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economic inequality
A House Tax Break Would Help the Rich at the Expense of the Rest
Extending or increasing a deduction for pass-through businesses is likely to exacerbate economic inequality, while delivering no economic benefits in the long run.
May 22, 2025
House Republicans’ tax plan would expand a tax break in the 2017 tax reform for “pass-through” businesses that has overwhelmingly benefited high earners. “Pass-throughs” are entities structured so that profits are not taxed at the business level but instead at the owners’ individual income tax rate.
The 2017 Tax Cuts and Jobs Act introduced a 20% deduction for Qualified Business Income (QBI) for pass-through businesses. House Republicans want to extend this tax break and increase it to 23%.
Contrary to proponents’ claims that the QBI deduction stimulates economic growth, economic research suggests a more nuanced and challenging reality. Recent analysis from our team at American University’s Institute for Macroeconomic and Policy Analysis (IMPA) reveals that extending or increasing the QBI is likely to exacerbate economic inequality, while delivering no economic benefits in the long run.
Extending the QBI deduction would systematically redistribute economic resources in ways that amplify existing inequalities.
Importantly, extending the QBI deduction would reduce government revenue significantly—by approximately 1.9% annually in the long run. Permanently increasing it would reduce revenue by 2.2% annually. These revenue losses represent a substantial fiscal challenge that cannot be overlooked.
Understanding Pass-Through Businesses
Traditional C corporations must pay the federal corporate income tax. Shareholders then pay individual income taxes on any profits distributed as dividends. In contrast, sole proprietorships, S corporations, and partnerships, as well as certain other types of businesses, are called “pass-throughs” because the businesses themselves do not pay taxes; instead, profits are passed through to individual owners, who then are taxed at their own individual tax rate. The QBI deduction reduces the amount of income from pass-throughs that is taxed.
According to Internal Revenue Service data, the number of nonfarm businesses organized as pass-throughs grew by 15% between 1980 and 2015, at which time more than 95% of all businesses were pass-throughs. But pass-through income is highly concentrated among top earners. Congressional Budget Office data show that, while income from pass-through businesses represents more than 20% of total household income for the top 1%, it accounts for merely 3% of income for the bottom 80% of households.
Think high-powered law firm partners or private equity fund executives. Without this tax break, they might owe the top marginal income tax rate of 37%. Under the current Republican proposal, they would owe just a 28.49% pass-through rate.
How Would Extending the QBI Deduction Affect the Economy?
Economic theory suggests that such tax deductions on business income have very little direct effects on real business activity if investment costs can be deducted from taxable income. And that is the case for pass-throughs. Because they can use accelerated depreciation provisions, taxes on their business income don’t change their investment decisions.
It’s not just theory: A recent study using tax record data finds no clear impact on investment, wages, or employment among pass-throughs that got an earlier tax break. A separate study found no impact on wages.
Even if tax breaks for businesses have no effect on individual business decisions, they can have negative effects on the economy as a whole. For example, such tax breaks reduce government revenue. If the revenue shortfall is financed by government borrowing, it can crowd out private investment. If the revenue shortfall is matched by reduced spending on public investment, such as scientific research, it is likely to reduce our standard of living in the long run. Such tax breaks also increase the after-tax required return to investors, which could cause businesses to distribute more profit, leaving less for investment.
We find that extending the QBI deduction would decrease government revenue by about 1.6% annually after 10 years and 1.9% in the long run.
Finally, such tax breaks increase after-tax profits and the market value of businesses, which raises the wealth of already-wealthy owners.
Our estimates using the IMPA macroeconomic policy model confirm that making the QBI deduction permanent would not boost economic activity, as is commonly claimed. Instead, we find that there would be a small decrease in GDP of 0.07% in the long run. Increasing the deduction to 23% would magnify the negative impact on economic activity.
Extending the QBI deduction would systematically redistribute economic resources in ways that amplify existing inequalities. Extending the QBI deduction would increase the share of the wealth owned by the top 1% by approximately 1.1%, while the bottom 50% would see their share fall by approximately 2.4%. Increasing the deduction, of course, redistributes even more wealth from the lower half of the distribution to the top.
