Globalization is under attack. The electoral victory of Donald Trump,
the Brexit vote and the rise of an aggressive nationalism in mainland
Europe and around the world are all part of a backlash to globalization.
In each instance, citizens have upset the political order by voting
to roll back economic, political and cultural globalization. Support for
Brexit came in large part from those
worried about their jobs and the entry of immigrants.
Similarly, the Midwest of the U.S. – the industrial heartland hurt by
global competition – was the linchpin of Donald Trump’s victory.
But what exactly are these globalizations and why the discontent? A
deeper examination of global integration sheds some light on how we got
here and where we should go next.
The rise of the globalization agenda
The roots of today’s global economic order were established just as
World War II was coming to end. In 1944 delegates from the Allied
countries met in Bretton Woods, New Hampshire to establish a new system
around
open markets and free trade.
New institutions such as the International Monetary Fund, the World
Bank and a precursor to the World Trade Organization were established to
tie national economies into an international system. There was a belief
that greater global integration was more conducive to peace and
prosperity than economic nationalism.
Initially, it was more a promise than reality. Communism still
controlled large swaths of territory. And there were fiscal tensions as
the new trade system relied on fixed exchange rates, with currencies
pegged to the U.S. dollar, which was tied to gold at the time. It was
only with the collapse of fixed exchange rates and the unmooring of the
dollar from the gold standard in the late 1960s that
capital could be moved easily around the world.
And it worked: Dollars generated in Europe by U.S. multinationals
could be invested through London in suburban housing projects in Asia,
mines in Australia and factories in the Philippines. With China’s entry
onto the world trading system in 1978 and the collapse of the Soviet
Union in 1989, the world of global capital mobility widened further.
Global transfer of wealth
While capital could now survey the world to ensure the best returns,
labor was fixed in place. This meant there was a profound change in the
relative bargaining power between the two – away from organized labor
and toward a footloose capital. When a company such as General Motors
moved a factory from Michigan to Mexico or China, it made economic sense
for the corporation and its shareholders, but it did not help workers
in the U.S.
Freeing up trade restrictions also led to a global shift in
manufacturing. The industrial base shifted from the high-wage areas of
North America and Western Europe to the cheaper-wage areas of East Asia:
first Japan, then South Korea, and more
recently China and Vietnam.
As a result, there was a global redistribution of wealth. In the West as factories shuttered, mechanized or moved overseas, the
living standards of the working class declined. Meanwhile, in China prosperity grew, with the poverty rate falling from 84 percent in 1981 to only
12 percent by 2010.
Political and economic elites in the West argued that free trade,
global markets and production chains that snaked across national borders
would eventually raise all living standards. But as no alternative
vision was offered, a chasm grew between these elites and the mass of
blue-collar workers who saw
little improvement from economic globalization.
The backlash against economic globalization is most marked in those
countries such as the U.S. where economic dislocation unfolds with weak
safety nets and limited government investment in job retraining or
continuing and lifetime education.
Expanding free markets
Over the decades, politicians enabled globalization through trade
organizations and pacts such as the North American Free Trade Agreement,
passed in 1994. The most prominent, though, was the
European Union, an economic and political alliance of most European countries and a good example of an unfolding political globalization.
It started with a small, tight core of Belgium, France, Italy,
Luxembourg, the Netherlands and West Germany. They signed the Treaty of
Rome in 1957 to tie former combatants into an alliance that would
preclude further conflicts – and form a common market to compete against
the U.S.
Over the years, more countries joined, and in 1993 the European Union
(EU) was created as a single market with the free movement of goods,
people and capital and common policies for agriculture, transport and
trade. Access to this large common market attracted former Communist
bloc and Soviet countries, to the point where the EU now extends as far
east as Cyprus and Bulgaria, Malta in the south and Finland in the
north.
With this expansion has come the movement of people –
hundreds of thousands of Poles have moved to the U.K. for instance – and some challenges.
The EU is now at a point of inflexion where the previous decades of
continual growth are coming up against popular resistance to EU
enlargement into poorer and more peripheral countries. Newer entrants
often have weaker economies and lower social welfare payments, prompting
immigration to the richer members such as France and the U.K.
Cultural backlash
The flattening of the world allowed for a more diverse ensemble of
cultural forms in cuisine, movies, values and lifestyles.
Cosmopolitanism was embraced by many of the elites but feared by others.
In Europe, the foreign other became an object of
fear and resentment, whether in the form of immigrants or in imported culture and new ways.
But evidence of this backlash to cultural globalization also exists
around the world. The ruling BJP party in India, for example, combines
religious fundamentalism and political nationalism. There is a
rise of religious fundamentalism around the world in religions as varied as Buddhism, Christianity, Hinduism, Islam and Judaism.
Old-time religion, it seems, has become a refuge from the ache of
modernity. Religious fundamentalism held out the promise of eternal
verities in the rapidly changing world of cultural globalization.
There is also a rising nationalism, as native purity is cast as
contrast to the profane foreign. Across Europe from Bulgaria to Poland
and the U.K., new nationalisms have a distinct xenophobia. Politicians
such as Marine Le Pen in France recall an idealized past as a cure for
the cultural chaos of modernity. Politicians can often gain political
traction by describing national cultural
traditions as under attack from the outside.
Indeed, the fear of immigration has resulted in the most dramatic
backlash against the effects of globalization, heightening national and
racial identities. In the U.S. white native-born American moved from
being the default category to a source of identity clearly
mobilized by the Trump campaign.
Reclaiming globalization
Globalization has now become the catchword to encompass the rapid and
often disquieting and disruptive social and economic change of the past
25 years. No wonder there is a significant backlash to the constant
change – much of it destabilizing economically and socially disruptive.
When traditional categories of identity evaporate quickly, there is a
profound political and cultural unease.
The globalization project contains much that was desirable:
improvements in living conditions through global trade, reducing
conflict and threat of war through political globalization and
encouraging cultural diversity in a widening cultural globalization.
The question now, in my view, is not whether we should accept or
reject globalization but how we shape and guide it to these more
progressive goals. We need to point the project toward creating more
just and fair outcomes, open to difference but sensitive to cultural
connections and social traditions.
A globalization project of creating a more connected, sustainable,
just and peaceful world is too important to be left to the bankers and
the political elites.
