There has recently been lots of discussion of globalization, its effects, especially on poverty and inequality, and many contradictory statements, some even absurd, were made. Here are eleven theses on globalization. First, inequality and poverty. Globalization is a force for the global good: the globalization of economic activity has enabled production of many commodities and provision of many services to be done in the places where it is cheapest to do. It has released previously used resources for other activities. It has also mobilized capital and labor that was misused or unemployed. The effect was a significant acceleration in global rate of growth (when measuring global growth by using democratic and not plutocratic measures, which have gone up too) and a dramatic decrease in global income inequality and global income poverty.
Concerning point three - I really doubt that western middle class people bother about if Chinese or Indian people live as good as they do themselves; they never meet them and can't judge. Well, they see Chinese tourists as they saw Japanese tourists 50 years ago, but why should they be angry about that? What bother them is the attrition of their own living standards compared to the 1 or max 10 %.
This is of course more burning in the US than in Europe. But even in Europe middle class people begin experience family members having to take zero-hours jobs or having no jobs at all. What we see in the western world was described excellently by Peter Turchin and Jack Goldstone (https://www.noemamag.com/welcome-to-the-turbulent-twenties/):
"First, faced with a surge of labor that dampens growth in wages and productivity, elites seek to take a larger portion of economic gains for themselves, driving up inequality.
Second, facing greater competition for elite wealth and status, they tighten up the path to mobility to favor themselves and their progeny. For example, in an increasingly meritocratic society, elites could keep places at top universities limited and raise the entry requirements and costs in ways that favor the children of those who had already succeeded.
Third, anxious to hold on to their rising fortunes, they do all they can to resist taxation of their wealth and profits, even if that means starving the government of needed revenues, leading to decaying infrastructure, declining public services and fast-rising government debts."
And that makes middle class people feel very uneasy.
Very interesting theses you have nailed to the "door" here ;-)
Some reflections.
Re. Third, the West. I think the feelings of insecurity and displacement are driven more by members of Western "middle classes" comparing themselves to LOCAL benchmarks rather than to Asian populations. In particular - how they are doing compared to their parents' generation in their own communities, and maybe how they are doing compared to whatever "elites" they are familiar with.
Re. Eighth, climate change. It is important to add that the climate change agenda is driving international organizations to take up energy policies and programs that are detrimental to people in poor countries e.g. banning public financing for fossil fuel projects https://twitter.com/toddjmoss/status/1589425188390989824?s=20
and even blocking the development of nuclear energy sources
- policies which slow their growth and which slow the rate at which citizens of poor countries will get access to reliable energy.
Re. Ninth financialization and amorality. Besides financialization, I think that other aspects of globalization processes contribute to the destruction of cohesion and social bonds, including: sustained, relatively high rates of immigration, esp immigration involving people with relatively high cultural "distance" from the host population [I suppose Robert Putnam's 2007 paper is the best reference for this point], and highly "liberal" trade regimes, enabling company size to grow and encouraging executives to identify less with their local community, or their homeland and thereby to relieve any pressure to behave in a pro-social fashion that might otherwise come from these social connections.
Re. Tenth, migration. Speaking of the US, I don't think it is accurate to characterize recent migration levels as "minimal". I guess it depends on what your measure is and what your comparator is.
I would argue that, when thinking about the impact on society, the share of the foreign-born in the population is a useful measure. If you compare the foreign-born share of the US population at different points in time, the share was 14.6 percent in September of 2022. This is triple the share in 1970 and nearly double the share in 1990. If you compare this share to that during the entire history of the US, the foreign-born share is now reaching the all-time highs reached in 1910. https://cis.org/Report/ForeignBorn-Population-Hits-Nearly-48-Million-September-2022
Re. Eleventh. What is to be done? I share your skepticism!
All good, but especially Sixth, Eighth & Ninth. There is no accounting (not here, not anywhere) for the forces exerted by dictatorial powers backed by national authoritarianism that may push to nihilistic ends.
