Slowbalization – More Causes Than You Might Think, and Clear Employment Effects

Another good drawing festooned a provocative article late last month.  This, on the cover of the January 26^th-February 1^st Economist, was of a snail with its shell replaced by a view of Earth and the title “Slowbalisation – The future of global commerce.” 

In the unbylined piece, and its summary in the Leaders section, we see that that word, “coined by a Dutch writer,” has been apt for the past few years.  The authors say that we can already talk about “the golden age of globalisation,” which ran for 20 years ending in 2010, and that it “was something to behold,” when shipping and telephone call costs came way down and “business went gangbusters.” 

The reasons it is not now the same go well beyond the current White House occupant, or even similar pseudo-populists in the likes of Poland and Hungary.  Per the authors, goods-moving rates have stopped falling, services are often impossible to transport, more parts are being made nearer their consumers, and “multinational firms have found that global sprawl burns money and that local rivals often eat them alive.”  “Cross-border bank loans” have plummeted from 60% of 2006 GDP that year to 36% recently, and “gross capital flows have fallen from a peak of 7% in early 2007 to 1.5%,” both largely caused by more cautious lending attitudes from the Great Recession.  Other metrics down from 2007 include trade in goods and services as percentage of GDP, intermediate imports as the same, the percentage of profits “multinational,” and the share of S&P 500 companies’ sales from other countries.  Even services that can be done remotely are not crossing borders as much as I, anyway, had expected, with information technology positions still often turning up near the top of lists of most promising American careers.  Accordingly, instead of, as it may have seemed, the Trump administration working to bring vigorous intercountry trade to a screeching halt, its tariff actions, instead, have had a “fragile backdrop.”

The real problems with slowbalization go beyond damaging people benefitting from cheaper and better products.  They include, per the authors, cutting emerging countries’ selling opportunities, impeding solving international problems such as immigration and tax avoidance, and helping China to “win regional hegemony faster.”  Although globalization has been one of the three largest factors of the permanent jobs crisis, even if it were to disappear completely automation and efficiency would stop manufacturing and easily optimizable service jobs from returning to anything like their 1950s ubiquity. 

Here are a few pertinent observations, some old but all valid.  The frequency and amount of international trade has not moved only in one direction even for the past several decades, let alone over centuries.  Tariffs are stupid, and cut prosperity in unmeasured ways much more than any job creation or often-in-vain-anyway job preservation adds to it.  As we saw with the auto industry in the 1980s and 1990s, overseas competition is one of the best drivers for American companies to improve their products.  Although its evidence is now in latent demand instead of official unemployment, our country has excess capacity in workers.  These four realities apply no matter what the world trade situation.

How can we expect American jobs to be affected by slowbalization?  The current unhurried downward trend for service providers will not accelerate but will continue.  They will be temporarily shored up in areas protected by tariffs.  They will improve for people connected with Canadian or Mexican trade, and worsen for those working for companies exporting elsewhere.  As shifts in trade laws generally involve treaties and negotiations, change will not be quick, so even if there is an overall reversal of anti-globalization attitudes, it will take years to see its results.  Yet, as with the weather, if you don’t like the current situation, wait – it will change.