Deglobalization…. elites beware!
Here is the new word and new concept that we have to think about…deglobalization.
Rana Foroohar writes in the Financial Times that deglobalization is a reality and we ignore it to our own expense.
Her argument starts out with the fact that people were caught “utterly unaware” by Brexit and this was followed up by the startling victory of Donald Trump.
Ms. Foroohar asks, “So, what is the next big thing” that will be missed?
The answer, “Quite possibly deglobalization.”
She continues, “Just as so many top corporate executives missed the rise of populism, so the global business establishment is in danger of missing the fact that a far-right/far-left consensus is building in the US around a nationalist economic agenda.”
“The belief systems, agendas and specific policy prescriptions of these two camps vary widely. But the end goal is the same—they want American companies to keep more capital, jobs and intellectual property at home.”
Ms. Foroohar believes that “Time and numbers are on the side of the disrupters, who have come of age in a time of economic constrain, environmental degradation and political turmoil.”
And, she concludes, “Business leaders are fooling only themselves if they fail to pay attention.”
So, according to Ms. Foroohar, I am an elite. And, I am only fooling myself. And, I will suffer the consequences.
But, my argument for globalization does not rest on the consensus building of the far-right and the far-left.
My argument rests on the basic fact of world history…information spreads and, although the spread of information may be slowed down from time-to-time, the spread of information ultimately wins out and begins to spread again at an even more rapid pace.
Globalization is, at its most fundamental level, a consequence of the growth and spread of information. And, along with the growth and spread of information goes the growth and spread of knowledge and knowhow, the basis of the production and trade.
For one, the process of creation and innovation is not going to change.
Rajshree Agarwal and Michael Gort presented research in the Journal of Law and Economics in the early 2000s, which examined the interval between the introduction of an innovation and competitive entry. That is, the time before an innovation is first brought to market and the entry of a competitor producing the same innovation.
In the 1967-1986 period, the interval was 3.4 years. Can you imagine what the interval might be in the 2009-2018 period? Could this interval be in the 2.0 to 2.5 year period?
Within an environment that is so competitive, the incentives are all in the favor of being in a world market with global supply chains and global trading partners. Protected markets are not going to serve firms that operate at this rate of time pacing. Protected markets will only cause firms to fall behind those that are more open around the world.
And, this is where China and some other nations come into the picture.
Particularly in technology, especially information technology, China wants to rule the world. It wants to operate in world markets. Its companies are primed to world in world markets. China wants to lead.
Other nations will want to participate in these advancements because they will be at the cutting edge.
The rest of the world is not going to stand still while the United States and Great Britain work protect themselves…and their workers.
Innovation pictured by Agarwal and Gort is almost continuous and requires the information flows that assure a country has the knowledge and knowhow to keep up with the best in the world.
Countries that adopt an inward looking nationalism are only going to find themselves falling behind. And, this is just what China…and others…would like the United States and Great Britain to do.
History confirms the result. Those areas of the world that foster the spread of information and the growth of trade prosper. Those nations that the turn in upon themselves, only lose out over time…they cannot keep up.
Now, there is not a doubt in my mind that, as Ms. Foroohar points out, that I was caught “utterly unaware by Brexit and by the rise of Donald Trump.”
The information was there but I ignored it or, in other ways it escaped me. One now reads books like “Hillbilly Elegy” by J. D. Vance and like “Coming Apart” by Charles Murray and learns that the signs were there…we elites just overlooked them in our self-confidence and self-centeredness.
Our only real excuse I believe is that we thought that the “marketplace” would take care of those that were being left behind. Everything would take care of itself, the lack of education, the lack of mobility, the lack of guidance, the lack of re-training, the lack of institutions to carry the load. For example, these disenfranchised people did not have the labor unions or the community organizations, like churches, to help them.
So, the body of the disenfranchised grew. But, the disenfranchised had something new going for them. They now also possessed the access to information technology so that their discontent and dissatisfaction could play off of one another and they could find similar souls to unite with.
Furthermore, government became more and more focused upon “short-run” solutions to economic and social issues. A little injection of fiscal stimulus could solve unemployment problems. Tax benefits to support housing construction became very common. And, so on.
But, short-run solutions did not solve longer-term changes in the economy. For example, a fiscal stimulus that put workers back to work in their old jobs did nothing to provide these same workers with the skills and technology needed to be productive members of the new era of technological change. These programs did not provide the education to the work force to, for example, make more workers participants in a 2.0 percent unemployment rate for people with a bachelors degree or morel
Politicians were unable…or unwilling…to create the policies or the programs that would meet the longer-run needs to the economy. Globalization is still going to be the driving force in the world economy, but we…whiter an elite or not…are going to have to recognize and provide support to those that seem to be falling through the cracks. We cannot let them down again.