The crisis of globalisation
The Hindu
By Carlo Pizzati
December 18, 2017
Even as leaders tap into discontent, there won’t be
any promised return to the past
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.
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