When it comes to critics of globalization with standing in the mainstream of the economics profession, few are better than Dani Rodrik. Nonetheless, when it comes to laying out the indictment of the path pursued over the last three decades in a Washington Post interview even he largely accepts the story that the basic story is that “globalization” has some specific direction attached to it.
The point here is that globalization, meaning the greater integration of economies across the world, could have been designed an infinite number of ways. The way it was designed was intended to redistribute income upward, with those at the top of the income distribution using their political power to make changes that enhanced their wealth and power. The upward redistribution was not an accidental outcome of a process of economic integration: it was the purpose of this process.
I will restate some of the points I have made thousands of times before. (See my book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer [it’s free]) To start, we didn’t have to make removing trade barriers in manufactured goods a central focus of trade deals. It would be every bit as much a step toward greater integration if we had focused on removing professional licensing barriers to make it as easy as possible for doctors, dentists, and other highly paid professional to train to U.S. standards and practice in the United States. This would have provided enormous gains to consumers in the form of lower costs for health care and other services while redistributing income downward, since these professionals are almost all in the top 5 percent and often top 1 percent of the income distribution.
There was nothing inevitable about a process of globalization in which the United States runs a large and persistent trade deficit. Contrary to lies that are endlessly repeated by people who should know better, the United States did not have to run large trade deficits to allow China and other poor countries to develop. The textbook story is supposed to have rich countries like the United States as lenders of capital to poor countries, meaning that we run trade surpluses. In fact, China had extraordinarily rapid growth with near balanced trade for almost two decades before it started running massive trade surpluses following its admission to the WTO in 2001. This is a simple point that is easily verified, but we know the elites are not good with numbers.
There is also nothing inconsistent about a process of global economic integration that focuses on diffusing knowledge by putting more information in the public domain so that the whole world can benefit, rather than trying to bottle it up in ever longer and stronger patent and copyright protections. The latter are forms of protectionism, which are 180 degrees at odds with “free trade.” These forms of protectionism have been a central part of every trade deal over the last three decades. And, of course, they have the effect of redistributing income upward. (How rich would Bill Gates be without patent and copyright protection?) Incredibly, our political debate is so corrupt that logic is turned on its head. In policy discussions not having strong protections in these areas is treated as a violation of free trade.
There are other related issues that should be added to a discussion of dealing with the globalization, such as the absurd commitment of central banks to a 2 percent inflation target. This relic of numerology has needlessly kept millions of people out of work in Europe and the United States and cost us tens of trillions of dollars of lost output. Since the unemployed tend to be at the middle and bottom end of the income ladder, this also redistributes income upward.
In short, there is a much more fundamental indictment of globalization that almost never gets mentioned anywhere. The problem is not a failure to take corrective steps to help the losers; the problem is a process that was designed to make much of the population of Europe and the United States losers.
This argument almost never appears anywhere, even in progressive magazines and websites. Apparently, it is much more comforting to liberals to think that they want to share some of their good fortune with those on the bottom than to think that they were beneficiaries of a process that was designed to screw those on the bottom. And, of course, since they never even hear this argument made, for the most part they never have to think about it.
Note: Typos corrected, thank Robert Salzberg.