Globalisation sits at the center of America’s economic crisis. On one side, critics of globalisation blame it for the plight of America’s suffering middle class. According to President Trump, our trade negotiators got snookered by those smart negotiators from other countries. We signed bad trade deals that led to the loss of American industrial jobs. This criticism of globalisation has found enormous resonance, especially in the parts of the country that experienced deindustrialization.
By contrast, globalisation’s advocates claim that all of this is sheer nonsense. America has benefited from globalisation. Protectionist policies put at risk all that has been gained through trade. In the end, they say, protectionism will not help even those who’ve lost their jobs due to globalisation or seen their wages collapse. They, the US, and the entire world will be worse off. Globalisation’s advocates shift the blame for deindustrialization and the American malaise elsewhere: the real source of job loss and low wages for unskilled workers has been improved technology, and globalisation is getting a bum rap.
For more than twenty years, I’ve been criticizing the way that globalisation has been managed—but from a completely different angle. From my perch as chief economist at the World Bank, it was obvious that the global rules of the game were tilted—not against, but in favor of the United States and other advanced countries at the expense of developing countries. The trade agreements were unfair—to the benefit of the US and Europe and to the detriment of developing countries.
The idea that our trade negotiators got snookered is laughable: we got almost everything we wanted in late-twentieth-century trade negotiations. Over the opposition of those from developing countries, we secured strong intellectual property protections—which protected the intellectual property of the advanced countries, but not that of developing countries. We’ve succeeded in forcing countries to open up their markets to our financial firms—and even to accept those highly risky derivatives and other financial products that played a central role in our own financial collapse.
It’s true that American workers have been disadvantaged—low-skilled workers in particular have seen their wages reduced, in part because of globalisation. But that is partly because American negotiators got what they asked for: the problem was with how we managed globalisation and with what we wanted—trade agreements simply advanced corporate interests at the expense of workers in both developed and developing countries. We as a country didn’t do what we should have to help workers whom globalisation was hurting. We could have ensured that globalisation benefited all, but corporate greed was just too great. The winners didn’t want to share their gains with the losers. Indeed, they liked it that wages were pressured down as American workers had to compete with workers from developing countries. It increased corporate profits all the more.
It might seem that President Trump and I are on the same side of this battle against globalisation, but that is wrong. Fundamentally, I believe in the importance of the rule of law—of a rules-based system for governing international trade. Just as we need a rule of law within our economy—without that, no society can function—so too, we need a rules-based international system. Trump, by contrast, wants to return to the rule of the jungle: when there is a trade dispute between two countries, they “duke it out,” and the stronger country wins. His misguided view is that since we are stronger than any single country we would win all of these battles, and we could then create an international trade regime that is a maidservant to US interests. He misses two critical points: why would anyone else join such a system, to be taken advantage of, rather than focus on trading and other economic relations with partners that behave and treat others decently? And other countries can, and would, get together, and while we’re not much different in economic size than China and Europe (though within a short while China is slated to be more than 30 percent larger than the US), if the other two got together against us—or any of the other two are joined by large numbers in the
“third world”—our seeming power advantage would quickly disappear.
Trump is wrong to blame globalisation, whether unfair trade rules or unwanted immigrants, for the country’s woes, but globalisation’s advocates are also wrong in arguing that globalisation has played no role in the plight of the large parts of the population that have seen their incomes stagnate or decline, and that it’s just technological progress that’s to blame. The real onus of blame, though, should be on ourselves: we mismanaged the consequences both of globalisation and of technological progress. If we had managed these well, both could have generated the blessing that their advocates claimed.
Excerpt From: Joseph E. Stiglitz. “People, Power, and Profits.”
Disclaimer: The views and opinions expressed in this article are the personal opinions of the author. The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK.