Hillary’s New Battleground – The Desperate Middle Class

America is preparing to pull up the drawbridge and repel dangerous trade and Hillary Clinton is scanning the horizon for sight of the enemy. The candidate for a Democratic presidency is on the lookout for dumpers, polluters, cheaters, union bashers - anything that gives her an excuse to sound tough about trade without abandoning the principle of freedom.

This week she raised doubts about Doha, the global trade agreement that is four years late and has still failed to deliver a first draft. She has even grumbled about Nafta, the free trade area between the United States, Canada and Mexico, despite it being one of the crowning achievements of her husband, Bill Clinton.

Free trade is no longer an article of faith for fashionable economists in America. A new band of agnostics is complaining that free markets are painful and the struggle for comparative advantage between trading partners implies some losers as well as winners. What is it about Americans that they will play games only that they can win?

This year Alan Blinder, an academic and former vice-chairman of the US Federal Reserve, questioned the prevailing view that globalisation was good and that free trade between mature and emerging economies was a “win-win” scenario. Mr Blinder suddenly noticed that it was not only blue-collar workers in rust-belt mills that would lose their jobs in a freely trading world.

Technology would enable service jobs to be exported, not only the workforce of a call centre but accountants, banking analysts, researchers and even lawyers might find themselves competing with lower-paid rivals in Asia. Mr Blinder estimated that 40 million American jobs could be at risk. He does not want government to build walls but to be smarter about education.

It is not only low-level jobs that can be exported - the challenge is to understand that comparative advantage for an American or a Briton means having a job that requires closeness to your customer. In the brave new world of free trade, teachers, tailors and taxi-drivers will be safe while actuaries, accountants and advertising copywriters may be threatened.

Mr Blinder reminds us that trade is not just about things that go in a box. Trade is also ideas, words and images that can be conveyed electronically. These are things that middle-class people do and Mr Blinder is showing us a horror movie in which the cosy world of office jobs on which Middle America depends is dismantled and exported to India.

Democratic politicians such as Mrs Clinton have spotted the new constituency of victims. During the 1980s and 1990s, blue-collar America suffered a massive upheaval, in which the mills were closed and jobs exported. If the offshoring is now to extend to white-collar workers, the political consequences will be huge and Mrs Clinton has spotted an opportunity to capture more middle-class votes at the expense of Republican free-traders.

Mr Blinder’s vision is accurate, except that he has failed to see the human response to the threat. Nations that trade successfully, such as Britain, do not trade only things in boxes. Nor does commerce end with trade in digital signals. Britain trades people, too. For Britain, globalisation has brought with it a surge in the numbers of people both entering and leaving the country. It is not only Polish plumbers and bogus refugees. During a decade of rapid expansion, the City of London imported large numbers of skilled professionals from Europe, Asia and North America. Britain has gained people at the top of the pile and at the bottom.

Where it is losing - at a rate of more than 400,000 a year - is in the middle. People are leaving Britain at record levels, the desperate middle class, the skilled, even the qualified and experienced, are fleeing high costs and high taxes. They are going to familiar destinations - Australia, New Zealand, the United States - but they are also heading for Asia, to the Gulf and to the Far East, where they staff law firms, accountancy practices, consultancies and a plethora of service functions and management jobs. Call them tax refugees or the skills drain, this is human capital moving to where it is needed and earns the best return. Politicians get their votes from those who stay behind. Not everyone can move easily and, as the global economy slows, faith in trade is weakening. President Sarkozy wants China to pay tariffs if it fails to cut carbon emissions.

Italy is desperate for relief for its textile firms. Soon, dissent will become strident and powerful. It will worsen inflation in mature economies and stifle growth in the immature, returning the just emerging to miserable penury.

During the height of Britain’s empire, Matthew Arnold wrote Dover Beach, a bleak poem about loss of religious certainty in an age of industrialisation. Arnold could not see how enlightened materialism would make Britain an easier, healthier and more prosperous place. Today it is the loss of faith in free trade that could leave us struggling, or as he put it: “On a darkling plain/Swept with confused alarms of struggle and flight/Where ignorant armies clash by night.”

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