We are seeing an expansion of anti globalization and anti immigrant rhetoric across the western world. Political parties pushing a protectionist agenda and policy are gaining real power on the ground. Why is this happening and what could we do better?
A Historic Perspective
Since the dawn of the industrial revolution capital and business have created unparalleled wealth and prosperity across the globe, lifting millions out of poverty and moving capital, mostly efficiently, to where is it best utilized.
The textile industry is a case in point. The early 18th century saw inventions like John Kay’s ‘Flying Shuttle’ and James Hargreaves ‘Spinning Jenny’ that saw material weaving efficiency dramatically improve turning the production from a cottage industry to a manufacturing industry. Entire cities and communities grew around the industry in the north of England.
The 19th century saw the introduction of the power loom which boosted further productivity. But by the time the latter 20th century rolled around most of the work and production had shifted to Asia. Big business shifted the capital to where it would be most efficiently utilized and with lower “sweat shop” wages the costs of production reduced further.
But what about all the people left behind? They had to rethink and re-skill and this can be a difficult process.
The move of capital has winners and losers. But providing this ongoing transformation is executed in the right way there are mostly winners. Wealth is generated and distributed to allow people to be sustained, supported and increase their standard of living. Businesses pay taxes, which fund local services and governments. So when the time comes to move the production to somewhere cheaper, governments and local authorities can invest in retraining and skilling up the workforce for other jobs. Humans live in the belief that nothing will change. If you work in the mines, you believe that this mine will always be open and it is a job for life, so when a mine is no longer efficient and it is labelled for closure, there are riots and social tension, see the UK in the latter 1970’s and early 1980’s. The reality is, there is no job for life.
The Tools of Globalization
Without the continual movement of capital, we would be left with extremely expensive clothing, power and electronic products and uncompetitive industries at home.
The other option here is to extend the life of slowly more uncompetitive businesses in the rich world by allowing immigrant workers to come in and keep wage competition healthy at home, meaning lower average wages and cheaper production.
The Backlash against globalism
There is a cycle to this problem. People’s revolution against the natural instinct of the few who hold all the power and wealth in business occurs when that power is used to control governments to sway the laws and rules against the greater good for the people being ruled. The rich want rules and laws to assure they retain their wealth and the people want rules to distribute wealth fairly. This is the natural order of things.
Unfettered global capitalism and lack of real market oversight and regulation is leading to a backlash against globalism, movement of people, openness of trade and the flow of capital.
Europe and America – moving down a protectionist path
Since the U.S. subprime crisis and the devastation it caused to the American and European middle classes the mood has been rightly sour. The people are moving towards a revolution and protecting themselves.
America and Germany have moved against the TTIP trade agreement, favoring to keep regulating trade to protect markets.
Britain voted out of the European Union to protect itself from free flow of immigrants and release itself to create its own preferential trade deals.
Protectionist anti-immigration political parties are springing up across Europe and gaining real power sometimes up to 30% of the vote. For example Austria’s Freedom Party, Italy’s Lega Nord, France’s Front National, Danish People’s Party, Spain’s Podemos Party and Germany’s AFD Alternative Für Deutschland, to name but a few.
Even in the U.S.A. which one could argue has been the greatest proponent of global capitalism AND the hardest hit by it has seen the rise of the right wing rhetoric trumpeted by Trump. But making ‘America Great Again’ will not be done by building a Mexican wall and introducing crushing border tariffs, it will be done by the government stepping up to help its people make the transition to new industries and providing the social foundations to enable them to move. The fact that many high profile companies do not pay taxes also causes mis-trust and fuels the fires.
Notably even the economist newspaper acknowledges:
“The strains inflicted by a more integrated global economy were underestimated, and too little effort went into helping those who lost out”. Economist October 1st 2016
Better regulation by governments, more integrated tax laws ensuring business pays tax where it generated the revenue and more care and support for people in industries who need to make a transition will help to protect the benefits of Globalism. But when governments are in the pocket of the rich this will not happen and the far right protectionist parties will gain in strength.
We have come a long way from the Steam Powered Loom and the cycle of change is ever faster, without the right approach to globalism we will be weaving a worse outcome for our global citizens and laying the foundation of a real revolution. After the industrial revolution, what will come next, a social revolution?