Next era of glob­al­i­sa­tion

Pakistan Observer - - INTERNATIONAL -

ting Amer­ica’s Mid­west­ern “Rust Belt” are real. Even as glob­al­iza-tion gen­er­ates ag­gre­gate growth, it pro­duces win-ners and losers. Ex­pos­ing lo­cal in­dus­tries to in­terna-tional com­pe­ti­tion spurs ef­fi­ciency and in­no­va­tion, but the re­sult­ing cre­ative de­struc­tion ex­acts a sub-stan­tial toll on fam­i­lies and com­mu­ni­ties.

Econ­o­mists and pol­i­cy­mak­ers alike are guilty of gloss­ing over th­ese dis­tri­bu­tional con­se­quences. Coun­tries that en­gage in free trade will find new chan­nels for growth in the long run, the think­ing goes, and work­ers who lose their jobs in one in­dus-try will find em­ploy­ment in an­other.

In the real world, how­ever, this process is messy and pro­tracted. Work­ers in a shrink­ing in­dus­try may need en­tirely new skills to find jobs in other sec­tors, and they may have to pack up their fam­i­lies and pull up deep roots to pur­sue th­ese op­por­tu­ni­ties.

It has taken a pop­u­lar back­lash against free trade for poli-cy­mak­ers and the me­dia to ac­knowl­edge the ex­tent of this dis­rup­tion.

That back­lash should not have come as a sur­prise. Tra­di­tional la­bor-mar­ket poli­cies and train­ing sys-tems have not been equal to the task of deal­ing with the largescale changes caused by the twin forces of glob­al­iza­tion and automation.

The US needs con-crete pro­pos­als for sup­port­ing work­ers caught up in struc­tural tran­si­tions — and a will­ing­ness to con-sider fresh ap­proaches, such as wage in­sur­ance.

Con­trary to cam­paign rhetoric, sim­ple pro­tec­tion­ism would harm con­sumers. A re­cent study by the US Pres­i­dent’s Coun­cil of Eco­nomic Ad­vis­ers found that mid­dle-class Amer­i­cans gain more than a quar-ter of their pur­chas­ing power from trade. In any event, im­pos­ing tar­iffs on for­eign goods will not bring back lost man­u­fac­tur­ing jobs.

It is time to change the pa­ram­e­ters of the de­bate and rec­og­nize that glob­al­iza­tion has be­come an en­tirely dif­fer­ent an­i­mal: The global goods trade has flat-tened for a va­ri­ety of rea­sons, in­clud­ing plum­met­ing com­mod­ity prices, slug­gish­ness in many ma­jor economies, and a trend to­ward pro­duc­ing goods closer to the point of con­sump­tion.

Cross-bor­der flows of data, by con­trast, have grown by a fac­tor of 45 dur­ing the past decade, and now gen­er­ate a greater eco­nomic im­pact than flows of tra­di­tional man­u­fac­tured goods.

Dig­i­ti­za­tion is chang­ing ev­ery­thing: The na­ture of the goods chang­ing hands, the uni­verse of po­ten­tial sup­pli­ers and cus­tomers, the method of de­liv­ery, and the cap­i­tal and scale re­quired to op­er­ate glob-ally.

It also means that glob­al­iza­tion is no longer ex­clu­sively the do­main of For­tune 500 firms.

De­spite all the anti-trade rhetoric, it is cru­cial that Amer­i­cans bear in mind that most of the world’s cus­tomers are over­seas. Fast-grow­ing emerg­ing economies will be the big­gest sources of con­sump­tion growth in the years ahead. This would be the worst pos­si­ble mo­ment to erect bar­ri­ers.

The new dig­i­tal land­scape is still tak­ing shape, and coun­tries have an op­por­tu­nity to re­de­fine their com­par­a­tive ad­van­tages. The US may have lost out as the world chased low la­bor costs; but it op­er­ates from a posi-tion of strength in a world de­fined by dig­i­tal global-iza­tion.

There is real value in the seam­less move­ment of in­no­va­tion, in­for­ma­tion, goods, ser­vices, and — yes — peo­ple. As the US strug­gles to jump-start its econ­omy, it can­not af­ford to seal it­self off from an im­por­tant source of growth.

US pol­i­cy­mak­ers must take a nu­anced, clear-eyed view of glob­al­iza­tion, one that ad­dresses its down­sides more ef­fec­tively, not only when it comes to lost jobs at home, but also when it comes to its trad­ing part­ners’ la­bor and en­vi­ron­men­tal stan­dards. Above all, the US needs to stop retry­ing the past — and start fo­cus­ing on how it can com­pete in the next era of glob­al­iza­tion.

NAJRAN: Deputy Crown Prince Muham­mad bin Sal­man bin Ab­dul Aziz, the se­cond Deputy Pre­mier and Min­is­ter of De­fence at­tend­ing If­tar with troops of van­guard Air De­fence units.

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