Globalisation claims another victim

Sunday 03/07/2016

It has long been dogma among economists and the thinking elite that the more we get globalisation, the better we will all be. Indeed, anyone who, until recently, dared dissent from this ortho­doxy was viewed as either ignorant of laws of international competition or simply narrowly protectionist.

However, Dani Rodrik dem­onstrated in The Globalization Paradox was that any gains from globalisation would be outweighed by additional costs in unemploy­ment, reduced wages, lost pen­sions and depopulated communi­ties. Global markets, if they are to be widely beneficial, require the kind of global governance struc­ture that does not exist and that most people would oppose.

As Gordon Brown, a British former Labour prime minister who made sure to keep Britain out of the euro when he was chancellor of the Exchequer, reminded read­ers of the Guardian newspaper, the elephant in the room of the British referendum that led to a vote in favour of the country leaving the European Union is globalisation and the speed, scope and seismic shifts in Europe and particularly Britain’s economy it has produced.

Whole towns across the Mid­lands and northern England have been hollowed out as textile, steel and other industries collapsed in the face of Asian competition. Mil­lions of semi-skilled workers have lost their jobs; whole communities have been turned into wastelands.

To add insult to injury, thou­sands of immigrants from Eastern Europe flowed in after Poland and its neighbours joined the Euro­pean Union in 2004, driving down wages and bringing new faces into communities where most people lived within a few miles of where they were born.

As the glue of shared religious allegiance and trade unions disap­peared, millions of British voters looked with bewilderment and scorn at an ever-richer London where property prices have rock­eted, where young people think of Europe and the world as their playground.

The massive social inequalities that characterise Britain, and to a lesser extent France and other Eu­ropean countries, have produced a peasants’ revolt, an uprising of the laissés pour compte because the European elites give the impres­sion that the single market, ever greater competition and mobility are the only things that matter. All too often Brussels seems beholden to the lobbying of multinational firms. Corruption scandals have ruined the reputation of count­less politicians in Britain, France, Spain, Italy and beyond.

The collapse of the Labour Party in Scotland a few years ago has now been mirrored by its collapse in England. Its voters flocked to the Brexit campaign because they have a deep feeling of having been betrayed by former Labour governments and the current Tory administration.

Brown is surely right to argue that if Britain and other European countries fail to face up to the massive inequalities that com­prise globalisation’s Achilles heel, anti-globalisation movements, often led, as in Britain, France and Holland, by the extreme right will mushroom and “our politics will revolve around nationality, race or simply identity”.

The argument that the modern dividing line in politics — not least in Britain — lies between those who are for an open or a closed world is flawed. It is not by drain­ing any ideology out of the system and pretending that massive inequalities do not exist that the problems will go away. Quite the reverse.

Either our political leaders or we Europeans as people manage globalisation better and tackle the injustices it brings seriously or we do not. A global free-for-all as defended by the Tory leaders of Brexit, Michael Gove and Boris Johnson, UK Independence Party’s leader Nigel Farage or the French National Front’s Marine Le Pen will only make matters worse.

Such unscrupulous politicians may gain power but not one of them has offered a convincing blueprint on how to tackle the challenges that confront us.

Rodrik’s argument was that open markets succeed only when embedded within social, legal and political institutions that provide them legitimacy by ensuring that the benefits of capitalism are broadly shared. The countries most open in terms of trade and investment are often the ones with the most extensive and effective regulation and the widest social nets.

Globalisation has created large pools of winners and losers. It has rearranged how work is done and where and how profits are made. Democratic societies will not toler­ate such disruption if its members are not assured that the process will be broadly beneficial. That has not been the case.

As for Arab countries, most of which are on the economic pe­riphery, globalisation and lack of democracy will combine to make them unstable for years to come.