Class warfare, anyone?

While the global overlords flirt in Davos, trouble brews at home.

Published January 24, 2006 6:35PM (EST)

Batten down the hatches, reinforce the dikes and retaining walls, check the batteries in the fallout shelter: Bad times are coming.

Such was the underlying message delivered by Jeff Faux, author of "The Global Class War," in a conference call set up by the Economic Policy Institute in honor of the kickoff of tomorrow's World Economic Forum in Davos, Switzerland.

Faux, a founder and former president of EPI, painted a dim picture of "declining American competitiveness and living standards," citing stagnant or declining wages for "the majority of American workers," and an unsustainable trade deficit. Americans, he noted, are "addicted to foreign trade": For every dollar of income growth in the U.S., Faux said, the trade deficit rises at an even faster rate.

"This is going to get worse," said Faux. But there's a silver lining, of sorts. Sooner or later (and Faux thinks it will be sooner) the decline of American living standards will lead to "political unrest" and it will be time, once again, to introduce the concept of a "social contract" back into the American economy.

We're going to have to start at home, said Faux, who believes it is "utopian" to imagine that a social contract can be imposed globally. Faux proposed a four-point platform: an economic bill of rights that would incorporate labor rights and environmental concerns into NAFTA; increased investment and infrastructural aid to Mexico from the United States and Canada; a "customs union" consisting of common tarriffs and trade policies for the U.S., Canada and Mexico; and a "continental citizen's Congress" that would be entrusted with deliberating upon "a new framework for looking at the future and making social decisions."

Some might look at those four points and call them utopian, as well, but let's say, for the sake of argument, that a major economic crisis is looming in the U.S., one of such an extent that it leads to a significant change in government and the political will to roll back the unregulated free-market policies that have dominated the U.S. since 1980.

In that context, the concept of a North American Customs Union that attempts to create a protected enclave from the onslaught of cheap foreign goods -- read: China -- is the element of Faux's plan that most directly challenges the current integration of the global economy. The goal, said Faux, is to reinvigorate the industrial manufacturing base of North America. That's laudable, but it's also fraught with its own dangers. If the U.S. economy declines to the point that politicians are empowered to block Chinese imports with tariffs, it's hard to see how in the short term the economic crisis won't get even more severe. Every big retailer in the U.S. depends on Chinese imports; by one account, 85 percent of Wal-Mart's suppliers are based in China. A price hike across the board would undoubtedly lead to closed stores, layoffs and even more economic distress.

Managing that transition could be the biggest challenge facing the U.S. since the Great Depression. Something to look forward to, I guess.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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