Since the end of World War II, a broad
consensus in support of global economic integration as a force for peace
and prosperity has been a pillar of the international order. Since the
fall of the Berlin Wall a generation ago, the power of markets in
promoting economic progress has been universally recognized. From global
trade agreements to the European Union project; from the Bretton Woods
institutions to the removal of pervasive capital controls; from expanded
foreign direct investment to increased flows of peoples across borders,
the direction has been clear. Driven by domestic economic progress, by
integrative technologies such as container shipping and the internet,
and by legislative changes within and between nations, the world has
grown smaller and more closely connected.
consensus in support of global economic integration as a force for peace
and prosperity has been a pillar of the international order. Since the
fall of the Berlin Wall a generation ago, the power of markets in
promoting economic progress has been universally recognized. From global
trade agreements to the European Union project; from the Bretton Woods
institutions to the removal of pervasive capital controls; from expanded
foreign direct investment to increased flows of peoples across borders,
the direction has been clear. Driven by domestic economic progress, by
integrative technologies such as container shipping and the internet,
and by legislative changes within and between nations, the world has
grown smaller and more closely connected.
This has proved more successful than could reasonably have been
hoped. We have not seen a war between leading powers. Global living
standards have risen faster than at any point in history. And material
progress has coincided with even more rapid progress in combating
hunger, empowering women, promoting literacy and extending life. Every
single day since 1990 there were an average of 108,000 fewer people in
extreme poverty. Since the beginning of the 21st century, global life
expectancy has increased by more than four months a year. A world that
will have more smartphones than adults within a few years is a world in
which more is possible for more people than ever before.
hoped. We have not seen a war between leading powers. Global living
standards have risen faster than at any point in history. And material
progress has coincided with even more rapid progress in combating
hunger, empowering women, promoting literacy and extending life. Every
single day since 1990 there were an average of 108,000 fewer people in
extreme poverty. Since the beginning of the 21st century, global life
expectancy has increased by more than four months a year. A world that
will have more smartphones than adults within a few years is a world in
which more is possible for more people than ever before.
Yet a backlash against the current paradigm of global integration is
reshaping politics and economic policy in a way that may plague us for
years. The momentum toward global economic integration was stopped when
the U.S. repudiated the Trans-Pacific Partnership. As I write this,
worries of a trade war between the U.S., China and other countries have
materialized, leaving a wide range of industries and countries
anticipating substantial losses. History with respect to the result of
such trade wars — most notably the Smoot-Hawley Tariff Act — is not
encouraging. The International Monetary Fund estimates that rising trade
tensions between the U.S. and the rest of the world could cost the
global economy 0.5 percent of gross domestic product, or $430 billion,
by 2020.
reshaping politics and economic policy in a way that may plague us for
years. The momentum toward global economic integration was stopped when
the U.S. repudiated the Trans-Pacific Partnership. As I write this,
worries of a trade war between the U.S., China and other countries have
materialized, leaving a wide range of industries and countries
anticipating substantial losses. History with respect to the result of
such trade wars — most notably the Smoot-Hawley Tariff Act — is not
encouraging. The International Monetary Fund estimates that rising trade
tensions between the U.S. and the rest of the world could cost the
global economy 0.5 percent of gross domestic product, or $430 billion,
by 2020.
The shift away from openness extends to immigration and capital flows
as well. The EU, notable for its commitment to the free movement of
people, is shifting toward much tougher immigration policies. New
immigration policies in the U.S. have turned police officers into
immigration-enforcement agents and hurt business growth. Restrictions on
foreign investment have been increasingly common as the U.S. has taken
to blocking Chinese investments, China has set unfair terms for U.S.
companies wishing to invest there, and Europe has increasingly favored
domestic companies over foreign competitors.
as well. The EU, notable for its commitment to the free movement of
people, is shifting toward much tougher immigration policies. New
immigration policies in the U.S. have turned police officers into
immigration-enforcement agents and hurt business growth. Restrictions on
foreign investment have been increasingly common as the U.S. has taken
to blocking Chinese investments, China has set unfair terms for U.S.
companies wishing to invest there, and Europe has increasingly favored
domestic companies over foreign competitors.
The backlash against global integration has many sources. Some of it
reflects broader economic frustrations associated with slower growth and
rising inequality. Some reflects the difficulties of maintaining
harmony within multiethnic societies. Surely the speed and scale of
China’s ascent has contributed. But what is most important is the
growing suspicion on the part of electorates that globalization is an
elite project that primarily benefits elites. Somehow branches for
financial institutions in foreign countries seem to be a higher priority
than protections for displaced workers. And protection of the
intellectual property of global corporations is a more focal concern
than preventing unfair competition from foreign companies that escape
regulation.
reflects broader economic frustrations associated with slower growth and
rising inequality. Some reflects the difficulties of maintaining
harmony within multiethnic societies. Surely the speed and scale of
China’s ascent has contributed. But what is most important is the
growing suspicion on the part of electorates that globalization is an
elite project that primarily benefits elites. Somehow branches for
financial institutions in foreign countries seem to be a higher priority
than protections for displaced workers. And protection of the
intellectual property of global corporations is a more focal concern
than preventing unfair competition from foreign companies that escape
regulation.
This must change if global integration is to maintain its political
foundation in the world’s rich countries. Political leaders must connect
global integration with tangible benefits for middle-class citizens,
must show that international cooperation helps to prevent exploitation
of ordinary citizens by elites, and must assure that adequate social
protections are in place so that those who must adjust to economic
change are protected.
foundation in the world’s rich countries. Political leaders must connect
global integration with tangible benefits for middle-class citizens,
must show that international cooperation helps to prevent exploitation
of ordinary citizens by elites, and must assure that adequate social
protections are in place so that those who must adjust to economic
change are protected.
In “The Economic Consequences of the Peace,” written after World War
I, John Maynard Keynes asserted the primacy of economics, observing that
“the perils of the future lie not in frontiers and sovereignties but in
food, coal and transport.” His call for strong policies directed at
promoting mutual prosperity and cooperation went unheeded, with
catastrophic consequences. The understanding of this grim experience
after World War II set the stage for the best 70 years mankind has
enjoyed. Will the U.S. and the global community turn away from the
paradigm of global integration that has worked so well and back to the
narrow nationalism that Keynes so powerfully and rightfully decried? Or
will they find ways of promoting global integration that benefit all
citizens everywhere? These might include major cooperative efforts to
prevent global corporations from avoiding taxes, crackdowns on
regulatory arbitrage, and stronger domestic programs to cushion the
impact of structural changes on individual workers. These are the
questions that may determine the history of the 21st century.
I, John Maynard Keynes asserted the primacy of economics, observing that
“the perils of the future lie not in frontiers and sovereignties but in
food, coal and transport.” His call for strong policies directed at
promoting mutual prosperity and cooperation went unheeded, with
catastrophic consequences. The understanding of this grim experience
after World War II set the stage for the best 70 years mankind has
enjoyed. Will the U.S. and the global community turn away from the
paradigm of global integration that has worked so well and back to the
narrow nationalism that Keynes so powerfully and rightfully decried? Or
will they find ways of promoting global integration that benefit all
citizens everywhere? These might include major cooperative efforts to
prevent global corporations from avoiding taxes, crackdowns on
regulatory arbitrage, and stronger domestic programs to cushion the
impact of structural changes on individual workers. These are the
questions that may determine the history of the 21st century.
