Robert Reich spoke for an hour, then answered many audience questions. Photo: Markham Hislop

Robert Reich says Donald Trump is undermining the post-war international economic system

Robert Reich, Bill Clinton’s labour secretary, was in Calgary Friday to promote his new book, Economics in Wonderland: A Cartoon Guide to a Political World Gone Mad and Mean, and talk about American President Donald Trump as a “cautionary tale” for Canada and Alberta. Energi News interviewed him about energy policy lessons Albertans can glean from the Trump Administration.

Reich spoke to a crowd of about 500 at an event organized by the Alberta Federation of Labour on May 4 at the University of Calgary. Not only is he a best-selling economist, but a heck of a cartoonist and an internet celebrity to boot, thanks to his folksy videos explaining everything from student debt to political gerrymandering.

Robert Reich

Prof. Robert Reich. Photo: Kloie Picot.

The casual style that works so well on video also serves Reich well on stage. “The Trump era has worn me down,” he opened with (the 71-year old professor at University of California Berkeley suffers from bone disorder Fairbank’s disease and is about four and a half feet tall), to chuckles from the friendly crowd.

This interview has been lightly edited for clarity:

Markham: Professor Reich, what are you going to talk about tonight in your presentation?

Reich: I’m going to talk about what has happened in the Untied States as a questionary tale for Canada and Alberta. I don’t presume to know or be able to tell Canadians what they should be doing, but I do think it’s important to understand what has happened in the US – what led to Donald Trump.

Markham: You’re probably going to be appalled at this, but Trump’s energy dominance doctrine and [Energy Secretary Rick] Perry’s new energy realism are catching on here in some sectors of the energy industry. Should that give us a little pause for thought?

Reich: We should be worried because the zero sum game that Donald Trump is playing around the world in terms of…it’s only possible for one nation to gain if another nation loses. It’s an extraordinarily dangerous doctrine. It runs contrary to everything that the United States has stood for in the post World War 2 era. 

Markham: The Calgary oil executives here, they point to expanding oil and gas production from the shale basins, LNG is going crazy down in your neck of the woods, and they say, “Oh, Trump is great for business.” How do you respond to that?

Reich: First of all, be very wary of what Trump is about in regards to any country other than the United States. Whether you’re talking about NAFTA or any form of energy, Trump is of the mind that we are not interdependent in terms of positive sum outcomes, win-win outcomes, we are very much each country on its own.

Secondly, if you look at world energy markets, what you are seeing now, particularly with regard to concern about climate change, is the extraordinary increase in the economic fortunes of reusable energy. I’m talking particularly about wind and solar. Solar power is what China is launching onto in terms of what its goals are going to be over the next 15-20 years to dominate the energy industries of the future. Wind and solar are very much what they’re counting on.

Robert Reich

Robert Reich, left, with Gil McGowan, president of the Alberta Federation of Labour. Photo: Markham Hislop.

Look elsewhere around the country, around the world, and you see very similar dynamics. So again, without being presumptuous, without telling you anything you don’t know or without telling Canada or Alberta anything it doesn’t know, I think one has to be very cautious about the underlying economics regardless of Trump politics. 

Markham: Now, a lot of your energy policy gets made at the state level and you see California is now pushing back against Trump’s proposed relaxation of the fuel standards and Texas is going great guns on wind and so on. Do we really care what Trump thinks about energy? I mean, it all gets done at the state level. 

Reich: No. Unlike provincial governments here, the USfederal government has a doctrine of preemption. If the federal government doesn’t like what a state is doing, the federal government can preempt that state law.

Now, under the clean air act, you do have an exemption built into the law for California, but even there, there is almost sure to be litigation. California is already gearing up for litigation to protect that exemption. The fuel economy standards in California are among– in fact, are the leading fuel economy standards in the country. But, because one out of every eight Americans lives in California, any automaker who wants to sell cars has got to confirm to California standards and that’s what the Trump administration and [EPA director] Scott Pruitt are particularly galled by. 

 

Markham: Professor Reich, what’s your take on the technologies that are transforming energy business models. Blockchain, artificial intelligence, machine learning, automation and so on because those technologies would seem to exasperate the very trends you’re talking about.

