The pol­i­tics of glob­aloney

Pankaj Ghe­mawat and Steven A. Alt­man say the world is far less glob­al­ized than pro­tec­tion­ists think

The Washington Post Sunday - - OUTLOOK - Twit­ter: @panka­jghe­mawat Pankaj Ghe­mawat is di­rec­tor, and Steven A. Alt­man is ex­ec­u­tive di­rec­tor, of the Cen­ter for the Glob­al­iza­tion of Ed­u­ca­tion and Man­age­ment at New York Univer­sity’s Stern School of Busi­ness. Ghe­mawat’s lat­est book is “The Laws of Glo

Don­ald Trump’s elec­tion was pro­pelled by the wave of anti-glob­al­iza­tion anger that is sweep­ing the United States and other Western ad­vanced economies. Trump has echoed that anger in his rhetoric. In his in­au­gu­ral ad­dress, he lamented that Amer­ica has “made other coun­tries rich, while the wealth, strength and con­fi­dence of our coun­try has dis­si­pated.” And now he is re­spond­ing to that anger with pol­icy. In his first days in of­fice, he signed an or­der to with­draw from the Trans-Pa­cific Part­ner­ship, pledged to rene­go­ti­ate NAFTA and pre­pared a mora­to­rium on new mul­ti­lat­eral agree­ments. He di­rected con­struc­tion of a wall along the south­ern bor­der and threat­ened a 20 per­cent im­port tax on goods from Mex­ico. And he blocked refugees, im­mi­grants and trav­el­ers from seven Mus­lim­ma­jor­ity coun­tries.

All of this re­flects gen­uine skep­ti­cism of the ben­e­fits of glob­al­iza­tion, op­po­si­tion to trade deals and anx­i­ety about im­mi­gra­tion among large por­tions of the U.S. pop­u­la­tion, protests not­with­stand­ing.

But as the Trump ad­min­is­tra­tion moves to re­duce and re­struc­ture U.S. in­ter­na­tional en­gage­ment, Amer­ica ur­gently needs a re­al­ity check. The United States is far less buf­feted by in­ter­na­tional trade, im­mi­gra­tion and other as­pects of glob­al­iza­tion than many Amer­i­cans as­sume; the whole world is far less glob­al­ized than peo­ple tend to be­lieve. And poli­cies rooted in over­es­ti­mat­ing glob­al­iza­tion — “glob­aloney” — could harm the peo­ple they pur­port to pro­tect.

If you had to guess, how much do you think the United States im­ports rel­a­tive to what’s made in the U.S.A.? Or what per­cent­age of the U.S. pop­u­la­tion do you think is made up of first-gen­er­a­tion im­mi­grants? If you guessed with­out look­ing at the graph­ics above, you prob­a­bly just guessed too high.

Given the po­lit­i­cal rhetoric of late, it may seem like the United States is one of the world’s most glob­al­ized coun­tries. It’s not. Based on how much goods, ser­vices, cap­i­tal, peo­ple and in­for­ma­tion flow across the na­tion’s bor­ders com­pared with how much stays in­side the

coun­try, the United States ranks 100th out of 140 coun­tries, ac­cord­ing to the 2016 “DHL Global Con­nect­ed­ness In­dex,” which we re­leased last Novem­ber. (Deutsche Post DHL spon­sored the study but ex­erted no in­flu­ence over the re­sults.)

On trade and im­mi­gra­tion — two of the big is­sues in U.S. pol­i­tics right now — the con­trast be­tween rhetoric and re­al­ity is es­pe­cially strik­ing.

The United States im­ported goods and ser­vices worth 15 per­cent of its gross do­mes­tic prod­uct in 2015. That makes Amer­ica less re­liant on im­ports than al­most ev­ery other coun­try. Just five na­tions im­ported less rel­a­tive to the size of their economies: Su­dan, Ar­gentina, Nige­ria, Brazil and Iran. And de­spite the Amer­i­can cliche that ev­ery­thing is made in China, less than 3 per­cent of money spent in the United States goes to Chi­nese im­ports — and a good por­tion of the price of Chi­nese prod­ucts sold here ac­tu­ally goes to U.S. com­pa­nies trans­port­ing, sell­ing and mar­ket­ing those goods.

