May 1, 2007 9:40 AM

If Bernanke's In Butte, It’s A Good Sign The Establishment’s Scared

The fourth in a series of live blogs from the international economic summit in Butte, Montana

Federal Reserve Chairman Ben Bernanke’s speech to the International Economic Summit here in Butte, Montana was not newsworthy for its content – it was a recitation of the same tired talking points on trade that we’ve been hearing since NAFTA. He hit all the typical notes – let’s take them apart right here.

Bernanke said “free” trade lowers prices and that “gains in disposable income [are] created by lower consumer prices” from “free” trade. Then in a not-so-subtle salute to Wal-Mart, he said “a number of the large, import-intensive retail chains in the United States are focused on low- and moderate-income consumers, who benefit from being able to buy a wide variety of lower-priced goods.” What he didn’t say was that wages are not keeping pace with overall price inflation, meaning that “free” trade’s wage depressing effect (through outsourcing and the replacement of good-paying jobs with Wal-Mart style jobs) is outweighing its price depressing effect. Lower prices may be great, but if wages fall faster than those prices as they are, then it’s hard to argue that the average American is experiencing “gains in disposable income created by lower consumer prices.”

Then there was the attempt to claim that “free” trade is actually increasing wages in America. “Jobs created by trade also tend to offer higher pay and demand greater skill than the jobs that are destroyed,” Bernanke said. That may or may not be technically true – but the average American worker under our “free” trade policy is not seeing better-paying job opportunities. As the Economic Policy Institute has diligently documented in a series of reports (here and here) jobs in expanding industries in America pay less and provide fewer benefits than jobs in contracting industries.

Finally, in the Q&A banter between Bernanke and Baucus, Bernanke delivered a version of the Great Education Myth. He admitted that economic “inequality is rising” and said that “fundamental reason [for that] is because the economic returns of skills are going up and up and up.” The message was that it’s all about educating. If our workers just get better educated, inequality will decrease and everything will be hunky dory. The problem, of course, is that the hard data shows that only increasing a workers’ education and skills is not a path to higher wages. We can have all the PhD’s we want, but if we continue down the trade path that people like Bernanke demand – a path that rewards outsourcing, worker exploitation, and environmental degradation – those well-educated workers will still be faced with many of the same problems they currently have.

I want to reiterate – none of what Bernanke said was really news. These are tired, Heritage Foundation-style talking points. But what is news is how many major national speakers like Bernanke at this event keep repeating these same lines about "free" trade being totally awesome for average Americans, as if the audience is being treated to a Clockwork Orange-style indoctrination program. If one of the most powerful people in the world such as a Federal Reserve Chairman is traveling all the way to little Butte, Montana to demand congressional Democrats ignore their campaign pledges to reform America's trade policies, then it's a good sign that the Establishment is extremely frightened. Ands it should be frightened. Polls show the majority of America wants a change in our trade policy, and Election 2006 witnessed a new crop of populist politicians running on platforms representing that desire for change.

The captains of global industry and finance have traveled to Montana in part to pressure Finance Committee Chairman Max Baucus (D), whose committee will oversee these trade decisions and whose complicity they need in order to continue the lobbyist-written policies they advocate for. What comes out of that pressure attempt, this conference and the broader debate this country's having on trade is anyone' guess – but it’s clear by the unity of the Establishment and its obvious fear that progressives are as close as we’ve ever been to reforming our trade policies for the better.