Globalization: Restrained or reshaped
Jared Bernstein
Well, the Democratic National Convention in Philadelphia hasn't exactly opened with the show of unity organizers hoped for, as some of Bernie Sanders's delegates loudly expressed disappointment with both the primary process and the presumptive nominee. On the former, the primary process, they've clearly got a point. On the latter, Hillary Clinton's candidacy, Sanders himself is asking them to quiet down and get behind her, which, at least according to one new poll, is precisely what 90 percent of his supporters plan to do.
With that backdrop, allow me to offer what might, given the rocky start in Philly (and Philly is, of course, where Rocky got started), seem like an unlikely forecast: I expect that by the end of the DNC, the underlying differences between the two parties' political and policy approach to this current, anxious moment will be bracingly clear. Differences like divisive vs. inclusive, "you're on your own" vs. we're in this together, government's the problem vs. government must offer solutions, vagaries vs. specifics, bombast vs. planning, and finally, restraining globalization vs. reshaping globalization.
In a moment, I'd like to discuss that last bit, about globalization. But I do think there's a good question as to where the electorate is at on all those differences. Trump's play — scare the crap out of everyone so that the swaggering strong man looks better than his more thoughtful, analytical opponent — may be a smart one, but a lot of it depends on whether you believe America's better off insulating and hiding behind walls and tariffs than engaging with the rest of the world.
Okay, that's some skewed rhetoric on my part, but I'm solidly on the record as simply not believing that globalization can be stopped or even particularly slowed. It can be reshaped, however, and there are different ways to go about that.
First, what's globalization? For one, it's international trade. Global trade volumes — imports plus exports — have grown from 25 percent of global GDP to 60 percent today. In the United States, that same metric has grown from 10 to 30 percent (with imports a larger share than exports over almost that whole time, i.e., trade deficits — I'll get back to that). But globalization is more than just trade. It's immigration flows, financial flows, cultural flows, geopolitics, which these days, includes terrorism, and basically, the idea that nations are increasingly involved with each other across many dimensions of life.
To be clear, this is not some breathless endorsement of all the above. To put it mildly, there are upsides and downsides to globalization. In the United States, there's cheap goods — Walmart wouldn't exist without the "China price" — but that leads to head-to-head wage competition which, given our large and persistent trade deficits, has hurt many non-college-educated workers and their communities. Financial connectedness produces great liquidity and low borrowing costs, but also systemic connections that, in the absence of adequate oversight, can create downturns that are both rippling and crippling. Immigration creates substantial cultural and economic benefits, particularly in countries with slow-growing labor forces, but unmanaged, its tensions are increasingly evident in national politics, with the recent Brexit vote exhibit A, and Trump's xenophobia, exhibit B.
So, how does this all map onto what I believe is a crucial difference between the two parties in this election? Can globalization be restrained; can it be reshaped?
Trump, nostalgically in my view, believes we can go back to a simpler time when all the global tensions engendered by those dualities noted above didn't exist. But while a country can leave the E.U. or try to keep out refugees, all those container ships are not about to drop their anchors. Financial transactions will proceed apace. It's instructive in this regard to watch the British post-Brexit vote, but before the exit itself, which has yet to be triggered. From where I sit, they seem to be saying, "Okay, let's figure out how to respect the vote while doing as little damage as we can to our nation's global integration."
In other words, it's easy to whack globalization at the level of Trumpian abstractions. What this means in practice is a lot less clear. It's the vagaries vs. specifics problem I noted above.
What I expect to hear from the DNC this week is less about restraining globalization than reshaping it. As Hillary Clinton recently put it, "Even if the United States never signs another trade deal, globalization isn't going away." I can't overemphasize how true I believe that is.
Trade, immigration, financial integration — none of these are inherently good or bad. But when you ignore them — when you either fail to manage them or do so from solely the perspective of corporate or investor interests — then you set the table for precisely the populist negativity regarding globalization that is so evident today.
Concretely, this means completely reorienting how we write trade agreements. Environmental and labor standards must come before, not after the deals are signed. In the interest of reducing our trade deficits, currency manipulation must be attacked head-on, through enforceable rules. Investors must have their own skin in the game when it comes to resolving disputes, not that of the rest of us. Financial oversight, along with its cousin, international taxation, must be jointly implemented in order to shut down havens that support tax avoidance and inadequate market regulation. A small, international tax on financial transactions would be helpful in this regard.
Academic research shows that immigration (unlike imbalanced trade) has not been anywhere nearly as hurtful to native populations as popular wisdom maintains. Either way, people who have been persistently underemployed or suffered real wage stagnation — and there are many who continue to suffer these trends — must have much more robust economic opportunities. This implies robust social safety nets that don't just catch people who've been hurt by globalization, but relaunches them with work supports, ranging from wage subsidies, health and child-care assistance, and a direct job when labor markets are persistently soft.
That, in turn, implies the need for a responsible fiscal plan that raises ample revenue to support an agenda that is complementary to globalization.
The days when elites in either party could simply scold those who were skeptical of globalization as not appreciating its benefits are thankfully behind us. Many people in advanced economies believe they've been hurt by expanded trade with low-wage countries, and many of them are right about it.
One side offers them a false nostalgia. The other side seems to have finally realized it can't get away with offering them the next, allegedly improved trade agreement as a solution to their problem. This week, once the factious dust clears, I'll be listening closely for a resonant agenda that reshapes globalization. I'll let you know if I hear it.
