Skip to 0 minutes and 8 seconds In this video, we’ll look at some of the reasons that might explain the anti-globalization backlash that has been so prevalent, especially in the United States. I think the question is, why is such intense rage around this issue? After all, globalisation has always caused problems. It has always meant more opportunities for some and more competition for others. But recently, it’s gone from problems to anger, anxiety, and outright rage, which has led to important political consequences. So we have to ask ourselves, what changed? I think the answer is unknowable. I mean, we don’t know yet what caused it. But I think of two things as being important.
Skip to 0 minutes and 58 seconds First of all, the new globalisation is affecting rich economies in ways that are quite different than the old globalisation did. And second, the slow growth that’s been experienced in the US and in Europe since the 2008 globalisation crisis may have triggered a more synchronised, stronger reaction to the dislocations that have been caused by globalisation and other things like automations, robots replacing jobs, and whatnot. So let me start with two key things about the way that globalisation changed. And then, we’ll talk about the growth slowdown. Key change number one, new globalisation breaks the monopoly that rich-nation workers had on rich-nation know-how. How Now, I think this is important. And it sort of feels unfair that this team has been broken up.
Skip to 1 minute and 55 seconds I mean, one way to think about it is to look at this graphic, which we’ve seen before. New globalisation, rich-nation firms can combine their know-how with poor-nation labourers, as well as rich-nation labourers. Now, the point here is you’ve got this factory on the left. The rich country factory is sharing its know-how with the workers who are located in the poor nation. And it is this knowledge offshoring which is really new about the new globalisation. Now, that knowledge offshoring may in some sense seem unfair for the workers. So just to take an example of a Canadian company called Bombardier, which makes aircraft. So they offshored some of the production of their aircraft from Canada to Mexico.
Skip to 2 minutes and 43 seconds Now, what that meant was that the Canadian workers for Bombardier were now competing quite directly with Mexican workers working from Bombardier, more or less working with the same kind of technology. Now, those workers in Canada may feel that that’s unfair, because they may feel that they essentially have a right to work with that technology. They are Canadians. Bombardier’s Canadian. And after all, a lot of the technology that Bombardier has was subsidised by tax breaks from the government of Canada. Now, important point here is that people feel much angrier, much more intense about losses that they think are caused by cheating or unfair behaviour than they do losses overall. Just think about it your own self.
Skip to 3 minutes and 33 seconds If you lose something– suppose you have an expensive pen that you lose. If it was your own fault, you’re upset about it. But if somebody stole it from you, you feel much angrier, because it’s sort of unfair that you’ve lost it. Now, let me illustrate the second change. The second change is that new globalisation affects economy with a finer degree of resolution. That’s kind of an abstract concept, so let me illustrate it with an example. I want to illustrate it with the type of competition faced by the US auto industry in the 1970s and the 1980s, versus a kind of competition that workers in the auto industry have experienced in the 1990s and the 2000s.
Skip to 4 minutes and 15 seconds So in the 1970s and ’80s, the US started as the dominant producer of autos in the United States. And throughout those couple of decades, the Japanese auto industries rose up. They became very productive. They had high-quality products for a very good price. And they started to push down the US market share in the US market with imports. But now, at that point that this competition was team USA against team Japan. And it was kind of a team effort. Now, with this graphic, you can kind of see in the old globalisation impact, we had the impact on team USA here. On the left, I’ve got US auto production in 1970, a great big factory, lots and lots of workers.
Skip to 4 minutes and 59 seconds And due to the competition coming from team Japan, the US auto industry got a little bit smaller, and there was fewer people working for it. But the team USA was together throughout that whole time. Now, let’s contrast that with the new globalisation. In the new globalisation, we have, just to take an example, Ford’s team USA versus Ford’s team Mexico. And here at the beginning, all the workers are in the factory in the US. After the new globalisation, Ford shifts some of the jobs from the US to Mexico, using Ford’s technology. Now, that just may seem unfair to the workers left in the US.
Skip to 5 minutes and 40 seconds And it certainly may seem to them there’s a different type of competition than the competition their parents faced from the Japanese. Now, let’s put these two things together, the fact that the team has been broken up and the fact that globalizations have a finer degree of resolution on the economy. What this means is that the new globalisation’s impact is more sudden, more individual, more unpredictable, and more uncontrollable. It’s more sudden, because Ford can take down to Mexico everything that’s not in Mexico that Ford needs to be there for production. It’s more individual, because if you’re in the US, you’re not really sure whose job or which stage of production going to go next.
Skip to 6 minutes and 27 seconds It’s more unpredictable, because we don’t really understand that whole process of offshoring. And it’s more uncontrollable, because it doesn’t depend upon things like trade costs or tariff cuts. It’s really got something to do with organising complex activities over distance. Now, the result of all this is that there’s a sense of economic anxiety and fragility, a sense of disenfranchisement in the US and some other nations that really was not created by the old globalisation. Or to put it differently, to many people in the US, it seems that no matter who you are, no matter what job you have, no matter what skill-set you have, you can’t really be sure that your job won’t be the next to go.
Skip to 7 minutes and 7 seconds And in this kind of environment, you get a much angrier, much larger political backlash against globalisation than you did with the old globalisation. The second major issue is the lack of growth since the global crisis in 2008. In European economies, we’ve only just recently returned to the level of income that we had in 2007. In the US, the recovery has been better, but the fruits of that recovery have been very unequally distributed. For example, the average income for an American– what I mean by the average is half above, half below. That is back down to the level it was in 1990, which means a whole quarter century without any real income gains for the average American. That’s a painful thing.
Skip to 7 minutes and 59 seconds To summarise, we can’t really be sure about why this anti-globalisation has risen so fast and so far. But I have tried to suggest a couple of reasons which might explain why it’s happening now and why it didn’t happen under the old globalisation. In the next video, we’re going to look at how worldwide this kind of anti-globalization backlash is.
What caused the rise of antiglobalisation?
This video uses aspects of the economics we covered last week to suggest why recent advances in globalisation have led to a backlash in some advanced economies.
After watching the video, please look at the case study in the next step which illustrates how the offshoring of jobs in recent globalisation was very unlike the sort of impact of globalisation in the 1980s when Japan’s auto industries reduced US auto companies’ market shares inside the US.
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