LONDON – In a recent symposium in the Financial Times on globalization’s prospects in 2011, the columnist Gideon Rachman observed that, “When Barack Obama visited India recently, the US President warned his hosts that the debate about globalization has reopened in the West,” and that “a backlash…is forming…and growing in advanced economies.”
But Rachman’s alarmism is misplaced. The fear of globalization in the West is nothing new. Articulate intellectuals and groups such as labor unions and environmental organizations in the advanced economies have voiced anti-globalization fears and sentiments for at least a quarter-century.
The fear of globalization, however, began historically in the East, not the West. After World War II, the West dismantled barriers to trade and investment flows, and worked to eliminate exchange controls and move to currency convertibility. What was sometimes called the liberal international economic order was the order of the day, and it was embraced by public opinion as well.
By contrast, the East generally embraced the fearful view that, as the Chilean sociologist Oswaldo Sunkel put it, integration into the international economy would lead to disintegration of the national economy. Many intellectuals shared this dark anti-globalization vision, and policymakers in much of the East were not far behind.
Indeed, the West accepted the view that globalization would result (as with trade) in mutual gain, embracing what I called in 1997 the notion of “benign neglect.” In the case of foreign investment and aid flows, the West went further, viewing them as being motivated by altruism, or “benign intent,” whereas the East regarded globalization in a world of poor and rich nations as implying “malign impact.” In some analyses, malign impact turned into a more sinister “malign intent.” Thus, foreign aid was regarded as a plot to trap poor nations in a neo-colonial embrace.
What happened next was what I have called an “ironic reversal.” As the benefits of globalization became manifest, and the damage wrought by autarkic policies also became evident, policymakers in the East began to appreciate that their anti-globalization stance had been a mistake.
But then fear of globalization moved to the West. The East had feared that it could not gain from trade with the West, which had superior infrastructure and human capital; now, the West had come to fear that it would lose from trade with the East, which had abundant, cheap labor. The longstanding stagnation in wages for unskilled labor was attributed to low-cost, labor-intensive imports, ignoring the corollary that Western workers’ consumption of labor-intensive Asian goods offset the effect on real wages.
To take another example, the East worried about a “brain drain” of professionals to the West, where opportunities seemed to be more plentiful. Today, the West is witnessing anti-globalization opposition from members of professional groups, who fear the loss of their jobs to foreign counterparts.
Rudyard Kipling famously wrote in “The Ballad of East and West”: “Oh, East is East, and West is West, and never the twain shall meet.” Given the ironic reversal of globalization fears, Kipling is still right: convergence has continued to elude East and West.
The current crisis did not create the debate about globalization now heard in the West; it only made it slightly more salient. Yet the crisis may be tilting Western policy outcomes in favor of globalization. For example, on trade, there has been a remarkable commitment to efforts – largely successful – to avoid significant backsliding into protectionism. Moreover, the G-20 leaders have continued to express the need to conclude the Doha Round of multilateral trade-liberalization negotiations.
There are also initiatives such as the appointment by the governments of Britain, Germany, Indonesia, and Turkey of a High-Level Expert Trade Group, with Peter Sutherland, former Director General of GATT and the WTO, and myself as co-chairs. The four governments will report at this year’s World Economic Forum in Davos on how to conclude Doha this year.
In other words, Kipling could yet be proved wrong. A reversal in the West is possible, perhaps even likely. So the current crisis may thus, accidentally, establish a pro-globalization consensus that spans East and West.