Finally, we find that extending the QBI deduction would decrease government revenue by about 1.6% annually after 10 years and 1.9% in the long run. Increasing it permanently to 23% would reduce revenue 2.2% in the long run. How much is that? In the 2023 budget, 2% was enough to cover about three-quarters of the annual cost of the Supplemental Nutrition Assistance Program (SNAP). Or it would support 12 years of cancer research at 2023 levels.
To sum it up: QBI deduction costs taxpayers a lot, does not stimulate growth, and has regressive distributional consequences. There is no economic justification for its continuation.
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How Can the Global South Fulfill the Promise of Bandung in the 21st Century?
To celebrate the spirit of Bandung is not simply to mark 70 years since the Asia-Africa Conference, but to affirm what being faithful to its principles and ideals means today.
May 08, 2025
The Bandung Conference in April 1955 has achieved the status of a mythical moment in the history of the Global South. There have been many accounts that have highlighted its downsides—among them, the underrepresentation of leaders from sub-Saharan Africa and the absence of anyone from Latin America, the way Cold War geopolitical rivalries found their way into the meeting, its legitimization of the nation state as the principal unit of interaction among the peoples of the postcolonial world to the detriment of other avenues of expressing and harnessing solidarity, and the disappointing aftermath exemplified by the India-China frontier war in the Himalayas in 1962.
Despite these undoubtedly important though arguably revisionist assertions, the “Bandung Moment” has achieved mythical status since, while its expression in the conference proceedings may have been less than perfect, the spirit of postcolonial unity among the rising peoples of the Global South pervaded the conference. Moreover, this spirit of Bandung has been a constant spur to many political actors to reproduce it in its imagined pristine form, leading to dissatisfaction with successive manifestations of Third World solidarity. To celebrate the spirit of Bandung is not simply to mark 70 years since the Asia-Africa Conference, but to affirm what being faithful to its principles and ideals means today.
It took determined resistance from the peoples of Vietnam, the Middle East, and other parts of the world to force the United States and its allies to learn the consequences of violating these principles, but it was at the cost of millions of lives in the Global South.
The Bandung document was primarily an anti-colonial document, and it is heartening to note that so many governments and peoples in the Global South have rallied behind the people of Palestine as they fight genocide and settler-colonialism in Gaza and the West Bank. The role of South Africa in lodging and pursuing the charge of genocide against Israel in the International Court of Justice, with the formal support of 31 other governments, is exemplary in this regard.
Bandung and Vietnam
April 2025 , the 70th anniversary of Bandung, is also the 50th anniversary of the reunification of the Socialist Republic of Vietnam. The celebrations over the last few days in Ho Chi Minh City brought back images of that decisive defeat of the American empire—the iconic photos of a tank of the People’s Army smashing through the gate of the presidential palace in Saigon and the frenzied evacuation by helicopter of collaborators from the rooftop of the U.S. embassy. In retrospect, the defeat in Vietnam was the decisive blow dealt to American arms in the last century, one from which it never really recovered. True, the empire appeared to have a second wind in 2001 and 2003, with the invasions of Afghanistan and Iraq, respectively, but that illusion was shattered with the panicked, shameful exit of the United States and its Afghan subordinates from Kabul in 2021, the images of which evoked the memories of the debacle in Saigon decades earlier.
The defeats in Vietnam and Afghanistan were the dramatic bookends of the military debacle of the empire, which had massive repercussions both globally and in the imperial heartland. Bandung underlined as key principles “Respect of the sovereignty and territorial integrity of all nations” and “Non-intervention or non-interference into the internal affairs of another country.” It took determined resistance from the peoples of Vietnam, the Middle East, and other parts of the world to force the United States and its allies to learn the consequences of violating these principles, but it was at the cost of millions of lives in the Global South. And it is by no means certain that the era of aggressive Western interventionism has come to an end.
Ascent and Counterrevolution
The economic dimension of the struggle between the Global South and the Global North since Bandung might have been less dramatic, but it was no less consequential. And it was equally tortuous. Bandung was followed by the founding of the Non-Aligned Movement in Belgrade in 1961, the formation of the Group of 77, and the establishment of the United Nations Conference on Trade and Development (UNCTAD). This upward arc in the struggle of the Global South for structural change in the global economy climaxed with the call for the New International Economic Order (NIEO) in 1974.
