Friday, December 16, 2016

The Backlash on Globalization: It’s Real, But What Will Be Put into Law?

It never was one world, and it may be splitting up even more.

The perception that the world might be getting less flat hit the press well before Donald Trump’s unexpected presidential election victory.  On September 6th, Martin Wolf’s Financial Times column “The tide of globalisation is turning” went back to 2008, citing a study showing that “the ratios of world trade to output” had been much the same since that year, with “cross-border financial assets” and direct foreign investment not only leveling off but peaking around then.  He showed in a chart that trade between countries, as a percentage of gross domestic product, went up irregularly but clearly from about 24% in the early 1960s to 59% in the late 2000s, where, after a 2008 to 2010 dip and recovery, it was through at least 2013.

That same day, Robert Reich’s “The reality of free trade deals – they don’t benefit all” appeared in Salon.  Reich pointed out that only 35% thought free trade benefited most Americans, and, although he is an economist, blamed increasing income inequality along with “unraveling” safety nets.

On the Sunday after the election, The New York Times published author and Morgan Stanley global strategist Ruchir Sharma’s “When Borders Close” comparing 2016 to 1914, when the forces underlying the outbreak of World War I “ended an extraordinary four-decade period of rising migration and trade.”  Movement of goods between countries was to fall from 30 percent of world GDP that year to 10% in 1933, three years after the American Smoot-Hawley Tariff Act caused what Sharma described as “a global trade war.”  Per his article and Wolf’s chart, it would be 60 years before intercountry trade matched that 30%.  He also mentioned a rise in protectionist legislation since 2008, and, along with Wolf, named that year as globalization’s high-water mark, and, in step with Reich’s conclusions, noted the increase in income inequality, specifically the share going to the top 1%, as greatly widening during the time of freest trade.  He finished by saying that “deglobalization” has proved itself to be as natural, and as long-lasting, as its opposite.

Adrian Wooldridge, in The Economist’s late-November “Bolshiness is back,” reached similar conclusions, saying that “this golden age is coming to an end” with “the first shots” coming from the political right, those backing Brexit in Great Britain and Trump in the United States.  He implied that we might also have equivalents of Hitler and Mussolini, and also cited higher top-end income concentration.

All of this may well be happening – if the next administration makes it reality.  As credited to Reagan-era journalist Helen Thomas, war makes strange bedfellows, and we have that now.  Concern about income inequality, jobs moving to other countries, accumulation of corporate money overseas, and wishes for trade restrictions, all historically liberal viewpoints, are now being addressed by Republicans.  Yet that could be more of a party shift than an ideological one, when, arguably, the Democrats as represented by Hillary Clinton are now pro-establishment and therefore conservative, and the Republicans at least purport to support common people as Democrats did for so many decades.  That means it should have been no surprise to see Salon, usually well to the left of even the major eastern newspapers, publishing, four days ago, Les Leopold’s “This is how you stop jobs from leaving American soil:  A game plan to fight outsourcing,” containing eight suggestions, ranging from a good use for unions (making lists of companies planning to move jobs out of the US), one bad idea (passing laws to stop outsourcing; the way to do that is through tax penalties), and on to pressuring Trump to take action, protesting, lobbying, and finding ways to “encourage allies to join the fray.”  If they can succeed and our president-elect turns this piece of his campaign rhetoric into reality, we can say that this is how the country is changing.  If not, we may be looking at 1930s Germany, in which Hitler went from speaking strongly and respectfully of workers to instituting the permanent-record Work Book, to make employers “once again the master of the house.”  That would be even worse than protectionism, which benefits the few at the expense of the many.  But I don’t know which it will be, and you don’t either.   

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