Globalization Backlash: A Flawed Response to an Inexorable Truth

Both globalism advocates and societies built on global interdependence are facing strong

headwinds given the current global outlook. The recent materialization of actions towards disintegration,

particularly in developed economies, have generated global distortions such as rising trade costs and

turmoils in financial markets. The nationalist movements in Italy and Greece, the UK’s withdrawal from

the European Union, or the US-China trade war are some examples of what many have called a

globalization backlash. Motivated by this concerns, this document discusses policy frameworks that could

not only help us cope with the actual anti-globalist trend, but also constitute a better way of managing

globalization. This inquiry is built on the idea that a globalization backlash is an ill-response to a broader

problem: the redistributive gains from disruption.

The latter comes from the fact that, although society has clearly gained from the adoption of

globalist policies, some specific sectors have worsened off. In fact, globalization not only exposes all its

players to global competition, but also makes them vulnerable to global trends (Rodrick, 1997). In words

of Bloomberg Opinion columnist Matt Levine: “the vulnerability is the price of modernity”, which makes

natural to expect hostile reactions from the most vulnerable. Displays of xenophobia or racism, are fueled

by the fact that free flow of people could threaten individuals in specific labor markets (Raijman &

Semyonov, 2000). Since economic activity has geographic and regional implications, there are cases of

entire communities coming to despair due to these kinds of structural economic shifts.1 These unwanted

economic consequences, feedbacked by issues related to national identity, have been crucial to the built-

up resentment against globalism, signaling our inability to construct societies that could be robust to the

vicissitudes of complexity.

1 For instance, the well-known “Rust Belt” in US or Northern England.

uneasiness in defining it as a premonition to an imminent globalization backlash for two reasons. First, as

Tomlinson (1999) pointed out, globalization goes beyond cross-border flows of people or goods and

services: it is really about accelerating connectivity. In fact, according to the McKinsey Global Institute,

the amount of information exchanged between 2005 and 2014 has grown by a factor of 45. Therefore, a

globalization backlash implies an unlikely (if not impossible) reversal of information exchange given the

current state of technological progress. Reiterating Tyson & Lund (2017), globalization is not rolling back

because it has gone digital, idiosyncratic to what currently has been coined as the Fourth Industrial

Revolution.

Second, protectionism is trivial on its causes, but not necessarily on its consequences. Evidence

has shown that the benefits are often outweighed by its costs. For example, Hufbauer & Lowry (2012) find

that each of the 1,200 manufacturing jobs saved by the tire tariffs over Chinese imports made by the US,

came at expense of more than 3 retail jobs, resulting in a net cost of 2,531 jobs. Petri et al. (2017)

estimated that US real income in 2030 would be 0.5% below from its withdrawal from the Trans-Pacific

Partnership. Regarding Brexit, a fall on UK’s real income between 1.3% and 2.6% is expected (Dhingra et

al. 2016). Furthermore, protectionism not only increases trade costs but also affects international

economic confidence, investment plans, financial markets and distorts the cost of capital (IMF, 2018). The

IMF estimates that trade tensions will reduce global GDP by 0.4% respect its baseline. China, US NAFTA

partners, Japan and the Euro Area are expected to be below in 0.5, 1.5, 0.2, and 0.1% from their baseline,

respectively. The latter denotes the role of complex systems in society, as well as the incompetence of

policymakers to foresee the overall consequences in a context in which nations are well embedded via

financial markets, communications, and global value chains.

2World Trade is expected to grow 80 and 100 basis points below the pre-crisis rate (5%) in 2018 and 2019,
respectively (IMF, 2018).
 As the previous examples show, repealing and reversing costs can ultimately surpass their

benefits. A great part of globalization’s discontent comes from the people that could not keep up with the

structural change that it implies, as well as the parallel technological improvements that came with it.

That explains the sympathy between anti-globalists and neo-luddites: both are opposed to change. In this

regard, the core idea I propose is to “de-demonize” change. To that end, we should orient policy into

building skills rather than degrees. According to the second and third category of The Automation

Readiness Index from The Economist, education and labor market policies should foster the development

of abilities consistent with the future of employment. Europeans have been already discussing this,

particularly Germany on its White Paper Arbeiten 4.0 (Work 4.0). They have already explored the idea of

funding skill development with nearly 500 billion euros through specific funds. Other responses have been

sponsored by Canada and Japan, which have made their migration regulation more flexible to absorb

skillful people. This reminds us that at the end, it is all about adapting and improving human capital.

Reductions of information asymmetries are also desirable in order to identify the skills that are

(or will be) demanded. Hence, we can leverage from linking academic institutions and private enterprises.

For instance, some universities from China are partnering with high-tech firms like Lenovo for vocational

training. Likewise, countries like Chile, India, and Brazil exploit online platforms to fill those information

gaps (World Bank, 2018). This highlights the importance of a generalized adaptation since, in a not-so-

distant future, developing economies may not exercise their comparative advantages as technology gets

cheaper and smarter3.

Conjointly, we should welcome lifelong learning, given that current global conditions demand

constant self-reinvention. This fact has been extremely relevant in Japan, South Korea and Singapore that

they have completely reformed their educational systems (Yang & Yorozu, 2015). Particularly, Singapore’s

Skill Development Fund constitutes a smart way of aligning social, private, and public sectors. This fund

3 Automation, machine learning, and artificial intelligence, for instance.

supports around 500 training courses throughout citizens’ lives. On the other hand, South Korea and

Germany remind us the importance of safety nets. Both countries operate within an Employment

Insurance scheme which provides financial incentives to employers to provide a subsidy on employee

training.

In synthesis, the adoption of policies to improve workforce skills, as well as safety nets in which

people could rely on, should be priority. Since these policies are not well tested, experimentation and

better measurement are needed. Challenges may rise from implementation, so we should leverage on

the synergies between the distinct agents in society. We cannot make any country great again by just

looking at how we dealt with things before. Instead, we must focus on redirecting any disruption impact

into improving human life.

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