Then the counterrevolution began. Taking advantage of the Third World debt crisis in the early 1980s, structural adjustment was foisted on the Global South via the World Bank and the International Monetary Fund, United Nations agencies like the U.N. Center for Transnational Corporations were either abolished or defanged, and the World Trade Organization (WTO) supplanted the General Agreement on Tariffs and Trade and sidelined UNCTAD. The “jewel in the crown of multilateralism,” the WTO was meant to discipline the Global South not only with trade rules benefiting the Global North but also with anti-development regimes in intellectual property rights, investment, competition, and government procurement.
Will the BRICS or any other alternative multilateral system be able to avoid replicating the old order of power and hierarchy?
Instead of the promised “development decades” heralded by the rhetoric of the United Nations, Africa and Latin America experienced lost decades in the 1980s and 1990s, and in 1997, a massive regional financial crisis instigated by Western speculative capital and austerity programs imposed by the International Monetary Fund ended the “Asian Economic Miracle.”
Although most governments submitted to IMF-World Bank structural adjustment programs, some, like Argentina, Venezuela, and Thailand resisted successfully, backed by their citizens. But the main area of economic war between North and South was the WTO. A partnership between southern governments and international civil society frustrated the adoption of the so-called Seattle Round during the Third Ministerial Conference of the WTO in Seattle. Then during the Fifth Ministerial Conference in Cancun in 2003, developing country governments staged a dramatic walk out from which the WTO never recovered; indeed, it lost its usefulness as the North’s principal agency of global trade and economic liberalization.
Rise of China and the BRICS
It was the sense of common interest and working together to oppose northern initiatives at the WTO that formed the basis for the formation of the BRICS (Brazil, Russia, India, China, South Africa), which gradually emerged as an alternative pole to the U.S.-dominated multilateral system in the second decade of the 21st century.
The anchor of the BRICS was China. A country that had beaten imperialism over five decades of struggle in the first half of the 20th century, the People’s Republic confidently entered into a devil’s bargain with the West: In return for offering cheap labor, it sought massive foreign investment and, most important, advanced technology. Western capital, seeking super profits by exploiting Chinese labor, agreed to the deal, but it was China that got the better end of the bargain, embarking on a crash industrialization process that made it the number one economy in the globe as of today (depending of course on which metric one uses). The Chinese ascent had major implications for the Global South. China not only provided massive resources for development, becoming, as one analyst put it, the “world’s largest development bank.” By reducing dependence on the Western-dominated financial agencies and Western creditors, it also provided policy space for Southern actors to make strategic choices.
The obverse of China’s super industrialization was deindustrialization in the United States and Europe, and coupled with the global financial crisis of 2008, this led to a deep crisis of U.S. hegemony, sparking the recent momentous developments, like U.S. President Donald Trump’s trade war against friends and foes alike; his attacks on traditional U.S. allies that he accused of taking advantage of the United States; his abandonment of the WTO and, indeed, of the whole U.S.-dominated multilateral system; and his ongoing retrenchment and refocusing of U.S. economic and military assets in the Western Hemisphere.
All these developments have contributed to the current fluid moment, where the balance in the struggle between the North and South is tipping toward the latter.
Rhetoric and Reality in the Global South Today
But living up to and promoting the spirit of Bandung involves more than tipping the geopolitical and geoeconomic balance toward the Global South. The very first principle of the Bandung Declaration urged “Respect for fundamental human rights and for the purposes and the principles of the Charter of the United Nations.” Nehru, Nasser, and Zhou En Lai played stellar roles in Bandung, but can it be said that the governments they represented have remained faithful to this principle? India today is ruled by a Hindu nationalist government that considers Muslims to be second-class citizens, the military regime in Egypt has engaged in egregious violations of human rights, and Beijing is carrying out the forcible cultural assimilation of the Uygurs. It is difficult to see how such acts by these governments and others that initiated the historic conference, like Burma where a military junta is engaged in genocide, and Sri Lanka with decades of a violent civil war, can be seen as consistent with this principle.
Indeed, most states of the Global South are dominated by elites that, whether via authoritarian or liberal democratic regimes, keep their people down. The levels of poverty and inequality are shocking. The gini coefficient for Brazil is 0.53, making it one of the most unequal countries in the world. The rate for China, 0.47, also reflects tremendous inequality, despite remarkable successes in poverty reduction. In South Africa, the gini coefficient is an astounding 0.63, and 55.5% of the people live under the poverty line. In India, incomes have been polarizing over the past three decades with a significant increase in bilionaires and other “high net worth” Individuals.