Reich: Exactly. In fact, technology is another big challenge for labour. If changes in technology continue at the present rate and we see big data, AI, robots and so on, we are going to find many jobs — in fact, the estimate is that over the next 20 years, about anywhere from 18% to 20% of the jobs will be lost, that we  have now.

The issue is not permanent job loss. The issue is wages. A lot of middle class jobs will be replaced by artificial intelligence — in healthcare, in education, in many professional areas that really are the backbone of the middle class.

And that means that we have more and more people who are going into essentially the personal care sector of the economy where robots can’t really provide much subsidence because of they’re not people and it is personal care that people want. Well, those jobs don’t pay very much and I’m talking about hotel, hospital, childcare, eldercare and so on. And when more and more people flood into that sector of the economy, those jobs will pay even less.

That’s the challenge. That’s why we need strong labor unions. It’s also why we need to at least consider universal basic income and other innovations. 

Markham: Capital has been replacing labor for centuries. It’s not a trend we’re likely to reverse. Does this mean maybe a greater emphasis on public policy as a means of countering it?

Reich: Well, as you said, capital has been replacing labor, but technology is moving now at a pace that’s faster than the ability of educational institutions to keep up. That is, 50 years ago, 40 years ago, 30 years ago, technology was moving very rapidly, but you had public education and public educational institutions that at least were capable of giving people enough capacity so that they could utilize these technologies and create new jobs.

I’m sure it’s the same in Canada: 20% of the jobs that are in the US right now didn’t exist in 1990. And many of them are technologically determined. So the problem is the pace of technological job displacement is now much faster than our capacity through education to keep up with it and that’s why we’re seeing downward pressure on wages in additional to all the other things in there. 

Markham: Does that mean there’s not a policy or an institutional solution? What is the solution?

Robert: Well, I mentioned universal basic income. Some people are taking the possibility of federal job guarantee. At the very least, we need to expand something in the United States we call the earned income tax credit, which is a wage subsidy, and I think that it’s also important to provide young people particularly with a technical education which young people in the US – I don’t know about Canada – are not getting.

A technical education that allows them to continue to learn on the job as technology continues to evolve. We don’t have that. We used to have vocational technical education but it was considered to be sort of a second track for the kids who couldn’t make it on the college track.

That’s a conceit we’ve got to get rid of. 

Markham: Does that mean then– we hear all the problems that the US is having with its education, especially its public education. Are we then talking about a bigger divide — a techno divide, a education divide between those at the bottom?

Reich: There’s already a huge technological and education divide. 

Markham: Will it get bigger?

Reich: If we don’t recognize the dangers of allowing it to get bigger, then staying on the present path it will get bigger. There are huge dangers in allowing it to get bigger. What we have in many of our states right now is essentially three different educational systems.

One is a custodial system for the poorest kids mainly just designed to keep them safe. The second is a factory system that is almost identical to what it was in the 1920s and 1930s in which children are processed through grades like you have manufactured items processed on assembly lines.

The elite educational system for the top 10% in terms of family income is very different. Some of it is public education. That is, if you go into a very wealthy suburb in the US, although it is called a public school, it is paid for by local property taxes and there are very few poor kids in that school because their families can’t afford to be there. So don’t let the labels fool you.

It is a very different form of education and it exacerbates the divide in terms of widening inequality. 

Interviewer: Are you going to tell us that capitalism is worth saving?

Reich: There really should not be any debate about this. China is a capitalist country now. Denmark, Sweden, Norway, they are capitalists. They also are socially democratic, at least Denmark, Sweden and Norway, not China. China is ostensibly communist but it is turning to private ownership and free exchange of goods and services. In other words, capitalism comes in every flavor.

The real issue is what kind of capitalism. Is it going to be capitalism with a human face? Is it going to be capitalism that respects people, that provides safety nets, that provides public investments, that enables people to live lives that are fairly secure?

Or is it going to be the harshest form of capitalism in which you have a few winners and almost everybody else feels that they are either losing or could lose any moment.