PRINCETON – As we enter 2017, globalization has become a dirty word. Many see it as a conspiracy by elites to enrich themselves at the expense of everyone else. According to its critics, globalization leads to an inexorable increase in income and wealth inequality: the rich get richer, and everyone else gets nothing.
While there is a kernel of truth in this view, it gets more wrong than right. And getting it wrong has consequences: at a minimum, scapegoating; more worryingly, bad policies that are likely to make our real problems worse.
The first thing we need to understand when we think about globalization is that it has benefited an enormous number of people who are not part of the global elite. Despite continuing population growth, the number of people who are poor worldwide has fallen by more than a billion in the last 30 years. The beneficiaries include the no-longer poor in, among other countries, India, China, Vietnam, Thailand, Malaysia, South Korea, and Mexico. In the rich world, all income groups benefit, because goods – from smartphones to clothing to children’s toys – are cheaper. Policies aimed at reversing globalization will lead only to a decrease in real income as goods become more expensive.
The call to rein in globalization reflects a belief that it has eliminated jobs in the West, sending them East and South. But the biggest threat to traditional jobs is not Chinese or Mexican; it is a robot. That is why manufacturing output in the US continues to rise, even as manufacturing employment falls.