Has Globalization hit its high-water mark?

[Puppycow]

Brexit is one sign, maybe. In the USA, both major candidates are against the TPP multilateral trade deal. One is really against it, the other I think put her finger in the wind and decided that it just would not be the popular position to take in the current political climate to be for it, so she is against it. Discontent with the growing gap between the rich and the rest seems to be growing and now even the Republican base has revolted against what used to be Republican orthodoxy: that free trade is good.

In his speech at the Republican convention, Trump said that the median household income is $4,000 less than it was in 2000, and this has been fact-checked and appears to be true. (That's inflation-adjusted in case you are wondering).

That is the median. The family right smack in the middle. As their real incomes have fallen, the cost of living has continued to rise, especially things like health care and higher education. The top 1% have done much better in the same time period. So the middle class really is losing ground while the rich get richer. Unfortunately Trump is proposing to cut taxes in a way that the biggest tax cut goes to the richest. He may have put his finger on the problem, but his proposed solution is still a tax cut that would mostly benefit the richest. On the other hand, he blames bad trade deals with Mexico and China for these problems.

Whether he wins or loses though, it seems like the American electorate has lost its appetite for free trade.

 

[Francesca R]

Best unbiased metric of this is world trade volume, or real value or as a percent of world GDP. Or even whether world real GDP grows or shrinks. (Though you have to correct for recessions). Number of net new FTAs per year is another measure (and they are rarely torn up).

IIRC on all these measures "globalisation" is still "increasing" but not as rapidly as it did in say 1990-2005. But I don't have the data here. IIRC migration flows are ever increasing as well, even if there is a perception this is going the other way (again it is influenced by things like recessions though)

Note that opposition to trade and migration can increase even as the latter two still flourish. The opposition might be temporary also, or corrective insofar as it is opposition to some aspect of growth/trade such as unfairness or unequal diststribution of benefits, not opposition to globalisation itself.

 

[MCel58]

Best unbiased metric of this is world trade volume, or real value or as a percent of world GDP. Or even whether world real GDP grows or shrinks. (Though you have to correct for recessions). Number of FTAs per year is another measure.

IIRC on all these measures "globalisation" is still "increasing" but not as rapidly as it did in say 1990-2005. But I don't have the data here. IIRC migration flows are ver increasing as well, even if there is a perception this is going the other way (again it is influenced by things like recessions though)

Note that opposition to trade and migration can increase even as the former two still flourish. The opposition might be temporary also, or corrective insofar as it is opposition to some aspect of growth/trade such as unfairness or unequal diststribution of benefits, not opposition to globalisation itself.

I wonder if this takes account of globalisation through digital innovation, it appears that much of globalisation is and will increasingly become "hidden" by technology for example providing designs for anything from shoes to pharma in one country that can be produced by 3D printing or other manufacturing approaches under license any where in the world. The amount of deals now being done on a global basis using some sort of licensing approach as more firms start to exploit their intangible assets like intellectual property is certainly on the increase.

 

[Puppycow]

Yes, that has been the trend, but I am wondering about from this year forward. If Trump were to win (God forbid) he is promising to rip up existing trade deals unless our trade partners agree to renegotiate them on terms more favorable to the U.S. I rather doubt that they would agree to this. Opposition to TPP is not only in the U.S. Japanese farmers for example think it's a bad deal for them. I don't have a crystal ball but I imagine that it's unlikely that other countries would agree to the terms he wants. So one possible result is new trade barriers appear.

 

[timhau]

In his speech at the Republican convention, Trump said that the median household income is $4,000 less than it was in 2000, and this has been fact-checked and appears to be true. (That's inflation-adjusted in case you are wondering).

That is the median. The family right smack in the middle. As their real incomes have fallen, the cost of living has continued to rise,

Just a small point: if you're using inflation-adjusted income numbers, you already factored in the rise in the cost of living. Why bring it up again?

 

[psionl0]

In the USA, both major candidates are against the TPP multilateral trade deal. One is really against it, the other I think put her finger in the wind and decided that it just would not be the popular position to take in the current political climate to be for it, so she is against it.

