Tahrir Square are likely to have a long wait.

Fourth, Beleaguered Europe’s Quest for a Lifeline:  To a considerable extent, the story of the twentieth-century — at least the commonly-told Western version of that story — is one of Europe screwing up and America coming to the rescue.  The really big screw-ups were, of course, the two world wars.  In 1917 and again after December 1941, the United States sent large armies to deal with those who had disturbed the peace.  After the first war, the Americans left.  After the second, they stayed, not only providing soldiers to safeguard Western Europe, but also rejuvenating the shattered economies of the European democracies.

Even with the passing of a half-century, the Marshall Plan stands out as a singular example of enlightened statecraft — and also as a testimonial to America’s unsurpassed economic capacity following World War II.  Saving continents in dire distress was a job that only the United States could accomplish.

That was then.  Today, Europe has once again screwed up, although fortunately this time there is no need for foreign armies to sort out the mess.  The crisis of the moment is an economic one, due entirely to European recklessness and irresponsibility (not qualitatively different from the behavior underlying the American economic crisis).

Will Uncle Sam once again ride to the rescue?  Not a chance.  Beset with the problems that come with old age, Uncle Sam can’t even mount up.  To whom, then, can Europe turn for assistance?  Recent headlines tell the story:

• “Cash-Strapped Europe Looks to China For Help”
• “Europe Begs China for Bailout”
• “EU takes begging bowl to Beijing”
• “Is China the Bailout Saviour in the European Debt Crisis?”

The crucial issue here isn’t whether Beijing will actually pull Europe’s bacon out of the fire.  Rather it’s the shifting expectations underlying the moment.  After all, hasn’t the role of European savior already been assigned?  Isn’t it supposed to be Washington’s in perpetuity?  Apparently not.

Back to the Future

In the words of the old Buffalo Springfield song: “Something’s happening here.  What it is ain’t exactly clear.”

American politicians stubbornly beg to differ, of course, content to recite vapid but reassuring clichés about American global leadership, American exceptionalism and that never-ending American Century.  Everything, they would have us believe, will remain just as it has been — providing the electorate installs the right person in the Oval Office.

“To those nations who continue to resist the unstoppable march of human, political and economic freedom,” declares Republican presidential candidate Jon Huntsman, “we will make clear that they are on the wrong side of history, by ensuring that America’s light shines bright in every corner of the globe, representing a beacon of hope and inspiration.”

“This is America’s moment,” insists Mitt Romney.  “We should embrace the challenge, not shrink from it, not crawl into an isolationist shell, not wave the white flag of surrender, nor give in to those who assert America’s time has passed….  I will not surrender America’s role in the world.”  With an unsurprising absence of originality, the title of Romney’s campaign “white paper” on national security is “An American Century.”

Governor Rick Perry’s campaign web site offers this important insight: “Rick Perry believes in American exceptionalism, and rejects the notion our president should apologize for our country but instead believes allies and adversaries alike must know that America seeks peace from a position of strength.”

For his part, Newt Gingrich wants it known that “America is still the last, best hope of mankind on earth.”

The other Republican candidates (Ron Paul always excepted) draw from the same shallow and stagnant pool of ideas.  To judge by what we might call the C. Wright Mills standard of leadership — “men without lively imagination are needed to execute policies without imagination devised by an elite without imagination” — all are eminently qualified for the presidency.  Nothing is wrong with America or the world, they would have us believe, that can’t be fixed by ousting Barack Obama from office, thereby restoring the rightful order of things.

“Is America Over?” That question adorns the cover of the latest issue of Foreign Affairs, premier organ of the foreign policy establishment.  As is typically the case with that establishment, Foreign Affairs is posing the wrong question, one designed chiefly to elicit a misleading, if broadly reassuring answer.