Nor is there accounting for the careless attitudes of those in the wealth-creating web toward the billions subject to all the conditions that cause disadvantage. These attitudes more likely than not to be developed into beliefs as the effects of global warming afflict millions (and more) through extremes of weather.
Competition for the minerals critical for production of low-carbon energy will exacerbate international tensions. If the history of, and hopes borne out of, globalisation mean anything then universal demands for those minerals will result in fairer means of distribution of the end-products necessary for production & storage of energy. Place bets while the wheel spins.
I think this is a very interesting and productive approach and wish I had seen the post earlier.
Many great scientific discoveries have been made by identifying what is important and ignoring the rest. Gravity in celestial objects depends only on the total mass and centre of gravity, not on the details of shape. Mass is conserved in chemical reactions, but colour and phase (gas, liquid, solid) are not. Energy and momentum are conserved but velocity isn’t.
Theses like the ones in Milanovic’s post distinguish the wood from the trees: properties that change relatively slowly and are therefore more fundamental from those that are temporary.
Liberals usually regard the main political contradiction in the world as between liberal democracies and everything else (labelled autocracies). However, history show that liberal democracy can disappear quite quickly, without most people noticing much difference in their lives, at least in the short term. Indeed, the African experience shows that even coups can be popular if an elected government appears corrupt or not to be dealing effectively with pressing problems.
Income and wealth however are much more enduring. In the absence of destruction by war, foreign conquest, or government breakdown they only change incrementally.
The vast majority of people in developing countries would like a Western lifestyle. They mean living standards and the freedom and opportunities that come with them far more than liberal democracy.
The post-World War 2 trading and human rights consensus had important positive features, but it established rules of the economic game that the richer capitalist countries knew they were good at. Ceding de facto hegemony to the US kept the military bill down for other rich countries and ensured that nominally international institutions such as the IMF and World Bank reflected their interests. Apart from small economies such as South Korea and Taiwan that were of strategic importance to the US in the struggle against communism, the list of rich countries in 1980 was very little different to that in 1900.
Post-war economic growth was largely confined to countries that were already rich. Together with trade unionism and the fear of communism, it caused ruling groups to accept a new political settlement. This included wage rates that were high even for the unskilled, and welfare provision that mitigated the enduring fears of the pre-war working class of unemployment, poverty, sickness, and old age. From the perspective of the world economy, workers in the economically advanced countries received a high rent premium because of their physical location. I grew up in such a unionised working-class family in the UK.
From about 1980, the reduced cost of transporting goods and improved information systems made the offshoring of parts of the manufacturing process economically possible. To this was added many business and financial services due to information technology. The hegemony of the rich countries seemed unchallengeable, particularly after the collapse of the Soviet Union, and such states saw no reason to curtail these profitable opportunities. With declining reliance on manufacturing at home, and in the absence of a really existing socialist alternative, it was possible for the rich to weaken the power of trade unions and increase inequality in the rich countries.
Unlike previous waves of globalisation, which benefitted poorer countries very little if at all, the post-1980 one lifted billions of people out of absolute poverty, mostly in Asia. It is arguably the most important economic event in world history. Previous approaches to development that withdrew a country from the world market or brought the economy under state control were only successful at best in the short term. At last there was something that actually worked.
Now the richer countries have cold feet. Globalisation has brought forward at least one state with the capacity to challenge US hegemony and in the longer term perhaps India will follow China. US workers have experienced little improvement in living standards overall and many have lost out to global competition. There are no longer bonds between big companies and the towns in which they used to operate. In the absence of a strong tradition of successful state welfare, many look to protectionism to help them.
For its part, for traditional realpolitikal reasons, the US state is increasingly using its military and financial supremacy to check China’s rise and exclude its economy from high value-added activities. And of course this brings out the most negative nationalist bullying and autocratic tendencies in the Chinese leadership, which further exacerbate global polarisation.
