Wednesday, August 9, 2017

Does It Make Any Sense To Be Anti-Globalization?

Does it make any sense to be anti-globalization, as many on the left style themselves? Brad DeLong doesn't think so and I'm inclined to agree (see chapter three of my book). DeLong terms such an attitude the new "socialism of fools" which perhaps goes a bit far. But he makes some excellent points in his new piece on Project Syndicate.

Stripped of associated theories, DeLong says globalization "should be understood as a process in which the world becomes increasingly interconnected through technological advances that drive down transportation and communication costs...To be sure, this form of globalization allows foreign producers to export goods and services to distant markets at a lower cost. But it also opens up export markets and reduces costs for the other side."

Put this way, globalization doesn't sound so bad and, importantly, sounds more or less inevitable. So why the intense reaction in many quarters against globalization? Why are people so upset at something that is arguably a natural outgrowth of economic and technological development?

Delong summarizes the reasons as follows:
First and foremost, it is easy for politicians to pin the blame for a country’s problems on foreigners and immigrants who do not vote.....
Second, more than a generation of inequitable and slower-than-expected economic growth in the global North has created a strong political and psychological need for scapegoats. People want a simple narrative to explain why they are missing out on the prosperity they were once promised, and why there is such a large and growing gap between an increasingly wealthy overclass and everyone else.
Third, China’s economic rise coincided with a period in which the global North was struggling to reach full employment. Contrary to what the followers of Friedrich von Hayek and Andrew Mellon have always claimed, economic readjustments do not happen when bankruptcies force labor and capital out of low-productivity, low-demand industries, but rather when booms pull labor and capital into high-productivity, high-demand industries.
Thus, neoliberalism does not just require open and competitive markets, global change, and price stability. It also depends on full employment and near-permanent booms, just as economist John Maynard Keynes had warned in the 1920s and 1930s. In recent decades, the neoliberal order failed to deliver either condition, most likely because doing so would have been impossible even with the best policies in place.
Fourth, policymakers did not do enough to compensate for this failure with more aggressive social policies and economic and geographic redistribution. When US President Donald Trump recently told upstate New Yorkers that they should leave the region and seek jobs elsewhere, he was simply echoing the past generation of center-right politicians in the global North.
The global North’s current political and economic dilemmas are not so different from those of the 1920s and 1930s. As Keynes noted then, the key is to produce and maintain full employment, at which point most other problems will melt away.
And, as the Austro-Hungarian economist Karl Polanyi argued, it is the role of government to secure socioeconomic rights. People believe that they have a right to live in healthy communities, hold stable occupations, and earn a decent income that rises over time.  
So there you go. The problem is not globalization but rather the constellation of economic policies that have kept us away from a high pressure full employment economy as globalization has proceeded. Blaming globalization is encouraging us to aim at the wrong target.

And, lest we forget, globalization has been central to the economic advances that have dramatically raised living standards all over the world. Indeed, most parts of the developing worldhave made huge progress in the last half century as globalization has bound countries closer and closer together.  Because of this, the proportion of the world’s population that lives on less than 2,200 calories a day has fallen from 56 percent in the mid-1960’s to less than 10 percent today. The proportion of the world’s population living in “extreme poverty” (currently defined by the World Bank as under $1.90 a day) has fallen from 44 percent in 1981 to less than 10 percent today. Put in terms of absolute numbers, there were almost 2 billion people living in extreme poverty in 1990; that is down to around 700 million today. That means around a quarter of the world’s population has been lifted out of extreme poverty in just the last 25 years—25 years that have coincided with an acceleration of globalization.

This trend has been strongest in East Asia, especially China, but it has greatly affected all parts of the developing world, including Sub-Saharan Africa, frequently the poster child for the alleged failures of globalization. In Sub-Saharan Africa, the percent of the population living in extreme poverty has dropped from 56 percent in 1990 to 35 percent today. More broadly, as Branko Milanovic, one of the world’s leading scholars on income distribution, notes:

Global income distribution [since the fall of the Berlin Wall] has changed in a remarkable way. It was probably the most profound global reshuffle of people’s economic positions since the Industrial Revolution. Broadly speaking the bottom third….became significantly better off and many of the people there escaped absolute poverty. The middle third or more became much richer, seeing their real incomes rise by approximately 3 per cent per capita annually.

Accompanying these dramatic rises in income have been dramatic increases in health. Between 1990 and 2013, the percentage of the world’s children who died before their fifth birthday fell by almost half. And overall life expectancy continues to climb, reaching 70 for those born in 2011. Back in 1950 world life expectancy was only 47. The average Mexican today lives longer than the average Briton did in 1955. And stunningly, of all the people in human history who have reached the age of 65, half are alive today.

These are amazing advances and they are taking place while the world is becoming ever more globalized. That’s because globalization, far from driving a race to the bottom, makes possible (even if it does not guarantee uniform progress in every country at every time) the spread of material progress to every corner of the earth. Marx, despite his underestimation of capitalism’s long-run potential, understood this. The broad left throughout most of the twentieth century understood this.  But many on today’s left have lost track of this fundamental truth and prefer instead to focus on the obvious facts that globalization has some negative effects, both in developing and advanced countries, and that material progress has been very uneven.  But it is only this maddening, uneven, unfair process that makes serious economic progress for most of human race possible. Therefore, on ethical and moral grounds alone, the left should enthusiastically embrace globalization, even as they seek to mitigate its negative effects where they occur and spread its benefits more evenly.

1 comment:

  1. Great essay, and I look forward to reading your book. I would add that many economists and technologists believe that automation has had an even more profound effect on income and wealth distribution (at least in the US) than has globalization. As you aptly point out, it is the gross policy failure to equitably redistribute the massive excess returns to both automation and globalization that is the root cause of the loud outcry.