21st Century Wire says…
It’s hard to not to draw a comparison between the Brexit referendum and the stunning surprise victory of Donald Trump in the 2016 presidential election in America. Many now argue that both were a repudiation on globalization.
Indeed, anxiety over the global economy as a whole contributed to 2016’s historic rejection of the status quo: big trade, big banks and Wall Street.
Yesterday in his overseas speech, even President Obama acknowleged that the globalized policies of the world have absolutely contributed to a political upheaval that has given rise to Brexit vote and a Trump presidency:
“The current path of globalization demands a course correction,” adding “Any legislation that is proven flawed can be corrected through the process of democracy.”
Earlier this year, conservative leaning Washington Times discusssed the nature of falied policy that has led to such sluggish growth in the US over the past 7-8 years:
“The previously bullish Fed finally and openly acknowledged that sluggish growth is the long term new normal for America. Secular stagnation is here to stay. The growth rate has limped out of the 2008-09 recession at a 2 percent pace now for seven years. The Joint Economic Committee of Congress tells us a normal recovery gives us about 3.5 percent growth and the Reagan and JFK booms were closer to 4 percent. So the GDP today thanks to President Obama is about $2 to $3 trillion smaller than it should be. This is roughly the equivalent of losing the entire annual output of every business and worker in Michigan, Ohio and Indiana combined.
Instead of speeding up to recover all this lost ground, we’re decelerating. Growth was 1.4 percent in the 4th quarter of 2015. It was 0.8 percent in the first quarter of this year. The Fed now has downgraded growth now to less than 2 percent for the rest of 2016 — down from an original forecast of 2.4 percent.”
One day after the US election, The Intercept’s Glenn Greenwald (of Snowden fame) captured the frustartion that led to the Brexit vote and Trump’s win. Here’s a short passage from his piece:
“The institutions and elite factions that have spent years mocking, maligning, and pillaging large portions of the population — all while compiling their own long record of failure and corruption and destruction — are now shocked that their dictates and decrees go unheeded. But human beings are not going to follow and obey the exact people they most blame for their suffering. They’re going to do exactly the opposite: purposely defy them and try to impose punishment in retaliation.”
Only time will tell what the future holds for Brexit or Trump – but for the moment, the voice of the everyday man has been heard loud and clear.
More from Washington’s Blog below…
(Image Source: Onmanorama)
You’ll Only Understand Trump and Brexit If You Understand the Failure of Globalization
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Washington’s Blog
Trump
Trump made rejection of globalization a centerpiece of his campaign. In his July 21st acceptance speech as the Republican nominee, he said:
Americanism, not globalism, will be our credo.
The Boston Globe bannered this headline on Thursday: “Trump won. Globalization lost. Now what?”
On election night, CNN’s Jake Tapper explained that many Americans voted for Trump because they are sick of the income inequality, globalization, and politics-as-usual that the status quo have given us. He pointed out that only a handful of people have gotten rich off of globalization, and a lot of people have been left behind.
Counterpunch wrote Friday:
The real meaning of this upset is that Wall Street’s globalization project has been rejected by the citizens of its homeland.
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Trump voters had several reasons to vote for Trump other than “racism”. Most of all, they want their jobs back, jobs that have vanished thanks to the neoliberal policy of transferring manufacturing jobs to places with low wages.
Brexit
Similarly, Brexit was largely a vote against globalization.
For example, the Guardian ran an article in June explaining, “Brexit is a rejection of globalisation”:
Britain’s rejection of the EU. This was more than a protest against the career opportunities that never knock and the affordable homes that never get built. It was a protest against the economic model that has been in place for the past three decades.
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Europe has failed to fulfil the historic role allocated to it. Jobs, living standards and welfare states were all better protected in the heyday of nation states in the 1950s and 1960s than they have been in the age of globalisation. Unemployment across the eurozone is more than 10%. Italy’s economy is barely any bigger now than it was when the euro was created. Greece’s economy has shrunk by almost a third.
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Inevitably, there has been a backlash, manifested in the rise of populist parties on the left and right. An increasing number of voters believe there is not much on offer from the current system. They think globalisation has benefited a small privileged elite, but not them. They think it is unfair that they should pay the price for bankers’ failings. They hanker after a return to the security that the nation state provided, even if that means curbs on the core freedoms that underpin globalisation, including the free movement of people.
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Torsten Bell, the director of the Resolution Foundation thinktank, analysed the voting patterns in the referendum and found that those parts of Britain with the strongest support for Brexit were those that had been poor for a long time. The result was affected by “deeply entrenched national geographical inequality”, he said.
There has been much lazy thinking in the past quarter of a century about globalisation. As Bell notes, it is time to rethink the assumption that a “flexible globalised economy can generate prosperity that is widely shared.”
But What Do the Experts Say?
Mainstream economists, organizations and politicians – including the World Bank, International Monetary Fund (and see this), McKinsey & Company and Obama – now admit that globalization creates inequality. People worldwide are furious at runaway inequality … and it’s affecting elections globally.
The Bank of International Settlements – the “Central Banks’ Central Bank” – says that financial globalization itself makes booms and busts far more frequent and destabilizing than they otherwise would be.
The Economist pointed out in July:
Most economists have been blindsided by the backlash [against globalization]. A few saw it coming. It is worth studying their reasoning ….
David Autor, David Dorn and Gordon Hanson have documented how the costs of America’s growing trade with China has fallen disproportionately on certain cities. And so on.
Branko Milanovic of the City University of New York believes such costs perpetuate a cycle of globalisation. He argues that periods of global integration and technological progress generate rising inequality ….
Supporters of economic integration underestimated the risks both that big slices of society would feel left behind ….
The New York Times reported in March:
Were the experts wrong about the benefits of trade for the American economy?
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Voters’ anger and frustration, driven in part by relentless globalization and technological change [has made Trump and Sanders popular, and] is already having a big impact on America’s future, shaking a once-solid consensus that freer trade is, necessarily, a good thing.
“The economic populism of the presidential campaign has forced the recognition that expanded trade is a double-edged sword,” wrote Jared Bernstein, former economic adviser to Vice President Joseph R. Biden Jr.
What seems most striking is that the angry working class — dismissed so often as myopic, unable to understand the economic trade-offs presented by trade — appears to have understood what the experts are only belatedly finding to be true: The benefits from trade to the American economy may not always justify its costs.
In a recent study, three economists — David Autor at the Massachusetts Institute of Technology, David Dorn at the University of Zurich and Gordon Hanson at the University of California, San Diego — raised a profound challenge to all of us brought up to believe that economies quickly recover from trade shocks. In theory, a developed industrial country like the United States adjusts to import competition by moving workers into more advanced industries that can successfully compete in global markets.
They examined the experience of American workers after China erupted onto world markets some two decades ago. The presumed adjustment, they concluded, never happened. Or at least hasn’t happened yet. Wages remain low and unemployment high in the most affected local job markets. Nationally, there is no sign of offsetting job gains elsewhere in the economy. What’s more, they found that sagging wages in local labor markets exposed to Chinese competition reduced earnings by $213 per adult per year.
In another study they wrote with Daron Acemoglu and Brendan Price from M.I.T., they estimated that rising Chinese imports from 1999 to 2011 cost up to 2.4 million American jobs.
“These results should cause us to rethink the short- and medium-run gains from trade,” they argued. “Having failed to anticipate how significant the dislocations from trade might be, it is incumbent on the literature to more convincingly estimate the gains from trade, such that the case for free trade is not based on the sway of theory alone, but on a foundation of evidence that illuminates who gains, who loses, by how much, and under what conditions.”
Continue reading Washington’s Blog here…
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