Turn­ing to im­mi­gra­tion, first-gen­er­a­tion im­mi­grants make up about 14 per­cent of the U.S. pop­u­la­tion. The United States ranks 27th in the world on this met­ric — above av­er­age, but nowhere near the top. And yet Amer­i­cans tend to think there are far more im­mi­grants in the United States. On av­er­age, Amer­i­cans es­ti­mated that 33 per­cent of the coun­try’s pop­u­la­tion was born abroad in a 2015 sur­vey con­ducted by Ip­sos Mori. U.S. re­spon­dents were even fur­ther off the mark in a 2013 Ger­man Mar­shall Fund study, guess­ing on av­er­age 42 per­cent — three times the cor­rect an­swer. In­ter­est­ingly, sim­ply telling re­spon­dents the ac­tual level of im­mi­gra­tion into the United States cuts the pro­por­tion who think there are too many im­mi­grants in half. As for the stan­dard re­frain that im­mi­grants are to blame for the loss of Amer­i­can jobs, main­stream econ­o­mists agree that tech­nol­ogy has cost far more jobs than has im­mi­gra­tion or in­ter­na­tional com­pe­ti­tion.

If you ask Amer­i­cans how glob­al­ized the world is as a whole, you get more glob­aloney. When we sur­veyed 1,720 U.S. adults in 2012, we found that they thought, on av­er­age, that the world is about five times more glob­al­ized than it re­ally is. Re­spon­dents guessed that eight times more peo­ple live out­side the coun­tries where they were born than ac­tu­ally do, and they over­es­ti­mated the pro­por­tion of trade across na­tional bor­ders by about 50 per­cent. They also had ex­ag­ger­ated per­cep­tions of the in­ter­na­tional pro­por­tion of tele­phone calls (ac­tu­ally 5 per­cent), fixed in­vest­ment (10 per­cent), and even con­nec­tions on Face­book (14 per­cent) and Twit­ter (25 per­cent).

Why do peo­ple get it so wrong? Peo­ple tend to be­lieve what­ever they de­sire or fear the most. And their mis­per­cep­tions about glob­al­iza­tion are fed both by po­lit­i­cal rhetoric and by pop­u­lar ac­counts — by crit­ics of glob­al­iza­tion, like Trump, and by those who em­brace it. In his best-sell­ing book “The World Is Flat,” up­dated twice since its ini­tial 2005 pub­li­ca­tion, Thomas Fried­man de­clares that we have wit­nessed the cre­ation of “a global, Web-en­abled plat­form for mul­ti­ple forms of col­lab­o­ra­tion . . . . This plat­form now op­er­ates with­out re­gard to ge­og­ra­phy, dis­tance, time, and, in the near fu­ture, even lan­guage.” But in fact, in­ter­na­tional flows are still strongly con­strained by dis­tance, as well as cul­tural, po­lit­i­cal and eco­nomic dif­fer­ences be­tween coun­tries. That’s why, along with China (with its huge man­u­fac­tur­ing base and con­sumer pop­u­la­tion), Canada and Mex­ico are the United States’ top trad­ing part­ners, each ac­count­ing for about 15 per­cent of U.S. mer­chan­dise trade. And when Amer­i­can com­pa­nies es­tab­lish a sin­gle for­eign op­er­a­tion, that out­post is in Canada, Mex­ico or Bri­tain (be­cause lan­guage and his­tory mat­ter) more than 60 per­cent of the time.

An­other rea­son peo­ple over­es­ti­mate glob­al­iza­tion: They be­lieve in the power of tech­nol­ogy to shrink the world. Yet peo­ple have been say­ing that the tech­nol­ogy of the day was mak­ing dis­tance ir­rel­e­vant as far back as the 1850s. The tele­graph didn’t do it — nor did the ra­dio, the au­to­mo­bile or the air­plane. And the In­ter­net won’t ei­ther, be­cause on­line in­ter­ac­tions mir­ror off­line re­la­tion­ships. While Face­book makes it tech­ni­cally pos­si­ble to “friend” some­one on the other side of the world as eas­ily as your next-door neigh­bor, peo­ple don’t re­ally choose their friends at ran­dom.