What then is the best chance of restarting globalisation and extending the wealth-creating benefits of capitalism to poorer countries? Global US companies outside the defence sector have an interest in this, but not the US working class, or the US state. Hence some weakening of US political and economic hegemony is desirable, although a sudden collapse would be destabilising.
Most poorer countries have an interest in promoting globalisation, despite the associated social disruption and tensions. However, many will not want to directly oppose the US and risk sanctions, although they also won’t want to undermine trade with China. They will try and maintain a neutral position as far as possible.
Reactionary states such as Russia, Iran and Saudi Arabia have little interest in promoting globalisation but will move closer to China as a counterweight to US economic sanctions and military pressure in order to further their political ambitions.
The European Union is intrinsically less protectionist but is so dependent on the US military to defend it from Russia that it will follow the policy of containing China, more or less willingly.
The European social democratic parties have a tradition of internationalism but are struggling to attract working class voters from far-right nationalist parties. They cannot afford to be charged with caring more about poorer countries than their own working-class electorate.
The world balance of forces is currently against progress on globalisation. The danger of falling into the “Thucydides Trap” of war between the prevailing hegemon and the rising power is substantial. Paradoxically, increased defence spending by European states may help by reducing military dependence on the US and enabling them to play more of a mediating role. We can but hope.
There are some things I don't understand, after reading the article twice.
1. Who are the rich people you want to tax? I suppose that includes Bill Gates, but I don't know if that includes you, for example.
2. I don't understand why you seem to think that the globalization has ironically created the conditions for conflict and war (6th thesis). If China (or any other country) managed to become near equal the current hegemon (again, whichever country) by some other means (in this case, anything other than globalization), the result would be the same, I think. So it has nothing to do with globalization and everything to do with the premium one can extract if one is a hegemon. But that's just how the power works.
3. Why is it that we must avoid war and trade conflicts at all costs? If there has to be a conflict, I'd really want it to be a trade conflict and not outright war. It is very weird (to me, at least) to put those two in the same category.
4. Throughout the article you emphasize the need for the consistent ideology (or ideological position). I do not understand why. What goes on currently (and has always been going on) is the power play. But it is not evident to me (nor intuitive) that a consistent ideology wouldn't create greater harm than the realpolitik.
Concerning point three - I really doubt that western middle class people bother about if Chinese or Indian people live as good as they do themselves; they never meet them and can't judge. Well, they see Chinese tourists as they saw Japanese tourists 50 years ago, but why should they be angry about that? What bother them is the attrition of their own living standards compared to the 1 or max 10 %.
This is of course more burning in the US than in Europe. But even in Europe middle class people begin experience family members having to take zero-hours jobs or having no jobs at all. What we see in the western world was described excellently by Peter Turchin and Jack Goldstone (https://www.noemamag.com/welcome-to-the-turbulent-twenties/):
"First, faced with a surge of labor that dampens growth in wages and productivity, elites seek to take a larger portion of economic gains for themselves, driving up inequality.
Second, facing greater competition for elite wealth and status, they tighten up the path to mobility to favor themselves and their progeny. For example, in an increasingly meritocratic society, elites could keep places at top universities limited and raise the entry requirements and costs in ways that favor the children of those who had already succeeded.
Third, anxious to hold on to their rising fortunes, they do all they can to resist taxation of their wealth and profits, even if that means starving the government of needed revenues, leading to decaying infrastructure, declining public services and fast-rising government debts."
And that makes middle class people feel very uneasy.
Very interesting theses you have nailed to the "door" here ;-)
Some reflections.
Re. Third, the West. I think the feelings of insecurity and displacement are driven more by members of Western "middle classes" comparing themselves to LOCAL benchmarks rather than to Asian populations. In particular - how they are doing compared to their parents' generation in their own communities, and maybe how they are doing compared to whatever "elites" they are familiar with.