There are signs that talking against it will win votes.

However, there is a long way to go until we see any actual steps taken against it - especially when global corporations and the very wealthy are the biggest beneficiaries of it.

 

[CapelDodger]

There are signs that talking against it will win votes.

However, there is a long way to go until we see any actual steps taken against it - especially when global corporations and the very wealthy are the biggest beneficiaries of it.

That.

 

[CapelDodger]

I wonder if this takes account of globalisation through digital innovation, it appears that much of globalisation is and will increasingly become "hidden" by technology for example providing designs for anything from shoes to pharma in one country that can be produced by 3D printing or other manufacturing approaches under license any where in the world. The amount of deals now being done on a global basis using some sort of licensing approach as more firms start to exploit their intangible assets like intellectual property is certainly on the increase.

Localisation of manufacture through flexibility and modularisation, thus shortening supply lines and reducing dependence on single large sources, does fit the zeitgeist. The economic model of centralised mass production and mass distribution of products full of bespoke parts might have had its day. Outside the really big stuff, of course, such as planes, trains and tanks.

 

[Francesca R]

I wonder if this takes account of globalisation through digital innovation, it appears that much of globalisation is and will increasingly become "hidden" [ . . . ]

As far as I know everything you mention gets caught in national accounts. Digital services trade certainly needs trade agreements and doesn't tend to happen without them. (The EU is actually rather less advanced in respect of the single market for digital services, meaning there is less of it than there probably would be already)

 

[Beelzebuddy]

In the USA, both major candidates are against the TPP multilateral trade deal. One is really against it, the other I think put her finger in the wind and decided that it just would not be the popular position to take in the current political climate to be for it, so she is against it.

The TPP is not just a trade deal.

To be fair to Hillary, she was for it while it was a secret agreement which needed to be negotiated in secrecy and no one but the drafters knew what was in it. Once the specifics of the deal were made available, she reversed course.

I would read that as her generally supporting globalization and trade deals, but objecting to this one in particular.

 

[Francesca R]

I rather thought Clinton had reversed course because of the Sanders effect.

 

[Puppycow]

The TPP is not just a trade deal.

To be fair to Hillary, she was for it while it was a secret agreement which needed to be negotiated in secrecy and no one but the drafters knew what was in it. Once the specifics of the deal were made available, she reversed course.

I would read that as her generally supporting globalization and trade deals, but objecting to this one in particular.

I rather thought Clinton had reversed course because of the Sanders effect.

You can't prove it either way, but c'mon does anyone really think the calculation wasn't a political one?

And remember that when Obama was running for president he said some negative things about NAFTA, but after he was elected all such talk stopped.

http://m.democracynow.org/stories/10351

"Obama Reverses Campaign Pledge to Renegotiate NAFTA"

 

[SashatheMagnificent]

In his speech at the Republican convention, Trump said that the median household income is $4,000 less than it was in 2000, and this has been fact-checked and appears to be true. (That's inflation-adjusted in case you are wondering).

That is the median. The family right smack in the middle. As their real incomes have fallen, the cost of living has continued to rise, especially things like health care and higher education. The top 1% have done much better in the same time period. So the middle class really is losing ground while the rich get richer. ]

And is not it wonderful?
I mean, the same middle class who basically stood silent when the BUsh and Obama administrations started and increased wars in the ME who killed thousands and thousands of people now pay a little price for their misdeeds

 

[dudalb]

And is not it wonderful?
I mean, the same middle class who basically stood silent when the BUsh and Obama administrations started and increased wars in the ME who killed thousands and thousands of people now pay a little price for their misdeeds

Your Marxism is showing with the hatred of the Middle Class.

 

[SashatheMagnificent]

Your Marxism is showing with the hatred of the Middle Class.

Nah!
I am a Nazi Fascist with pedophile tendencies and I steal wallets during my free time.

Do not flatter me by calling me a Marxist, please

 

[Beelzebuddy]

I rather thought Clinton had reversed course because of the Sanders effect.

You can't prove it either way, but c'mon does anyone really think the calculation wasn't a political one?

