With the election of U.S. President Donald Trump, the citizens of the United States did not only overthrow what was colloquially seen as the political elite. They also declared a preference for protectionist economic policies that favor American firms and American workers over the long-prevalent trend toward global economic integration. This sentiment is not only American. Events like Brexit, and the growing popularity of far-right nationalist parties in both Germany and France reveal a trend in Western economies to challenge the push for eliminating trade barriers between countries. This has left the global community wondering: “are we in a post-globalisation world?”
To answer this question, we must first understand the reason why globalization and economic integration have been to this point been a key goal for a variety of nations the world over. The primacy of globalization is based upon the Theory of Comparative Advantage, as described by 19th Century economist David Ricardo. The notion here is that all nations can profit from specializing in the production of goods that it is relatively well-equipped to produce, and trading excess production for goods that it is relatively ill-equipped to produce. This would in turn maximize the goods of all nations. This powerful theory was embraced by many countries following World War II. However, this process has sped up drastically the World Trade Organization, the International Monetary Fund, and the World Bank, each of which has a mandate to help increase and facilitate global trade. It is thanks in part to these organizations that trade deals such as the Trans-Pacific Partnership and the Canada-Europe Trade Agreement were formulated.
So now we find ourselves wondering: “with all this support for trade liberalization, how is economic protectionism on the rise?” The first explanation is that political sentiments for any given country tend to be cyclical in nature. Periods of liberalism tend to be followed by an equal-length period of conservatism. In the United States, these cycles fall in step with the 8 years that are the maximum that any one President can serve. As such, we might conclude that one contributing factor is the alignment of several countries (namely, the United States, United Kingdom, and France) in this cycle. It is important to note that this explanation has essentially zero bearing in economics, and focuses entirely on the cyclical nature of political sentiments.
Another explanation, and one that is much more economically rigorous, is that some western nations are suffering what might be described as a winner’s curse. Countries like the United States have achieved incredible levels of economic productivity, and perpetual disruption allows us to produce more goods and services with ever lower input levels. The result is that for every factory, every call center, and every construction site, fewer materials are needed. More importantly, fewer labor-hours are needed. Where once the General Motors factory floor was a bustling warehouse full of skilled workers, it is now a gleaming, climate controlled room with robotic arms suspended from the sealing and mounted on the floor, with a few highly skilled technicians darting between them. The result is that the (employed) blue-collar American worker is becoming extinct. In light of this, it’s no wonder that workers in highly developed, formerly manufacturing-based economies are displeased to see that all of their labor-intensive goods are being manufactured in far-away nations like Bangladesh and Vietnam. Is this sentiment fully rational? No, but it provides insight into why large portions of these countries back protectionist regimes.
Therefore, the notion is that by restricting the flow of imported goods to these countries, more goods will need to be produced at home, which would repatriate jobs. This is not a rational belief because there’s a very good chance that many of the tasks that are performed overseas by human hands would be carried out domestically by machinery. There is no reason to believe that French t-shirt production would be remotely as labor-intensive as that of Bangladesh.
Now, as much as these sentiments seem to be growing, and are apparent in many highly influential countries, it is not time to despair for global trade liberalization. As countries like Brazil, India, and China continue to modernize their economies, they will increasingly integrate with the global economic market. Furthermore, rising rates of higher education in countries like the United States and France will lead to an ever-larger group of people who will have the education to understand the benefits of global trade. It is the role of the economics community, and specifically the WTO, the IMF, and the World Bank, to not only facilitate globalization, but to educate the global citizenry of the virtues of tearing down age-old trade barriers. It certainly does not take a formal education in economics to understand the virtues of globalization, but it is no longer safe to assume that the average individual, even in a highly-developed and globally-integrated country, takes the virtues of trade liberalization as a given. This endeavor will not only maximize the utility of all nations globally, but it will also lead to improved international relations (it is rare to see two countries with strong trade links go to war), and expose all countries to better technology and broader culture.
So, to answer the question posed above and by many people the world over, we might live in a post-globalization world, but only if we allow it to be so!
Picture entitled, "Globe", taken by Kieran Lynam on March 7, 2007, obtained through Creative Commons (https://flic.kr/p/Cve4Q)