Perhaps the greatest obstacle to a new, equitable global order is the fact that all countries remain embedded in a system of global capitalism, where the pursuit of profits remains the engine of economic expansion, both creating great inequalities and posing a threat to the planet.
The vast masses of people throughout the Global South, including Indigenous communities, workers, peasants, fisherfolk, nomadic communities, and women are economically disenfranchised, and in liberal democracies, such as the Philippines, India, Thailand, Indonesia, South Africa, and Kenya, their participation in democracy is often limited to casting votes in periodic, often meaningless, electoral exercises. South-South investment and cooperation models such as the Belt and Road Initiative and free trade agreements frequently entail the capture of land, forests, water, and marine areas, and extraction of natural wealth for the purposes of national development. Local populations—many of whom are Indigenous—are dispossessed of their livelihoods, territories, and ancestral domains with scant legal recourse and access to justice, invoking the specter of homegrown colonialism and counterrevolutions.
Bandung, as noted earlier, institutionalized the nation state as the principal vehicle for cross-border relationships among countries. Had global movements like the Pan-African movement, the women’s movement, the labor movement, and the peasant movement been represented at the 1955 conference, the cross-border solidarities institutionalized in the post-Bandung world could perhaps have counteracted and mitigated, via lateral pressure, elite control of national governments. Those advocating for the self-determination of peoples, and for the redistribution of resources, opportunities, and wealth within national boundaries, would perhaps not have been demonized and persecuted as subversives and threats to national interests.
During this current moment of global transition, as the old Western-dominated multilateral system falls into irreversible decay, the new multipolar word will need new multilateral institutions. The challenge, especially for the big powers of the Global South, is not to create a replica of the old Western-dominated system, where the dominant powers merely used the U.N., WTO, and Bretton Woods institutions to indirectly impose their will and preferences on the vast majority of countries. Will the BRICS or any other alternative multilateral system be able to avoid replicating the old order of power and hierarchy? To be honest, the current political-economic regimes in the most powerful countries in the Global South do not inspire confidence.
Bandung and the Continuing Specter of Capitalism
At the time of the Bandung Conference, the political economy of the globe was more diverse. There was the communist bloc headed by the Soviet Union. There was China, with its push to move from national democracy to socialism. There were the neutralist states like India that were seeking a third way between communism and capitalism. With decades of neoliberal transformation of both the Global North and the Global South, that diversity has vanished. Perhaps the greatest obstacle to a new, equitable global order is the fact that all countries remain embedded in a system of global capitalism, where the pursuit of profits remains the engine of economic expansion, both creating great inequalities and posing a threat to the planet. The dynamic centers of global capitalism may have moved, over the last 500 years, from the Mediterranean to Holland to Britain to the United States and now to the Asia Pacific, but capitalism continues to both penetrate the farthest reaches of the globe and deepen its entrenchment in areas it has subjugated. Capitalism continually melts all that is solid into thin air, to use an image from a famous manifesto, creating inequalities both within and among societies, and exacerbating, indeed threatening to render terminal, the relationship between the planet and the human community.
Can we fulfill the aspirations of Bandung without bringing forth a post-capitalist system of economic, social, and political relations? A system where people in all their diversity and strengths can participate and benefit equally, free from the violence of bigotry, racism, patriarchy, and authoritarianism, and from the slavery to endless growth that is destroying the planet? That is the question, or rather that is the challenge, and the “unfinished business” of Bandung. The 10 principles that form the basis of the Bandung spirit are reflected in international human rights law but have been cynically manipulated to serve particular geopolitical, geoeconomic, racialized, and gendered interests. Being faithful to the spirit of Bandung in our era therefore, requires us to go beyond the limits of Bandung. The Bandung Spirit continues to signify ideals of anti-colonialism, anti-imperialism, peace, justice, self-determination, and solidarity—ideals that were shaped by the peoples of Asia and Africa at the forefront of struggles for liberation from colonialism and resistance to imperialism, who gave their lives for liberty. Despite the achievement of independence from colonial occupation—with significant exceptions like Palestine, West Papua, and Kanaky—struggles of rural and urban working classes for freedom from capitalist exploitation and extractivism, and from fascist alliances between capital and authoritarian states continue.