So what’s at stake? Glob­aloney would be funny if its con­se­quences weren’t so dan­ger­ous.

Ex­ag­ger­ated per­cep­tions of glob­al­iza­tion make ac­tual prob­lems harder to solve. In­come in­equal­ity in the United States, for ex­am­ple, has risen to a level last seen in the 1920s. It is po­lit­i­cally ex­pe­di­ent to place the blame abroad, but the lim­ited role of im­ports in the U.S. econ­omy fits with re­search sug­gest­ing that do­mes­tic fac­tors such as tech­no­log­i­cal change and the de­cline of unions are big­ger con­trib­u­tors. The real so­lu­tions for in­equal­ity in­volve do­mes­tic pol­icy: taxes, ed­u­ca­tion, la­bor reg­u­la­tion and so on. If we re­spond in­stead by cut­ting in­ter­na­tional flows, we dis­tract our­selves from the hard com­pro­mises that are re­ally re­quired. On top of that, de­glob­al­iza­tion would de­press growth, cut­ting our ca­pac­ity to fund more ef­fec­tive pol­icy re­sponses.

The same pat­tern re­peats it­self across many pol­icy ar­eas. Con­cerned about big cor­po­ra­tions con­sol­i­dat­ing and harm­ing con­sumers? Glob­aloney would lead you to fo­cus on global mar­ket con­cen­tra­tion, but it’s usu­ally na­tional or lo­cal con­cen­tra­tion that mat­ters. Push out for­eign com­peti­tors, and prob­lems of do­mes­tic mar­ket con­cen­tra­tion would get worse. Wor­ried about food se­cu­rity? Only 6 per­cent of milk, 9 per­cent of rice, 12 per­cent of corn and 22 per­cent of wheat are traded in­ter­na­tion­ally on a global ba­sis, but trade is a sav­ior when lo­cal har­vests fall short.

Glob­aloney can also dis­tort our view of our al­lies. If the world re­ally were flat, Mex­ico might be no more strate­gic to the United States than Spain or In­done­sia, two coun­tries with sim­i­lar-size economies. It is be­cause dis­tance mat­ters that it is so wor­ry­ing that U.S.-Mex­ico re­la­tions have reached what for­mer pres­i­dent Vi­cente Fox calls “the very low­est point since the war be­tween Mex­ico and the United States” that ended in 1848.

Fi­nally, it’s worth re­mem­ber­ing what hap­pened last time glob­al­iza­tion went into re­verse. Af­ter the United States passed the Smoot-Haw­ley Tar­iff Act of 1930, reprisals fol­lowed and global trade plunged by twothirds. The col­lapse of the first wave of glob­al­iza­tion was a ma­jor con­trib­u­tor to the Great De­pres­sion. And there are eerie sim­i­lar­i­ties be­tween that his­tor­i­cal pe­riod and the present one: ris­ing in­equal­ity, a grow­ing power (China now, Ger­many then) chal­leng­ing the es­tab­lished or­der, and an in­crease in overt ex­pres­sions of racism and xeno­pho­bia, among oth­ers.

Though there is less glob­al­iza­tion to­day than many pre­sume, it would still be an er­ror to as­sume that we can turn back the dial on in­ter­na­tional in­te­gra­tion with­out suf­fer­ing too much. His­tory sug­gests that de­glob­al­iza­tion can have dis­as­trous con­se­quences. And since in­ter­na­tional trade and in­vest­ment in­ten­si­ties are three to four times higher now than they were be­fore the last great reversal, the dam­age of de­glob­al­iza­tion to­day could be even worse than last time around.


Work­ers pack av­o­ca­dos in Uru­a­pan, Mex­ico. Dis­tance still lim­its global trade, which is why Mex­ico and Canada are two of Amer­ica’s top trad­ing part­ners.

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