But tampering with globalization is risky. Should Trump have his way, the resulting dislocation would shake the global economy down to its socks.
Is it really worth the effort?
After all, the original governing logic behind globalization was magnanimous: “A rising tide lifts all boats.” From its inception in the dark days after the Second World War, free trade was seen as a central pillar for European recovery and the preservation of world peace.
Why was free trade so highly regarded?
Protectionism and vicious national economic competition were widely believed to be major contributors to the Second World War. According to Cordell Hull, then-United States secretary of state, “free trade dovetails with peace; high tariffs, trade barriers and unfair economic competition with war.” Sentiments like these were clearly evident at the 1944 Bretton Woods Conference, where the Allies made their economic plans for the post-war world.
However, despite committing to freer trade, the conference also attempted “to reconcile liberal international trade policies with high levels of domestic employment and growth.” The goal was a balanced international system benefiting the world community and each of its parts.
Despite these noble intentions, it seems the win-win logic of globalization has been lost in the implementation. Even Thomas Piketty, the famous French economist and author of [popup url=”http://amzn.to/2fjHsJV” height=”1000″ width=”1200″ scrollbars=”1″]Capital in the Twenty First Century[/popup], has said: “Trump’s victory is primarily due to the explosion in economic and geographic inequality in the United States over several decades and the inability of successive governments to deal with this.”
So what’s wrong with globalization?
A lot, it seems. Globalization has been associated with the hollowing out of developed economies, contributing to wage stagnation, runaway climate change and corporate tax evasion.
But if we confine ourselves to economic issues, it might be possible to preserve the best of globalization while jettisoning the most disruptive elements – although it’s impossible to fix globalization without fully appreciating the problem’s core.
Globalization worked pretty well for the first few decades. The Treaty of Paris (1951) established the European Coal and Steel Community and set an important standard in co-operation. This was soon followed by the Treaty of Rome (1957), which established the European Atomic Energy Community.
With the success of these early supranational agreements, the road was cleared for more globalization initiatives. That accelerated the development of the European Economic Community and set the stage for the Canada-United States Free Trade Agreement of the 1980s.
Regrettably, globalization changed for the worse after the fall of the Soviet Union. In the early 1990s, the monetarist-inspired Washington Consensus launched a new era, with a new set of rules for globalization.
Originally, globalization was as much about strengthening human rights as about trade. Developed western economies concentrated on advancing workers’ rights (and therefore increasing workers’ share of gross domestic product) while increasing the scale of the market for business.
But the Washington Consensus quietly abandoned the idea that rights mattered in globalization. From that point, Wall Street and corporations gained the upper hand. We see the results now.
During the presidential campaign, Trump said China was responsible for “raping” the U.S. economically, engaging in “the greatest theft in the history of the world.”
But China didn’t set the rules of international trade, which allowed multinational corporations to exploit Chinese workers. The administration of former U.S. president Bill Clinton granted communist China “most favoured nation status” with no human rights or political reform preconditions. Corporations gained free access to developed markets for their products while paying next to nothing for labour.
With these changes in the 1990s, globalization became a race to the bottom. Manufacturing flooded out of “rights-biased” developed economies like the United States, Canada and the European Union to “rights-denying” emerging economies like China, Bangladesh and Mexico.
Fixing globalization won’t be easy, but eliminating the unfair corporate bias in trade agreements and establishing a renewed commitment to improving workers’ wages and conditions would level the playing field.
Those would be good first steps toward creating a sustainable global economy – rather than blowing up international trade deals, as Trump has threatened.
Robert McGarvey is an economic historian and former managing director of Merlin Consulting, a London, U.K.-based consulting firm. Robert’s most recent book is Futuromics: A Guide to Thriving in Capitalism’s Third Wave.