A Har­vard econ­o­mist ex­plains why the rise of pop­ulism should not have sur­prised any­one.

The Washington Post Sunday - - BUSINESS - BY ANA SWANSON ana.swanson@wash­post.com

For decades, it seemed like the world was on an un­stop­pable march to­ward closer in­te­gra­tion. The world was flat and get­ting flat­ter, thanks to the spread of multi­na­tional cor­po­ra­tions, new tech­nolo­gies such as the In­ter­net and in­ter­na­tional mi­gra­tion, all of which knit to­gether far-flung coun­tries around the world.

Since the fi­nan­cial cri­sis, how­ever, glob­al­iza­tion no longer ap­pears in­evitable. Coun­tries, in­clud­ing the United States, have seen the rise of a pop­ulist back­lash against more lib­er­al­ized trade and in­ter­na­tional in­te­gra­tion that could re­sult in glob­al­iza­tion play­ing out in re­verse — with coun­tries’ economies be­com­ing more in­su­lated and less in­te­grated. Look no fur­ther than the trio of Pres­i­dent Trump, Sen. Bernie San­ders (I-Vt.) and Brexit for proof that pop­ulism is both a wide-rang­ing and pow­er­ful force.

This back­lash demon­strates just how much the world needs to ur­gently re­ex­am­ine the mech­a­nisms of glob­al­iza­tion and trade to en­sure that more peo­ple ben­e­fit from them, says Dani Ro­drik, an econ­o­mist at Har­vard. In a re­cent work­ing pa­per and a forth­com­ing book, Ro­drik says pre­serv­ing the lib­eral global or­der will hinge on broad­en­ing its ben­e­fits to more peo­ple. In the mean­time, the fu­ture of glob­al­iza­tion hangs in the bal­ance. This in­ter­view has been edited for length and clar­ity.

Q: For decades, it’s seemed like glob­al­iza­tion was in­evitable. Do you see greater eco­nomic in­te­gra­tion as the long-run trend of his­tory? Or maybe we’re think­ing of it back­ward, and the re­cent pe­riod of global in­te­gra­tion we saw up to the fi­nan­cial cri­sis is the ex­cep­tion to the norm?

A: One of the big­gest false­hoods in the dis­cus­sion of glob­al­iza­tion is that it has been in­evitable and there is noth­ing you can do about it. In fact, glob­al­iza­tion and the type of glob­al­iza­tion we have is the prod­uct of the choices we made. Trade agree­ments have to be ne­go­ti­ated. We had to co­or­di­nate in­ter­na­tional or­ga­ni­za­tions to dis­sem­i­nate the norm of free cap­i­tal flows and fi­nan­cial glob­al­iza­tion.

So I think it’s silly to pre­sume that it can­not be re­versed, if we man­age it re­ally badly. I don’t see that on the hori­zon, but I do not think we should min­i­mize the role of our own de­ci­sions in the form that glob­al­iza­tion took.

Q: Where do you come down on trade now? In your re­cent pa­per, you say that “trade gener­i­cally pro­duces losers,” and you cite stud­ies that show how NAFTA and China’s en­try into the World Trade Or­ga­ni­za­tion led to job losses. But freer trade also cre­ates eco­nomic gains.

A: I would say that the agenda for glob­al­iza­tion has be­come very im­bal­anced. There are spe­cific groups that are ben­e­fit­ing hand­somely, and there are groups that have lost out. The chal­lenge is not to re­verse or op­pose glob­al­iza­tion. I think the chal­lenge is to re­bal­ance it in a way that will pro­vide broad gains to many groups who feel they have been ex­cluded.

I do think we’ve mis­man­aged this process badly. The forces that have gained, the right-wing pop­ulists, don’t have a stake in ei­ther lib­eral democ­racy or the lib­eral world econ­omy, and both are at stake right now. But I do think there is a way out. It’s go­ing to re­quire al­ter­na­tives to the nar­ra­tive of the right-wing pop­ulists. I’m hop­ing that will come about.

Q: What is the dif­fer­ence be­tween left-wing pop­ulism, which you say falls on eco­nomic cleav­ages, and right-wing pop­ulism, which cen­ters on eth­nic and na­tional dif­fer­ences?

A: They dif­fer in two key re­spects, which makes me more sym­pa­thetic to left-wing pop­ulists than right-wing pop­ulists.

One is that left-wing pop­ulists have reme­dies in mind that would elim­i­nate the di­vi­sions that cre­ate the back­lash in the first place. They talk about cleav­ages in terms of in­equal­ity of op­por­tu­nity and in­come and wealth, and to the ex­tent that you’re able to over­come th­ese things, you are work­ing to elim­i­nate di­vi­sions. Whereas right-wing pop­ulists feed off cul­tural, eth­nic, racial and re­li­gious cleav­ages that need to be deep­ened to make them suc­cess­ful. In other words, right-wing pop­ulists ac­tively cre­ate an en­emy that can mo­bi­lize their sup­port­ers. That makes them danger­ous, be­cause their reme­dies en­tail deep­en­ing the cleav­ages they thrive on.