Re. Eighth, climate change. It is important to add that the climate change agenda is driving international organizations to take up energy policies and programs that are detrimental to people in poor countries e.g. banning public financing for fossil fuel projects https://twitter.com/toddjmoss/status/1589425188390989824?s=20
and even blocking the development of nuclear energy sources
https://toddmoss.substack.com/p/tyranny-of-the-anti-nuclear-minority
- policies which slow their growth and which slow the rate at which citizens of poor countries will get access to reliable energy.
Re. Ninth financialization and amorality. Besides financialization, I think that other aspects of globalization processes contribute to the destruction of cohesion and social bonds, including: sustained, relatively high rates of immigration, esp immigration involving people with relatively high cultural "distance" from the host population [I suppose Robert Putnam's 2007 paper is the best reference for this point], and highly "liberal" trade regimes, enabling company size to grow and encouraging executives to identify less with their local community, or their homeland and thereby to relieve any pressure to behave in a pro-social fashion that might otherwise come from these social connections.
Re. Tenth, migration. Speaking of the US, I don't think it is accurate to characterize recent migration levels as "minimal". I guess it depends on what your measure is and what your comparator is.
I would argue that, when thinking about the impact on society, the share of the foreign-born in the population is a useful measure. If you compare the foreign-born share of the US population at different points in time, the share was 14.6 percent in September of 2022. This is triple the share in 1970 and nearly double the share in 1990. If you compare this share to that during the entire history of the US, the foreign-born share is now reaching the all-time highs reached in 1910. https://cis.org/Report/ForeignBorn-Population-Hits-Nearly-48-Million-September-2022
Re. Eleventh. What is to be done? I share your skepticism!
Why would any sane person in the first world want more immigration from the third world?
All good, but especially Sixth, Eighth & Ninth. There is no accounting (not here, not anywhere) for the forces exerted by dictatorial powers backed by national authoritarianism that may push to nihilistic ends.
Nor is there accounting for the careless attitudes of those in the wealth-creating web toward the billions subject to all the conditions that cause disadvantage. These attitudes more likely than not to be developed into beliefs as the effects of global warming afflict millions (and more) through extremes of weather.
Competition for the minerals critical for production of low-carbon energy will exacerbate international tensions. If the history of, and hopes borne out of, globalisation mean anything then universal demands for those minerals will result in fairer means of distribution of the end-products necessary for production & storage of energy. Place bets while the wheel spins.
I think this is a very interesting and productive approach and wish I had seen the post earlier.
Many great scientific discoveries have been made by identifying what is important and ignoring the rest. Gravity in celestial objects depends only on the total mass and centre of gravity, not on the details of shape. Mass is conserved in chemical reactions, but colour and phase (gas, liquid, solid) are not. Energy and momentum are conserved but velocity isn’t.
Theses like the ones in Milanovic’s post distinguish the wood from the trees: properties that change relatively slowly and are therefore more fundamental from those that are temporary.
Liberals usually regard the main political contradiction in the world as between liberal democracies and everything else (labelled autocracies). However, history show that liberal democracy can disappear quite quickly, without most people noticing much difference in their lives, at least in the short term. Indeed, the African experience shows that even coups can be popular if an elected government appears corrupt or not to be dealing effectively with pressing problems.
Income and wealth however are much more enduring. In the absence of destruction by war, foreign conquest, or government breakdown they only change incrementally.
The vast majority of people in developing countries would like a Western lifestyle. They mean living standards and the freedom and opportunities that come with them far more than liberal democracy.
The post-World War 2 trading and human rights consensus had important positive features, but it established rules of the economic game that the richer capitalist countries knew they were good at. Ceding de facto hegemony to the US kept the military bill down for other rich countries and ensured that nominally international institutions such as the IMF and World Bank reflected their interests. Apart from small economies such as South Korea and Taiwan that were of strategic importance to the US in the struggle against communism, the list of rich countries in 1980 was very little different to that in 1900.
