Where did it all go wrong?

Published: 
March 2017

Globalisation has lifted millions out of poverty but many people feel ignored by the system, says Paul Brewer. In the wake of Trump and Brexit, governments must beware of complacency.

We should not be panicking - this is not the end of globalisation as consumers, business and government together will not allow that to happen.

The commentators predicted it would never happen, but the Brexit vote and the election of Trump have shocked politicians and citizens alike.

As the world tries to make sense of the outcomes, there is a lot of soul searching as to how the widely accepted wisdom – for the UK to stay in the EU and the US to choose Hillary Clinton - could have been so blatantly disregarded by so many voters.

Irrespective of the political arguments, those of us who advocate continued economic globalisation have had their hopes shaken.

Since the 1980s, globalisation has proceeded apace with increasing levels of trade and capital flows across borders and the benefits are clear to see - higher consumption levels, greater customer choice, new technologies and access to the best the world can offer for both consumers and businesses.

True, there have been hiccups, with the global financial crisis to name just one. However, we were soon over that and again on our way to a better world - or so we thought. So where did it all go wrong?

In my view, we globalisers have been overly complacent. Anti-globalisation groups have always been with us, at least since the ancient Greeks showed signs of anti-trade nativism,  but such groups have had little sway in rich countries and have generally been seen as a fringe - idealistic, naive young people with totally unrealistic views.

These groups were soundly defeated in the debate about globalisation. The results were clear in ballot boxes across most advanced nations and increasingly in developing countries too. We could get on with globalisation - or so we thought.

What seems to have happened is that the focus of debate was on the wrong groups. It wasn’t the young idealists but the simmering discontent amongst other, less obvious groups that we needed to address - people who were disadvantaged by globalisation or thought they were.

They had on occasions protested, especially when factories closed, income inequality rose or CEO pay rocketed. When the banks were caught out in the latest mischief, when governments seemed engrossed in irrelevant social issues or spent too much on themselves. But they never presented loud, articulated, sustained protests and hence they were largely ignored or, more usually, dealt with through platitudes.

Of course, we argued, the disadvantaged needed to be helped by training, new jobs, advice, counselling and so on. We thought this was enough and it seemed to be - but it was not. They simmered away and eventually found an effective route to protest: ‘Let’s leave the European Union’ and ‘let’s vote for Trump’. Globalisation’s proponents have taken their eyes off the ball and been rewarded accordingly.

We should not be panicking - this is not the end of globalisation as consumers, business and government together will not allow that to happen. My view is that the Trump administration will play tough in public pronouncements on trade, impose some marginal constraints, as the US has done before in steel, tyres and automobiles, for example, but ultimately put little of substance in the way of ongoing trade links. The costs of doing so are well understood in the US bureaucracy.

The UK will negotiate a trade agreement with the EU which will not be seriously damaging to either party. Why should they do otherwise? But clearly something has gone wrong. There is no point in calling the Brexit and Trump voters globalisation’s losers. There are too many to ignore, they are standing up to be counted and we cannot simply say they are wrong.

Globalisation’s achievements have been extraordinary. It has helped raise average incomes across the world to well beyond any previous historical level. Hundreds of millions have been lifted out of poverty. The world is more connected, more cooperative and more secure than in any previous era. But large numbers of people consider themselves ignored within the system and indeed they have been.

Governments, which control globalisation, need to stop being so complacent or governments themselves will change - and probably not for the better.

 

Dr Paul Brewer is a senior lecturer in international business at UQ Business School.


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