Proclaim it from the rooftops: No, America is not “over.”  Yet a growing accumulation of evidence suggests that America today is not the America of 1945.  Nor does the international order of the present moment bear more than a passing resemblance to that which existed in the heyday of American power.  Everyone else on the planet understands this.  Perhaps it’s finally time for Americans — starting with American politicians — to do so as well.  Should they refuse, a painful comeuppance awaits.

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That’s right, they paid nothing. This is especially strange since the U.S. recently surpassed Japan as the country with the highest corporate tax rate, weighing in at 35 percent.

But the rate doesn’t tell the whole story. Current rules for multinational corporations (MNCs) allow companies to defer income earned in other countries, effectively paying no taxes at all until the money is returned to the U.S., or “repatriated.” Companies can defer income indefinitely, and are currently salivating at the prospect of a tax holiday that would allow repatriation at a meager 5.25 percent. In the last holiday of 2004, higher corporate margins did not lead to more jobs.

Beyond deferrals, MNCs also can deduct taxes paid to foreign governments from their U.S. tax burden, and can even offset credits earned in high-tax countries onto income earned in low-tax countries.

These complex tax provisions are easy for some firms to exploit, especially if they have lots of tax attorneys. Last year, Bloomberg exposed Google’s fancy tax-avoidance technique known as the “Double Irish” and the “Dutch Sandwich.” (No, it is not a fun game of jump-rope.) While selling America’s intellectual property rights to overseas subsidiaries, Google aligned loopholes in four countries’ tax codes, ultimately reducing its total tax burden to 2.4 percent. In fairness, Google’s CEO made a measly $313,219.

This tendency of MNCs to find complementary loopholes among countries harkens back to the pre-globalization era, when multistate companies would shift operations to the lowest-tax states. The race to the bottom of tax revenues was relieved when states pooled their collective bargaining power to create more consistent tax rules.

To end the race to the bottom, states adopted a new approach to taxation. Known as formulary apportionment (FA), companies divide their total tax burden among host states based on the percentage of sales (and sometimes payroll and property) located in each state, rather than on the elusive headquarters’ location. The apportionment approach increases simplicity (which businesses love) and increases tax revenue (which governments love.) That’s what we call a win-win.

Of course, firms would not be happy with the change if it increased their tax burden. A shift to FA could be paired with lower tax rates to be revenue neutral, so America would no longer have the highest corporate tax rate. Policies designed to be revenue neutral, however, should err on the side of the Treasury, especially if we truly want to reduce the deficit.

The best global scenario is for all countries to adopt apportionment, so that MNCs would have one general tax rule to follow, rather than the current system where MNCs have different rules for every country in which they operate.

In the short term a truly global policy is unlikely. But the EU is now considering moving to apportionment, creating an opportunity for the U.S. to collaborate with Europe. We may even be able to leverage a U.S./EU partnership into a larger OECD policy. Basing taxes on sales would create a reasonably level playing field among all adopting countries. It’s time the private sector stop holding all the bargaining chips.

Even in the less ideal event that the U.S. adopt apportionment unilaterally, we would be at a competitive advantage for start-ups, since companies could avoid being doubly taxed on domestic sales. This would likely spur other countries to adopt FA. Some supporters of FA include Jason Furman, Deputy Director of the Obama Administration’s National Economic Council, and even Larry Summers.

FA would create jobs by removing existing incentives to shift production overseas. Increases in corporate tax revenue would allow the U.S. to invest in education and infrastructure, both known job creators. We would also have more capital to invest in new technology and innovation.

FA would prevent firms from exploiting international loopholes, ensuring that they pay their fair share. In this recession, we need to transfer more of the tax burden to corporations and their wealthy stakeholders, currently the only remaining untapped reserve of revenue. The middle class has been squeezed dry.

In fact, while most of us have seen our incomes grow less than 2 percent per year since 2000, the wealthiest 1 percent saw their incomes grow over 10 percent every year. This inequity has finally percolated into widespread demonstrations and unrest. The time is now for redistributive action.