“History is a nightmare from which I am trying to awake,” declares a character in a famous novel. The world might seem to be on the cusp of a new era, with its promise of a new global order, but the Global South still has to awaken from the nightmare of the last 500 years. It is not coincidental that the birth of capitalism also saw the beginning of the colonial subjugation of the Global South. Only with the coming of a postcapitalist global order will the nightmare truly end.
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How Eco-Localism Differs from Trump’s Tariff Terrorism
Even though both eco-localists and Trump administration officials have at times promoted the use of tariffs, they propose using them for entirely different reasons, and, presumably, would achieve very different results.
Apr 20, 2025
Followers of the Small Is Beautiful school of environmentalism (to which I subscribe) often critique globalization and advocate localism. The controversial new Trump tariffs seem purpose-made to choke off global trade and promote American domestic manufacturing. Am I thrilled?
Let’s unpack the goals and tactics of both eco-localism and the Trump tariffs and see where there’s congruence, and where there’s contradiction.
Where the Eco-localists Are Coming From
Trade makes many folks materially better off by enabling a local abundance of resources or skills to be shared across a wider area. However, increased trade often worsens economic inequality and depletes and pollutes the environment faster than would otherwise happen. Therefore, eco-localists see trade as a mixed benefit whose unintended negative impacts must be carefully managed.
Globalization of trade raises the stakes of both benefits and risks. On the risk side of the leger, taken to the extreme, it leads to a world in which everything is for sale, all resources are depleted, pollution is everywhere, labor is exploited to the maximum degree, and everything is owned by a tiny number of super-rich investors and entrepreneurs.
The scope of globalization that’s happened in the last few decades is unequaled in human history (the spread of the Roman Empire is one of several smaller-scale precursors). Corporations and banks delivered the technology and capital; trade agreements like NAFTA and trade partnerships like the E.U. contributed the legal framework; and fossil fuels provided abundant, concentrated, storable energy for manufacturing and transport. The result is an integrated global market in which a single product, such as a smartphone, may incorporate design elements from skilled workers in the U.S.; raw materials from 20 countries; and assembly by poorly paid workers in China, Vietnam, or India. The phone can then be sold in scores of nations. The intended benefit is that billions of people get to use a technology that, by its very nature, requires global supply chains, internationally shared technological expertise, and stable rules of economic cooperation and investment. The unintended side effects are that a few people become unimaginably rich while nature is poisoned and people’s mental, physical, and social health deteriorates.
Within the deteriorating circumstances of a world seemingly on the verge of environmental ruin and global conflict, eco-localist strategies are looking more and more sensible.
The winners of the globalization game include a growing global billionaire class and a fast-growing middle class in China, India, and other manufacturing hubs. Middle-class consumers around the world win by getting cheap goods. Corporations and investors reap a windfall.
However, society and nature are losers when globalization worsens inequality while speeding up depletion and pollution. Global economic inequality declined during some decades of the 20th century, but it did so mainly because of the Great Depression and two World Wars. Otherwise, the last century saw a relentlessly widening gap between rich and poor—a trend that has accelerated in the past two decades, not just in the U.S., but in China, India, and elsewhere. Indigenous cultures in less-industrialized nations are hardest hit, as globalization uproots people from traditional village life, thrusting them into cities and factories. Meanwhile, forests disappear, carbon accumulates in the atmosphere, wild creatures vanish, and floods and fires devastate more communities.
The United States, the country that invented consumerism, in part to deal with a glut of production, used to be the world’s manufacturing powerhouse. But, with cheaper labor available in Asia and the “productivity” gains from automation and other technologies, the U.S. has instead become the top global consumer, a center of global finance, the primary military superpower, and the trendsetting conductor of international rules of commerce. The share of U.S. jobs in manufacturing has declined by 35% since the 1970s. And that decline has created political and social problems including political polarization, which in turn is undermining democracy in the U.S. and other countries.
Eco-localists argue that globalization is authoritarian by nature: Increasingly, multinational corporations rule the world. Individuals and communities are powerless by comparison.