The sec­ond as­pect is that, not al­ways but typ­i­cally, right-wing pop­ulists do not have any great love for the norms of lib­eral democ­racy be­cause they be­lieve that there is one true na­tional will. They gen­er­ally ab­hor the idea that we should have dif­fer­ent views as to how that is de­ter­mined, or things like a free in­de­pen­dent ju­di­ciary. So right-wing pop­ulism is more danger­ous to democ­racy than left-wing pop­ulism.

Q: You men­tion that left-wing and right-wing pop­ulism de­rive from dif­fer­ent eco­nomic and so­cial con­di­tions. Look­ing at the United States to­day, do you see one form as more as­cen­dant?

A: I make a dis­tinc­tion be­tween the deep causes of pop­ulism and the po­lit­i­cal nar­ra­tives around which they get wrapped. The deep causes of pop­ulism are eco­nomic and struc­tural, gen­er­ally speak­ing. There might be residues of racism and ethno-na­tion­al­ism in the United States and Euro­pean coun­tries, but I don’t think that’s what’s re­ally driv­ing pop­ulism. What’s driv­ing it is the eco­nomic in­se­cu­ri­ties, the ris­ing in­equal­ity and the eco­nomic and so­cial di­vi­sions that have been cre­ated, not just by glob­al­iza­tion but by the kind of poli­cies we have pur­sued in the past few decades.

But the man­ner in which pop­ulism gets pack­aged is dif­fer­ent. You can pack­age it around a rightwing, ethno-na­tion­al­is­tic, racial­ist nar­ra­tive, or you can pack­age it around a left-wing so­cial and eco­nomic ex­clu­sion nar­ra­tive. What’s hap­pen­ing on a day-to-day ba­sis might make it eas­ier for rightwing than left-wing or­ga­ni­za­tions. Refugees are in the news, and if there is the con­stant threat of Is­lamist ter­ror­ism, that is go­ing to pro­vide fuel for right-wing pop­ulists. It’s much more salient and gives them a way of or­ga­niz­ing this broad-based dis­con­tent.

Q: We’re ob­vi­ously see­ing a strong back­lash now to freer trade, which seems like a dra­matic shift from pub­lic opin­ions just a decade or two ago. Is there any­thing econ­o­mists got wrong about trade? Or did they just not do a good job of ex­plain­ing the down­sides?

A: Eco­nomic the­ory would have pre­dicted this kind of back­lash. The mod­els trade econ­o­mists use pre­dict not just that trade lib­er­al­iza­tion is ac­com­pa­nied with sig­nif­i­cant in­come re­dis­tri­bu­tion but also that the amount of re­dis­tri­bu­tion tends to rise rel­a­tive to over­all eco­nomic gains as we start chas­ing af­ter the most re­mote im­ped­i­ments to trade. So there was a cu­ri­ous dis­junc­tion be­tween what econ­o­mists know and the way they rep­re­sented the dis­ci­pline to the rest of the world.

Q: What needs to be done to al­ter glob­al­iza­tion?

A: I have a book com­ing out this fall in which I talk about re­bal­anc­ing glob­al­iza­tion. There are three ar­eas I em­pha­size. One is that we need to move to­ward agree­ments that pro­vide greater ben­e­fits to em­ploy­ees and la­bor in­stead of em­ploy­ers and cap­i­tal. An­other is that I think we’ve moved too far in terms of global gov­er­nance and stan­dard­iza­tion of reg­u­la­tions. We need to en­hance na­tional gov­er­nance, and para­dox­i­cally, that would make eco­nomic glob­al­iza­tion work bet­ter. Third would be mov­ing from ar­eas where over­all eco­nomic gains are rel­a­tively small to ar­eas where over­all eco­nomic gains could be rel­a­tively large, such as in­creas­ing the mo­bil­ity of work­ers across borders.

Q: You have im­plied Europe has done more than the United States to re­dis­tribute the gains in trade, and it has re­sulted in a dif­fer­ent kind of pop­ulism in Europe. Ex­plain that.

A: In the United States, ev­ery time there was a trade agree­ment, you needed to tack on trade ad­just­ment as­sis­tance to get la­bor to go along. Over time, it’s be­come clear that th­ese mea­sures re­ally don’t work be­cause there are no po­lit­i­cal in­cen­tives to en­sure they work once agree­ments have been signed. In Europe, you don’t have a sep­a­rate mech­a­nism for com­pen­sat­ing trade losers. In­stead you have very broad so­cial in­sur­ance mech­a­nisms. Europe, which be­came an open econ­omy ear­lier than the United States, was able to man­age this open­ness be­cause of th­ese ex­pan­sive wel­fare states.

In­deed, it’s not that pop­ulism hasn’t taken up in Europe, it’s just that Euro­pean pop­ulists, in­clud­ing the right-wing pop­ulists, are not nec­es­sar­ily anti-trade. The na­ture of the con­ver­sa­tion over trade is not nearly as con­tentious as it has be­come for quite some time in the United States, go­ing back to Pat Buchanan and Ross Perot, who were in many ways an­tecedents of Don­ald Trump.

LINDA DAVID­SON/THE WASH­ING­TON POST

Ja­son Scaggs touches up his Flag Barn in Owings, Md. With the pop­ulist move­ment, the global economies may be­come more in­su­lated.

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