I don't think Clinton has ever said anything that wasn't a political calculation, at least not this decade, but I'm fine giving her the benefit of the doubt on this. You could smell the stink coming off the deal, but it was still technically under negotiation and, in theory, a good idea.

 

[Puppycow]

The Economist mounts a defense of free trade and globalization:

Why they’re wrong

Short excerpt:

Protectionism, by contrast, hurts consumers and does little for workers. The worst-off benefit far more from trade than the rich. A study of 40 countries found that the richest consumers would lose 28% of their purchasing power if cross-border trade ended; but those in the bottom tenth would lose 63%. The annual cost to American consumers of switching to non-Chinese tyres after Barack Obama slapped on anti-dumping tariffs in 2009 was around $1.1 billion, according to the Peterson Institute for International Economics. That amounts to over $900,000 for each of the 1,200 jobs that were "saved".

 

[Tsukasa Buddha]

In his speech at the Republican convention, Trump said that the median household income is $4,000 less than it was in 2000, and this has been fact-checked and appears to be true. (That's inflation-adjusted in case you are wondering).

That is the median. The family right smack in the middle. As their real incomes have fallen, the cost of living has continued to rise, especially things like health care and higher education. The top 1% have done much better in the same time period. So the middle class really is losing ground while the rich get richer. Unfortunately Trump is proposing to cut taxes in a way that the biggest tax cut goes to the richest. He may have put his finger on the problem, but his proposed solution is still a tax cut that would mostly benefit the richest. On the other hand, he blames bad trade deals with Mexico and China for these problems.

Whether he wins or loses though, it seems like the American electorate has lost its appetite for free trade.

I fact check it as mostly false . "Median household income" can be fairly misleading in a number of ways.

It’s worth taking the time to examine Sanders’s claim that the middle class is worse off now than in the past. He doesn’t cite a source for his statistic, but it seems to rely on looking at the median household income over time and adjusting for inflation using the Consumer Price Index (CPI).

This is a problematic methodology because it does not control for the well-known fact that the median household has itself grown smaller over time. Even if median income stayed the same over time, a decline in the number of people in the median household over time would lead to an increase in income per household member.

Additionally, Sanders’s statistic looks at income before taxes and transfers. Transfer payments and tax credits (like the Earned Income Tax Credit) make up a significant portion of income for many lower-income families. Not controlling for these factors understates their true economic well-being.

The figures cited by Sanders also fail to take into account the fact that a larger proportion of worker compensation comes in the form of non-cash benefits (such as health insurance) now than in the past.

Acording to research published by the National Tax Journal, “Broadening the income definition to post-tax, post-transfer, size-adjusted household cash income, middle class Americans are found to have made substantial gains,” amounting to a 37 percent increase in income over the 1979-2007 period.

Similarly, in 2014, the Congressional Budget Office found that adjusting for changing household size and looking at income after taxes and transfers, households in all income quintiles are much better off than they were a few decades ago.

The incomes of households in the three middle income quintiles grew 40 percent between 1979 and 2011. Somewhat surprisingly, given the histrionics about the state of America’s poor, income in households in the lowest quintile was 48 percent higher in 2011 than it was in 1979.

Research from the Federal Reserve Bank of Minneapolis comes to even more optimistic conclusions.

Linky.

 

[The Great Zaganza]

Current globalization is based on the theory of comparative advantage. But the higher the level of necessary automation and the percentage of virtual goods, the less it matters where, in physical space, a product is made. And what is made weighs less and less each year. The collapse of the Korean shipping company is a clear sign that long-distance trade is not expanding.

But if we see globalization as a tool for lifting people out of poverty, we can save the idea: of course sweat-shop wages in Bangladesh are better than no wages at all.

I think trade between under-developed countries will increase while it will decrease between the post-industrialized ones.

 

[Craig B]

... of course sweat-shop wages in Bangladesh are better than no wages at all.

That principle is often invoked also by apologists for super exploitation; but it isn't always valid. Many sweatshop employees are former agriculturists or artisans whose previous occupations have been destroyed by the very economic system that now overworks and underpays them.

Sweatshop labour is better than starvation, but is it better than being a small-holding farmer, for example?