Eco-localists make the following recommendations to governments and communities:
- Incentivize cooperative, worker-owned businesses;
- Promote the meeting of human needs through non-market means—i.e., the sharing economy;
- Focus on the well-being of people and nature instead of simply aiming to grow GDP;
- Tax the rich and provide more economic security (including education and healthcare) for lower-income people;
- Re-localize production by regulating big corporations so that smaller, local producers and sellers can remain competitive; and
- Strengthen the rights of communities (including the rights of nature) and the fabric of democracy.
Where the Tariff Terrorists Are Coming From
The Trump tariffs are an unfolding story that changes daily. The goals of this astonishing set of new, constantly shifting trade policies are somewhat unclear, as statements by the president and other officials are sometimes contradictory. U.S. President Donald Trump himself has a longstanding fascination with tariffs, which he sees as coercive tools for achieving various international ends, not all of them economic.
Trump often laments the fact that America runs a trade deficit with many nations. In Trump’s mind, any trade deficit is a loss, and he wants America to win. Here is Commerce Secretary Howard Lutnick, speaking on CBS News’ “Face the Nation” on Sunday, April 6:
We’ve got to start to protect ourselves... and we’ve got to stop having all the countries of the world ripping us off. We have a $1.2 trillion trade deficit, and the rest of the world has a surplus with us. They’re earning our money. They’re taking our money, and Donald Trump has seen this, and he’s going to stop it.
Still, trade rebalancing doesn’t seem to be Trump’s only aim. Tariffs could be used either as a weapon to extort concessions from other nations, or as a durable source of income for the government and a way to restructure trade over the long haul, favoring U.S. domestic manufacturers. Trump has cited both purposes. But they are fundamentally incompatible: If successfully used as a bargaining chip, then tariffs will be negotiated away and therefore will provide no long-term income to the government. If they are meant to be held in place to provide long-term income (Trump has even mooted the notion of replacing income taxes with tariffs), then there’s nothing to negotiate. As a side note, there’s one other possible motivation: Tariffs—with carve-outs to specific businesses, industries, or countries—have historically been used as a tool for corruption.
After the announcement of dramatically high tariffs on all nations on April 2 (dubbed “liberation day” by the administration in an Orwellian turn), the U.S. bond market immediately saw a dramatic sell-off, causing the interest rate the government pays on its debt to soar. Trump relented, delaying most tariffs for 90 days while leaving a 10% tariff in place on all nations except China, which he targeted with a 145% tariff. China has responded with its own 125% tariff on all U.S. imports. China has also cut off exports of strategic raw materials. It seems that the trade war Trump has initiated is almost entirely directed toward Beijing; much lower tariffs on other countries could conceivably be used to coerce those countries to stop doing business with China.
A possible outcome would be the commercial isolation of China and the end of its rise as a global superpower capable of eclipsing the U.S. However, if this is indeed Trump’s goal, his strategy seems to ignore the fact that China already has a broad sphere of influence, including trade alliances with Brazil, India, Russia, South Africa, Egypt, Ethiopia, Indonesia, Iran, and the United Arab Emirates (i.e., the BRICs countries). Further, engineering a clash between the U.S. and its European allies on one side and BRICs nations on the other might not end well, given the fact that Trump has already torched his country’s leadership of the Western alliance through his authoritarian posturing, his undermining of NATO, and his threatening of friendly nations with enormous tariffs. We’re already seeing the European Union negotiating with China to lower trade barriers to Chinese electric vehicles. Prospects for driving a wedge between Asian nations and China might be even worse.
Trump’s strategy does have its cheerleaders. Here’s influencer Ken Rutkowski’s breathless paean:
[Tariffs represent]... a new economic philosophy that restructures the global trade system, repositions the American worker at the core of the system, and challenges the 30 years of offshoring conventions. [They are] a decades-in-the-making strategy to restore industrial self-reliance, real wage growth, and economic security. The new playbook views tariffs as versatile tools. This regime sees them not only as revenue generators but also as negotiation triggers and economic equalizers. Protection? Yes. Leverage? Absolutely. Alignment? Finally. From Wall Street to Main Street. The endgame? A more balanced global economy where America consumes less and produces more, while China consumes more and exports less. It’s a forced rebalancing—one tariff at a time.
