A few years ago, I wrote columns whose main message was that globalisation was harmful to the average citizen of the world. The world’s leading business and financial publication the Economist has written a cover story with the title Goodbye Globalisation: A nationalistic and self-sufficient era beckons. It won’t be richer or safer.
Today, the rise in income inequality has been attributed to globalization. We have reached a point where 67 individuals around the world have a total wealth equivalent to the bottom 50% of the world’s population. Think about this: 67 individuals have as much wealth as 3.8 billion people.
Income inequality has been one of the main reasons for the rise of populism. We kept reading reports that economies were growing and that GDP was rising. The only problem was that a few people became fabulously rich; but, most of the population were experiencing a stagnant real income. The culprit is that there was a philosophy that as the wealthy became wealthier, their “wealth” would trickle down to the masses. This “trickle down,” the essential defense for capitalism, never happened. Increased GDP growth did not translate into better lives for most people.
There was a time when the same “trickle down” was believed to be applicable to nations. As certain nations became richer they were expected to share their wealth with the poorer countries of the world. This was the dream of international organizations like the United Nations. Instead, the rich Western nations continued to enrich by further exploitation of poor countries. The Third World countries were developed solely as sources of raw materials for the goods and services of the Western imperial powers.
Today China – the new economic giant – is following the same imperial pattern of the Western powers. It’s Belt and Road initiatives are aimed at securing reliable sources of raw materials and markets for its economy. The primary objective is to continue the economic growth of China.
This was my second message in my globalization articles years ago. I wrote that I did not believe China could sustain its economic growth through the exploitation of globalization. China had become the manufacturing center of the world.
I used to call China a “parasite” economy because it thrived at the expense of others. The country created jobs, not through new technologies or exploiting raw materials, but by offering wages lower than those in other countries. The jobs created in China came from the flight of jobs from other countries to China.
I once wrote that this “parasitic” economic practice surely could not be tolerated by other countries for too long. As GDP growth accelerated, real income continued to stagnate not only in countries like the Philippines; but, even in rich countries like the United States.
In the poor countries, business leaders were able to keep wage low by repeatedly warning that in the age of globalization, the nation had to keep wages low to be able to remain competitive. In the meantime, many of these same business leaders were outsourcing their manufacturing to China.
The classic example is the footwear industry where manufacturing was hard hit by Chinese low cost competition. The few footwear companies outsourced their manufacturing to China and were able to continue marketing their brand.
When I would write and advocate about the need to protect local industries to protect local jobs, I was told that I was still advocating protectionism and economic nationalism. These concepts were supposedly anti-business and obsolete in this globalized world. I would argue that this “trickle down” theory did not work and business was losing jobs in our economy. This was the time when the overseas workers became “heroes.” My question then was why were jobs being created abroad and not here in the Philippines?
China was once a heavily protected economy until it was able to build an industrial and financial base that could compete with the rest of the world. Now it has suddenly become the champion of open markets and globalization. The United States and Japan were once champions of globalization and open markets. But now that they are losing their competitive edge, these two countries, along with many other countries, have elected governments that are advocating economic nationalism and protectionism. The United States has launched a trade war with China. This is not just Trump. I hear the same rhetoric from Democrats. This is what I expected to happen; but, I thought it would happen sooner. In the meantime Japan is offering financial incentives to hundreds of Japanese companies in China to return to Japan.
The article in the recent issue of the Economist about globalization actually does not attack nor condemn globalization. Its theme is apparently that for better or for worst globalization is coming to an end. It says:
“Even before the pandemic, globalization was in trouble. The open system of trade that had dominated the world economy for decades had been damaged by the {2008} financial crash and the Sino-American trade war.... As economies reopen, activity will recover, but don’t expect a quick return to a carefree world of unfettered movement and free trade. “It concludes that this new world of nationalism will “enfeeble the recovery, leave the economy vulnerable, and spread geopolitical instability.”
Three years ago, the Economist had an article entitled: “Left Behind: How to Help the Places Left Behind by Globalization.”
I fail to see how any system – like globalization – can be beneficial if it leads to terrible income inequality and the rise of populism.
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