Post-war economic growth was largely confined to countries that were already rich. Together with trade unionism and the fear of communism, it caused ruling groups to accept a new political settlement. This included wage rates that were high even for the unskilled, and welfare provision that mitigated the enduring fears of the pre-war working class of unemployment, poverty, sickness, and old age. From the perspective of the world economy, workers in the economically advanced countries received a high rent premium because of their physical location. I grew up in such a unionised working-class family in the UK.
From about 1980, the reduced cost of transporting goods and improved information systems made the offshoring of parts of the manufacturing process economically possible. To this was added many business and financial services due to information technology. The hegemony of the rich countries seemed unchallengeable, particularly after the collapse of the Soviet Union, and such states saw no reason to curtail these profitable opportunities. With declining reliance on manufacturing at home, and in the absence of a really existing socialist alternative, it was possible for the rich to weaken the power of trade unions and increase inequality in the rich countries.
Unlike previous waves of globalisation, which benefitted poorer countries very little if at all, the post-1980 one lifted billions of people out of absolute poverty, mostly in Asia. It is arguably the most important economic event in world history. Previous approaches to development that withdrew a country from the world market or brought the economy under state control were only successful at best in the short term. At last there was something that actually worked.
Now the richer countries have cold feet. Globalisation has brought forward at least one state with the capacity to challenge US hegemony and in the longer term perhaps India will follow China. US workers have experienced little improvement in living standards overall and many have lost out to global competition. There are no longer bonds between big companies and the towns in which they used to operate. In the absence of a strong tradition of successful state welfare, many look to protectionism to help them.
For its part, for traditional realpolitikal reasons, the US state is increasingly using its military and financial supremacy to check China’s rise and exclude its economy from high value-added activities. And of course this brings out the most negative nationalist bullying and autocratic tendencies in the Chinese leadership, which further exacerbate global polarisation.
What then is the best chance of restarting globalisation and extending the wealth-creating benefits of capitalism to poorer countries? Global US companies outside the defence sector have an interest in this, but not the US working class, or the US state. Hence some weakening of US political and economic hegemony is desirable, although a sudden collapse would be destabilising.
Most poorer countries have an interest in promoting globalisation, despite the associated social disruption and tensions. However, many will not want to directly oppose the US and risk sanctions, although they also won’t want to undermine trade with China. They will try and maintain a neutral position as far as possible.
Reactionary states such as Russia, Iran and Saudi Arabia have little interest in promoting globalisation but will move closer to China as a counterweight to US economic sanctions and military pressure in order to further their political ambitions.
The European Union is intrinsically less protectionist but is so dependent on the US military to defend it from Russia that it will follow the policy of containing China, more or less willingly.
The European social democratic parties have a tradition of internationalism but are struggling to attract working class voters from far-right nationalist parties. They cannot afford to be charged with caring more about poorer countries than their own working-class electorate.
The world balance of forces is currently against progress on globalisation. The danger of falling into the “Thucydides Trap” of war between the prevailing hegemon and the rising power is substantial. Paradoxically, increased defence spending by European states may help by reducing military dependence on the US and enabling them to play more of a mediating role. We can but hope.
There are some things I don't understand, after reading the article twice.
1. Who are the rich people you want to tax? I suppose that includes Bill Gates, but I don't know if that includes you, for example.
2. I don't understand why you seem to think that the globalization has ironically created the conditions for conflict and war (6th thesis). If China (or any other country) managed to become near equal the current hegemon (again, whichever country) by some other means (in this case, anything other than globalization), the result would be the same, I think. So it has nothing to do with globalization and everything to do with the premium one can extract if one is a hegemon. But that's just how the power works.
3. Why is it that we must avoid war and trade conflicts at all costs? If there has to be a conflict, I'd really want it to be a trade conflict and not outright war. It is very weird (to me, at least) to put those two in the same category.
4. Throughout the article you emphasize the need for the consistent ideology (or ideological position). I do not understand why. What goes on currently (and has always been going on) is the power play. But it is not evident to me (nor intuitive) that a consistent ideology wouldn't create greater harm than the realpolitik.