Today’s so-called crisis of globalisation is nothing more than a new variable of the old battle between protectionism and free trade. On the one hand it is the tribalists while on the other it is the globalists. On one side there are the anti-Amazon, pro-retailers, losers of a global challenge, while on the other, there are the pro-Amazon, e-commerce winners.
Nothing more, really. The opening of trade walls has accelerated industrial evolution in such a way that workers have had to learn to adapt to almost every generation. The difference, today, is that the evolution didn’t happen within a lifetime, but a few times within that lifetime. This is why the Indian farmer, who initially moved to the city to work in a call centre, had to reinvent himself as an Uber driver and is now worried about driverless cars — all within one lifetime.
Cause of discontent
Technological innovations are what accelerate the rhythm of change. The medium is the message all over again. It is the transformation of technology that affects society, not whatever that technology delivers (news, electricity, TV series). And this is why in the United States and the United Kingdom and in some parts of Europe, so many 50-somethings, unemployed, disgruntled voters who found it hard to reinvent themselves ended up voting for someone who promised to bring back an impossible past — a greater America, a more British Britain, whatever that may mean.
Up until 20 to 30 years ago, you could reach your pension age before a new radical evolution in the job market, which created its winners and losers. Today, the challenge is that evolutionary shifts happen not just once before reaching pensionable age, but often.
This is what causes globalisation’s discontent. Blue collar workers from the mid-West cannot move to Silicon Valley; it’s a totally different skill set, and only few can manage it.
A sort of revenge
U.S. President Donald Trump’s and Brexit’s victories can be seen as a sort of “revenge of the losers”. The victims of the system described above decided to vote for someone who promised to protect them. Ludicrous. And, in fact, little has been done by Mr. Trump or British Prime Minister Theresa May to help those workers. And little is being done. Their standards of living have not improved. Or have certainly not returned to previous levels. Nor is there any policy in motion indicating that the previous levels will return.
There won’t be any promised return to the past. Which doesn’t mean the economy will not thrive. It just won’t bring back the same old jobs to the unskilled.
For example, the latest U.S. tax reform promises to lower corporate taxes, rehashing the ancient myth job, the “trickle down” theory, will not impact the lower middle classes who voted for Mr. Trump. At the dangerous cost of increasing the deficit and widening the hole, Mr. Trump is lowering too high corporate taxes to bring them down to European levels.
It would seem to make sense even though the impact on total taxation will be marginal. Lowering tax on capital may increase wages for those skilled workers whose productivity will be positively affected by increased demand for capital intensive work, but while engineers might see an increase in their wages, the unskilled won’t benefit directly from it.
In other words, instead of fighting the ills of globalisation, Mr. Trump has found a way to economically hit the coastal electorate who mocked and railed against him — the Hillary Clinton voters. By lowering the maximal for family deductions and real estate taxes, he has hit those middle to upper middle classes in the east and west coasts who hate him. They are the ones who will not benefit from this reform. This is what he’ll obtain with this tax reform. Brilliant from his point of view because the reform dips into the pockets of people who never have and never will vote for him.
How will this impact free trade globally? U.S. manufacturing is down to 11.7% of U.S. GDP (2016), while farming agriculture is only 1% (2015). America produces services such as Amazon, Google and Facebook; these are the richest corporations. Their expansion is thriving globally. And so is the expansion of other multinational corporations.
Even though the discontent of globalisation is a leftover of the crisis of 2008, today we don’t see that it will really impact globalisation seriously. At least, so far, we don’t see the results of this desire to raise barriers. Globalisation is here to stay.
Carlo Pizzati is an author and professor of communication theory
this editorial appeared in the daily national newspaper The Hindu on Dec. 18th 2017 also readable at this link.