Trump, Brexit supporters living in past

‘Comparative advantage’ lets countries concentrate on their strengths

Brexit and Donald Trump represent what I call “the politics of rejection.” It works like this: pick a trend, institution, trade deal, whatever, and say “no” to it. No to the European Union. No to immigration. No to NAFTA. That’s it. If this sounds childish, it is.

So far, only Britain has had its “Now what?” moment. But others will come. If Trump, his supporters and their counterparts in Europe wish not to be made fools of, they need to watch the U.K., and watch carefully. Failure there is the failure of their brand of politics. Achieving the sort of change they want will mean learning from it, not emulating it.

I want to point to one such failure in the Brexiteers’ attitude to trade, the economy and globalization, and I want to do this by invoking the concept of “comparative advantage.” Through this lens, we can see the globalization these groups think they’re rejecting isn’t as straightforward as it appears.

Simply, a country has a comparative advantage if it is better in some area than its rivals. In an increasingly competitive global economy, this concept has taken on a special relevance, with countries pressured to expand on their specialties at the expense of other sectors. As a result, over the past three decades, the world has become a sort of production line, with countries acting for their trading partners as assembly line workers do: one welding metal, another affixing tires, but no one doing it all. At the end, you have more cars than you would had each worker tried to make them on their own, but you’ve also reduced each participant’s ability to make much independently. This is particularly evident in Europe, where — simplifying of course — Germany makes the cars, the U.K. provides the services, and Bulgaria covers textiles — but it also applies to the world more generally.

Over time, the structure of each country’s economy — its banking regulations, the role and power of its unions, its corporate governance structures, and so on, (like the specialized skills of the assembly line worker) — adapts to strengthen its comparative advantage, all the while weakening its ability to do anything else.

This narrowing process has had a number of beneficial results, not least of which is efficiency: more and better products are produced. But there are downsides, too. In Britain, the pursuit of comparative advantage began in earnest shortly after it joined the EU. In a short time it more or less abandoned manufacturing to its competitors and redoubled its advantages in banking, insurance and other services — all centred in London. Once prosperous factory towns across the north of England were laid waste, their people left without work, as their country locked itself into a sequence that would make these changes essentially irreversible. Decades passed, GDP grew, but the shutters remained: the “left behind” was born.

Different variations of this process have occurred across much of the western world. And, as we are now used to hearing, little has been done to help those who lost out. The politics of rejection emerged as a voice for their cause. It rejected the global system that stole their livelihoods, and promised a way back to an earlier time. But this remains an empty promise. Thirty years of pursuing comparative advantage has ensured that the lumbering allpurpose economies of the early 20thcentury are gone — and not coming back any time soon. The politicians of rejection are selling their supporters a lie, and its success stems from a misunderstanding of globalization.

Consider again the assembly line analogy. The Brexiteer still imagines their country as factory, capable of producing cars of its own. But this is an illusion. If they were able to see it as the windshield installer or welder it is, tearing itself out of the fabric of globalization would make a lot less sense. As a worker, the best Britain can hope to find outside of the factory is work in another, in which case their skill set remains the same, though their ability to profit from it is less certain. But the idea that it could become a car producer itself, capable of competing with the factory it just left, is almost absurd.

Yet this is just what the politics of rejection wants to do — what Britain has already tried to do. And now they face an uncomfortable choice: intensify their current setup — their comparative advantage, which for Britain led to Brexit in the first place — or become uncompetitive. Neither will satisfy those who voted to leave. In fact, they will again be the worst affected.

As the first country to simply say “no” to globalization, Britain is an object lesson in what the politics of rejection gets you. Let’s hope Trump and his ilk pay it heed before it’s too late.