Opinion

Why globalisation, as we know it, is dead

Rajkamal Rao | Updated on January 15, 2018

Globalised sectors such as financial services are raking it in, displacing the working class. The game is too lopsided to continue

In fewer than six months, two mighty countries who together wrote the post-World War II playbook for how the rest of the world should inter-operate suddenly appear to be reversing course.

In championing such a reversal, Donald Trump and Nigel Farage identified major fault lines in the concept of globalisation and skilfully communicated them to the people. Other nationalists, Norbert Hofer in Austria, and Marine Le Pen in France, are also drawing record support. As Thomas Friedman says, “When you connect with voters on a gut level, they will give you enormous latitude.”

Elites and commoners

First, a major problem with globalisation is that it does not penalise bad actors. During the financial crisis, the supposedly know-it-all bankers and traders brought the world down to its very knees. But no one was punished and the banks were bailed out at taxpayer expense because they were deemed too big to fail. In a non-globalised world, there would have been serious penalties imposed on hundreds of individuals, including regulators who had been too cushy with the very industry they were supposed to oversee.

Take Greece. This is a country that went amok with highly irresponsible decisions that brought the mighty Euro to the brink. But in an irony, it was Greece’s Prime Minister Alexis Tsipras who made it appear as though the Eurozone banks were being too cruel on a sovereign nation and even campaigned to default on existing loans. If the common man were to swindle customers for gain he would have gone to jail. If he had borrowed money from a bank and defaulted on his obligations the bank would go after his collateral for cause. In globalisation, the common man sees a rigged system that is harsh on him but is lenient to elites who do far more damage.

And then, there’s the hypocrisy. Consider the case of a worker displaced when a plant moves its operations overseas. Buried in the trade deals is almost always a provision for the host government to fund the worker’s retraining. But attending school and learning new skills is fundamentally not an easy thing to do. Even if the worker arms himself thus and competes to find a job, he often loses out to an immigrant who is willing to work for far less. The common man sees a double standard at work: The government is giving assistance to the displaced worker with one hand but is taking it all away with the other with generous immigration policies that hurt the very worker who was to be helped by the retraining programme.

Elites shrug off complaints about outsourcing saying that it is a necessary by-product of globalisation. But the common man sees that this practice hurts people, families and communities like nothing else. In services, the Walt Disney Company got into trouble for outsourcing its IT operations to an Indian major but required displaced workers to train their replacements. How is this practice not harsh?

Too many losers

The common man is also deliberately forgotten for the greater good. The recent climate accord eliminates CFCs from use in commercial air conditioners because it is deemed to be harmful to the planet. But doing so will mean that air conditioners will get far more expensive for the world’s rising middle classes who have to endure sweltering temperatures in the summer.

The elites never have to worry about their climate controlled equipment or petrol guzzling SUVs taken away from them but they are willing to impose their righteous morals on others. In a globalised world, the common man has no say in these decisions and is asked to trust unseen bureaucrats in foreign nations to determine his standard of living.

Every policy has winners and losers. Globalisation was fine, on balance, as long as there were more winners than losers. What the Trump and Farage victories show is that globalisation is no longer working for many in the US and the UK. In the US, these were 60 million voters spread over more than 80 per cent of the land area of the country. The globalisation winners — the densely concentrated populations in the coastal cities working in global industries like entertainment, media, finance, technology and services — had nothing to fear.

Silent majority

For the disaffected, the matter was additionally one of pride. When they took their issues to leaders in government, industry and the media, they were often dismissed in the starkest of terms, even branded racist or bigots for not coping with a changing world. Hillary Clinton famously said half of them belong to what she called “a basket of deplorables”. Pollsters kept talking about how these people never went to college — hinting that they were somehow dumber than the elites on the coasts.

So the losers in the globalisation battle formed a silent majority. They held their opinions from pollsters or even lied to them when asked. And on election day, they took their heartfelt disillusions to the privacy of the ballot box without having to fear recrimination from anyone.

A popular myth is that the disaffected were all whites. But exit polls show that more blacks supported Trump than they did Romney in 2012. Trump had consistently battered Hispanics by calling Mexican immigrants rapists and murderers. He shouldn’t have received more than 1 per cent of the Hispanic vote. On election day, 35 per cent of the Hispanics turned out for Trump. It is political campaigns which micro-segment voters into finely defined classes based on race, culture and religion.

But voters rarely think this way. A basic lesson of democracy is that citizens will always vote their economic self interests first. Politicians like Trump and Farage exploited voters’ legitimate fears that globalisation had gone too far and promised them major changes in government policy to reverse course.

This is why globalisation as we now know it is dead. The game was too rigged. The playing field was no longer level. Until these change, this game is not coming back anytime soon.

The writer is managing director of Rao Advisors LLC, Texas

Published on November 22, 2016

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