Globalisation isn’t a ‘given’
The impact of globalisation on working people’s wages, jobs and prospects emerged as one of the key themes of 2016, following the seismic political developments in both Europe and the US. 2017 sees no sign of the debate going away. The policymaking community is figuring out how to react. As Gavin Kelly put it:
’tis the season for global economic leaders to decry the inequities of globalisation and declare that more needs to be done to help the victims of change.
Evidence of these inequities is growing. Branko Milanović’s evocative ‘elephant’ graph suggests a trade-off between gains to workers in emerging countries and losses to workers in advanced countries, and in the meantime the global rich moving merrily further ahead. Work across both the US and the UK has suggested that ‘adjustment’ to the loss of manufacturing jobs to emerging economies has been more painful and slower than expected.
Nationalist inclined politicians see these failings as inevitable, and a retreat from the world an obvious solution. In the meantime, as Gavin points out, there is collective handwringing from more liberal policy makers about what can be done to compensate the ‘losers’ from economic change.
However much of the debate on the liberal side seems to treat the form of globalisation as a ‘given’, as an immutable and irreversible change (despite significant slowdowns in the volume of global trade). While globalisation can no longer be seen as wholly positive, under this view the problem is how to adjust to or compensate for newly recognised downsides.
This handwringing about global forces stands in sharp contrast to a growing confidence in the ability of government at a domestic level to intervene in the economy and challenge the status quo. Whether it’s the National Living Wage, the commitment to an industrial strategy, or (an admittedly incredibly timid) approach to reviewing corporate governance, 2016 could also be seen as the year when ‘pre-distribution’ (the idea that the state should intervene in the economy to affect the initial distribution of income or wealth, rather than only redistribute once that distribution is determined) finally moved beyond the seminar room.
An approach looking something a bit like ‘pre-distribution’ is also gaining traction in the global context, with an increasing debate looking not only at how the rewards from growth are distributed and potentially re-distributed, and on the rules which govern economic growth and global activity in the first place. Perhaps surprisingly, this effort has been led by the IMF. In their Finance and Development journal last year they published an assessment of what they called ‘neo-liberalism’ that caused a minor sensation (in wonk circles!). They followed this up with a set of articles on globalisation (see review). Their ‘neo-liberalism’ piece included an assessment of capital account liberalisation, and the way that the globalisation of finance – rather than trade – has been operating. They suggested that the benefits of this approach – even on its own terms of producing high and stable growth – had been significantly “oversold”.
The economist Dani Rodrik has also led the call for a re-examination of how the global economy is governed. His diagnosis of a ‘trilemma’ facing the global economy sees democracy, national sovereignty and global economic integration as mutually incompatible. This leads him to suggest a re-examination of our financial architecture, including a re-assessment of the role of the Bretton woods ‘compromise’ and capital controls in the original post-war settlement.
These approaches don’t seek to ‘turn back the tide on globalisation’, ‘end free trade’ or deny the benefits the last 30 years have seen accrue to poor people in poorer countries. Rather, they suggest that there might be a better way to ‘do’ globalisation – which perhaps avoids creating so many ‘losers’ in the first place. These approaches also learn from the past; indeed trading links were strong in the post war era. (See the analysis in a companion piece to this blog).
Thinking about the rules which govern the global economic settlement also focuses attention on who gets to make them. As Gavin rightly points out – calling people ‘losers’ is hardly the best way to engage them. Having those that were losing out in the room where decisions were made would be the basis for a more constructive dialogue.
So just as we’ve argued that one of the key ways to boost the long term success of the British economy is to ensure that workers have a voice about company decision, we’d argue that working people need more of a voice in decisions about how the global economy is governed. Trade unions played a key role in the debates of the 1930s that led up to the Bretton Woods Agreement and the post-war era, resulting in working people winning from the expansion in global demand and trade. If we want to stop the handwringing, and start thinking about what to do, thinking about who gets to set the rules might be a place to start.
– Thanks to Geoff Tily, who co-authored this blog.