Trump’s tariffs are often said to benefit U.S. workers in the long run. Yet this ostensible objective seems contradicted by the administration’s fascination with AI—which, according to Bill Gates, will eliminate all but three kinds of jobs. Further, our supposed worker-centric future is being designed by billionaires, whose interests rarely coincide with those of workers.
If the Trump tariff goal is a world dominated by America, it’s an America that is itself dominated by super-wealthy elites, an America that is no longer a fully functioning democracy, an America with no checks or balances on executive power, an America with no law that its top officials are required to obey, and an America where noncitizens and potentially citizens as well can be whisked off the streets without warning and deported to foreign prisons. New York Congressman Ritchie Torres summed up the situation well:
If a superpower were intent on engineering its own decline, it would antagonize its allies, paralyze its economy with the certainty of uncertainty, erode confidence in the world’s reserve currency, discard due process, defund medical and scientific research, sabotage the most critical form of critical manufacturing—domestic chipmaking—and grow its deficit until debt service devours the largest share of its budget.
Meanwhile, the Trump administration, steeped in hostility toward environmental protection, will not use tariffs to avert environmental catastrophe. Not only has Trump abandoned the Paris climate agreement, but his domestic policies include promoting coal mining and oil drilling, softening pollution regulations, expanding logging on federal lands, and weakening if not killing the Endangered Species Act.
Is There Any Overlap? And What Direction Should We Embrace?
Tariffs could reduce global trade, which seemingly would align with eco-localists’ aims. Perhaps tariffs could be used to protect communities and livelihoods, and as a form of economic defense against globalization. However, eco-localists tend to see tariffs as a tool of last resort, one that often has nasty unintended consequences, such as increased international hostility and higher prices for essential goods. The word “tariff” rarely shows up in books on ecological economics. However, in Beyond Growth, pioneer ecological economist Herman Daly did discuss tariffs briefly:
Nearly all policies for sustainability involve internalizing external environmental and social costs at the national level. This makes prices higher. Therefore free trade with countries that do not internalize these costs, or do it to a much lesser extent, is not feasible. In such cases there is every reason for protective tariffs.
Tariffs, used protectively, could slow or even reverse globalization, providing time and wherewithal for societies to deal with the unintended side effects of recent decades of corporate-led trade expansion. However, this hinges on using tariffs explicitly and consistently to promote policies that reduce pollution, resource depletion, and unfair treatment of workers. There is nothing in the Trump team’s statements to suggest these are significant aims.
Many eco-localists advocate deliberately shrinking the industrial economy to reduce its impact on nature. Shrinking the U.S. economy is not Trump’s explicit goal, but it is an almost certain result of his tariff policies. Liberal and conservative analysts agree that trade barriers will, in David Frum’s words, “make U.S. goods more expensive to produce, costlier to buy, and inferior to the foreign competition.” But rather than reining in trade for the purpose of reducing pollution and exploitation of workers, Trump and his team seem to be intent on accelerating environmental degradation (fossil fuel products are exempt from U.S. tariffs) and increasing economic inequality by weakening government health and safety programs and doling out lavish tax cuts to the rich.
So, even though both eco-localists and Trump administration officials have at times promoted the use of tariffs, they propose using them for entirely different reasons, and, presumably, would achieve very different results. One group is concerned with protecting nature and minimizing economic inequality so that humans and other species can persist. For Trump and his team, the environment is irrelevant, and workers are chumps useful merely for gaining national power. Once achieved, that power can then be leveraged internationally through belligerent tariffs, with the goal of bludgeoning the entire world into submission.
The Trump team’s maximalist power grab is certain to provoke reactions. The world has been plunged into a trade war, but trade wars have a nasty tendency to turn into shooting wars. Within the deteriorating circumstances of a world seemingly on the verge of environmental ruin and global conflict, eco-localist strategies are looking more and more sensible. While there is no likelihood of their national adoption in the U.S. anytime soon, they are perhaps most applicable and effective at the community scale.
Indeed, this is the moment when eco-localism is most desperately needed. As soaring consumer prices, supply chain disruptions, and reductions in government-provided funding and services threaten communities, localists can help bolster local markets and inspire mutual aid efforts, helping mobilize folks to take more responsibility for their own collective resilience and well-being.
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