President Donald Trump’s 2016 victory and other nationalist “political earthquakes” have put globalization advocates on the defensive while even convincing some economists who once believed in globalization like a religion to change their minds, Nikil Saval writes after having attended this year’s World Economic Forum in Davos.
At Davos, according to Saval, “by all reports the mood was one of anxiety, defensiveness and self-reproach”: “The future of economic globalisation, for which the Davos men and women see themselves as caretakers, had been shaken by a series of political earthquakes.”
He writes that “in a panel titled ‘Governing Globalisation,’” the economist Dambisa Moyo, “otherwise a well-known supporter of free trade, forthrightly asked the audience to accept that ‘there have been significant losses’” from globalization.
Saval notes that the Brexit result and Trump’s election meant that “the barbarians weren’t at the gates to the ski-lifts yet – but they weren’t very far” since “the backlash to globalisation has helped fuel the extraordinary political shifts of the past 18 months.”
“Americanism, not globalism, shall be our creed,” Trump said on the campaign trail, as Saval points out. In the UK, he notes that “the vote for Brexit was strongest in the regions of the UK devastated by the flight of manufacturing.” British prime minister Theresa May, he notes, said at Davos that “talk of greater globalisation … means their jobs being outsourced and wages undercut.”
This week on Charlie Rose’s show, Joshua Green, author of Devil’s Bargain: Steve Bannon, Donald Trump, and the Storming of the Presidency, said that Steve Bannon, who is Trump’s chief strategist, opposes the “global financial class that is more interested in making money, erasing national borders, tearing down cultural identities than it is in serving the ordinary working-class blue-collar people that Bannon thinks is the backbone of our country and ought to be at the center of our politics.”
Bannon’s prescription, according to Green, “is to tear down the global free-trade system, to close America’s borders, to deport people who are here illegally, and to curb legal immigration … as a way of privileging American citizens and reasserting … a cultural identity.” (emphasis added)
At Davos this year, Saval observed that the participants had to realize that “after years of hedging or discounting the malign effects of free trade, it was time to face facts: globalisation caused job losses and depressed wages, and the usual Davos proposals – such as instructing affected populations to accept the new reality – weren’t going to work. Unless something changed, the political consequences were likely to get worse.”
Saval points out that for years, “mainstream economists and politicians upheld the consensus about the merits of globalisation … with little concern that there might be political consequences.”
But now, “millions have rejected, with uncertain results, the punishing logic that globalisation could not be stopped. The backlash has swelled a wave of soul-searching among economists, one that had already begun to roll ashore with the financial crisis. How did they fail to foresee the repercussions?”
One economist in the 1990s, Harvard’s Dani Rodrik, was skeptical about globalization. Rodrik’s book, Has Globalization Gone Too Far?, “sounded an unusual note of alarm” in 1997, according to Saval.
Rodrik, he notes, wrote that the social costs that came with globalization were “high – and consistently underestimated by economists. He noted that since the 1970s, lower-skilled European and American workers had endured a major fall in the real value of their wages, which dropped by more than 20%. Workers were suffering more spells of unemployment, more volatility in the hours they were expected to work.”
Though “Rodrik foresaw that the cost of greater ‘economic integration’ would be greater ‘social disintegration,’” many dismissed his thesis that “the inevitable result would be a huge political backlash.” Paul Krugman reportedly “privately warned Rodrik that his work would give ‘ammunition to the barbarians.'”
Now, as Saval notes, even the most ardent supporters of globalization have had to “concede, at least in part, that it has produced inequality, unemployment and downward pressure on wages. Nuances and criticisms that economists only used to raise in private seminars are finally coming out in the open.”
“If the critics of globalisation could be dismissed before because of their lack of economics training, or ignored because they were in distant countries, or kept out of sight by a wall of police, their sudden political ascendancy in the rich countries of the west cannot be so easily discounted today,” Saval writes.
He pointed out that even Larry Summers–“former chief economist of the World Bank, former Treasury secretary, president emeritus of Harvard, former economic adviser to President Barack Obama”–now writes about “responsible nationalism” while Martin Wolf, the former Wold Bank economist, has acknowledged that “the elites – the policymaking business and financial elites – are increasingly disliked.”
“You need to make policy which brings people to think again that their societies are run in a decent and civilised way,” Wolf has reportedly acknowledged.