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Business News/ Opinion / Globalization paradoxes, redux
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Globalization paradoxes, redux

Only a concerted intellectual effort to resuscitate the conception of globalism is likely to tip the balance in favour of globalization itself

Data assembled by the Peterson Institute, a Washington think-tank, documents that global trade as a percentage of global output has flatlined at around 60% since a sharp drop after the global financial crisis of 2008. Photo: Indranil Bhoumik/Mint Premium
Data assembled by the Peterson Institute, a Washington think-tank, documents that global trade as a percentage of global output has flatlined at around 60% since a sharp drop after the global financial crisis of 2008. Photo: Indranil Bhoumik/Mint

I had asked recently in this column, Is globalism dead? (1 August). By this I was referring to a retreat from a principled commitment to freer trade in goods, services, and factors of production—capital and labour, in particular—by the political class in advanced economies such as the US and the UK. The election rhetoric in the US, and what we heard from all parties in the Brexit debate in the UK, certainly seem to suggest as much.

As I remarked, Republican presidential candidate Donald Trump, ever one to capture the spirit animating his putative supporters, has asserted categorically: “Americanism, not globalism, will be our credo." While the Democratic candidate, Hillary Clinton, has been more guarded, she has notably accomplished a neat volte-face on the Trans-Pacific Partnership (TPP), which, according to her, is no longer the “gold standard" of trade agreements as she once averred, but an agreement quite possibly detrimental to the interests of American workers. Very well!

That there has been a degradation of the public discourse in the advanced economies is not in question. Part of the reason is the failure of the political and the intellectual elite to make a principled and nuanced defence of freer trade in particular and globalization in general, while acknowledging that it produces losers who must be compensated. (I have argued previously in these pages that the challenge in emerging economies such as India is somewhat different, less a function of the opposition of putative losers and more, of a domestic political economy in which it is difficult to push reforms, whether of domestic or international policies.)

Yet, this is not the whole story. As economist James Dean and I argued recently in Canada’s Globe And Mail, part of the difficulty lies in inherent, incipient conflicts among three large categories—national sovereignty, democracy and globalization. This is a potential conflict that has been well understood by political scientists for a long while but has been grasped only more recently by economists. It has been popularized in recent years by Harvard Kennedy School economist Dani Rodrik, who uses the somewhat infelicitous word “trilemma" to describe the three-way tussle. The term also suggests a zero-one, black-and-white trade-off, whereas in practice, trade-offs are occurring at the margin on each pair of the three concepts. Reality is messier than crystalline academic conceptualizations.

Perhaps for this reason, members of the political and intellectual elite the world over—I speak here in particular of the advanced economies—have been loath to acknowledge the pertinent trade-offs and make a sophisticated case for the benefits of freer trade. One casualty has been the abandonment of any attempt to make the case for the rules-based, multilateral trading system founded on the cherished principles of the single undertaking and of consensus. That everyone agrees on everything (more or less), and everyone must agree, ensured that successive rounds of multilateral trade negotiations were not grossly tilted toward the interests of, say, advanced economies over emerging and frontier economies.

Also Read: Is globalism dead?

The result has been the proliferation of preferential trade agreements, which in their most recent incarnations such as the proposed TPP, have little to do with trade and more to do with domestic regulatory policy. I have argued on numerous occasions in this space that India was right to avoid being suckered into such a Trojan horse agreement, and should avoid falling into similar traps in future (without retreating into a defensive crouch that fails to articulate a muscular case for its national economic interest).

The irony is that TPP appears to be dead on arrival in the US itself, that too for an agreement which was essentially rigged in favour of the US to begin with! This is perhaps because, having given up on the aspiration for (and language of) legitimate free trade, it became intellectually and politically difficult for proponents of the TPP to defend an agreement which had been sculpted to favour US corporate lobby interests—such as of the pharmaceutical industry. In other words, having given up on making the case that “this is good for the world and good for America", it became difficult to defend the position that “this is good for corporate America and therefore good for America". The argument that what is good for General Motors is good for the country might just have worked in the heyday of American industrial supremacy in the postwar years, but rings hollow today in a country in which the erstwhile industrial heartland is now a rust belt.

The reality today is that not only is the concept of globalism besieged, globalization itself may well be in retreat. Data assembled by the Peterson Institute, a Washington think-tank, documents that global trade as a percentage of global output has flatlined at around 60% since a sharp drop after the global financial crisis of 2008.

Only a concerted intellectual effort to resuscitate the conception of globalism is likely to tip the balance in favour of globalization itself.


Every fortnight, In the Margins explores the intersection of economics, politics and public policy to help cast light on current affairs.

Comments are welcome at views@livemint.com. To read Vivek Dehejia’s previous columns, visit www.livemint.com/vivekdehejia

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Published: 11 Sep 2016, 10:48 PM IST
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