The past decade has seen a steady rise of populist movements across the political landscape in many societies. Unlike in the 1990s, when the antiglobalization movement opposed neoliberal economic integration with an emphasis on developing countries, today’s backlash against globalization is fueled by ire about its impacts in advanced economies. The most notable antiglobalization undertones were reflected in the June 2016 Brexit vote in the United Kingdom and the November 2016 election of president Donald Trump in the United States. The European Union (EU) is under threat from Euroskeptic political parties, North-South cleavages, and the markedly distinct vision for the EU favored in capitals like Budapest and Warsaw.
In the most recent era of globalization, many households have experienced a fall in their standard of living due to stagnant or declining wages coupled with the rapidly increasing costs of a middle-class lifestyle amid growing job insecurity.1 Nativist arguments that open markets and globalization have impoverished the middle class and systematically attacked national identities resonate with segments of society that have become disenchanted with the purported benefits of the current system. The risks facing those living in precarious situations—a social class known as the precariat—are rooted primarily in technological factors or mismanagement of economic transformations rather than trade. Be that as it may, waves of immigration—another characteristic of this period—provide fertile ground for right-wing politics to capture these frustrations and blur the mechanisms of causality in terms of what creates this damage and who benefits from it.
It is clear today that those left behind view globalization as interlinked with job security and cannot tolerate transformations in the global or national economy without some form of support from the state. Given that this group will only grow in size with technological change, mainstream political parties are already recalibrating their long-held positions on issues such as trade and migration in response to this trend.
The political salience of antiglobalization sentiment not only in developing countries but also in industrialized nations will depend on the extent to which post-pandemic social contracts re-embed markets in social values. For centrist politicians, the challenge will be to convince electorates that they can deliver the necessary transformations in policy thinking to ease the sense of unfairness felt by those left behind and overcome their distrust of the elites who helped shape the system they oppose.
The coronavirus crisis has certainly magnified existing weaknesses in developing economies and elevated the status of questions such as the optimal design of capital controls. On the bright side, the pandemic has also produced new opportunities by exposing the risks inherent in global supply chains built around China. Ongoing debates over redundancy versus reshoring—the process of returning the production of goods to a company’s country of origin—will have significant implications for economies that can present an alternative to China in their region. As global foreign direct investment flows and trade are rejiggered, developing countries can be expected to pursue somewhat nationalist economic policies to deal with the crisis. In parallel, they are likely to seek to benefit from a broader restructuring of global value chains toward a more diverse, flexible, and region-focused architecture to ensure the sustainability of their industries in a new world.
A key challenge in this regard will be to galvanize capacity-building efforts to design localization policies rooted in identifying and advancing comparative advantages at a product level. Since labor cost differentials will continue to become less relevant with automation, the way developing countries manage this process will determine the political potency of globalization in the domestic political economy. After the pandemic, the management of countries’ debt-servicing obligations will be a major force in molding popular sentiment.
In summary, dissatisfaction with globalization has turned into a powerful political dynamic in many nations. It has triggered a backlash against established political systems and actors, propelling the emergence of populist and nativist platforms. At the same time, this dissatisfaction has created a domestic policy environment that is conducive to widespread trade protectionism and tighter immigration policies. It has therefore finally become clear that rampant and unimpeded globalization has produced an unsustainable model that creates ever-wider income disparities within and among nations. But more importantly, unchecked globalism is increasingly seen as a threat to the integrity of democratic rule. The predominant question for policymakers around the world is how to reframe globalization to mitigate its negative consequences while keeping its core growth-enhancing dynamics intact.
This compilation focuses on five key themes that underpin globalization: trade, data and technology, finance, tax, and climate change. The study’s first aim is to identify the concerns related to these anchor policies. The second aim is to explore regional convergences and divergences regarding possible solutions to these common problems. The compilation concludes with a road map that includes specific proposals designed to address the shortcomings of the current framework of globalization. These proposals benefit from sufficient multilateral support to drive an agenda of policy reform.
The compilation’s methodology was designed to collect regional perspectives on globalization by leveraging the know-how of Carnegie’s global presence. Thus, the chapters on the United States, the EU, India, Russia, and China were written by Carnegie experts; those on Latin America and Africa were commissioned to independent experts. The next chapter consists of a broad analysis of the prevailing criticisms and cleavages of globalization. It starts with an overview of the political implications of globalism gone wrong. It then focuses on the five major policy areas, which also constitute the core analysis for the following regional chapters.
The final chapter summarizes the main findings with the aim of charting a policy-relevant agenda for globalization reform. It also recommends the establishment of a high-level task force to streamline the various recommendations for rewiring globalization. This proposal aims to address a core deficiency of current debates: the lack of an inclusive discussion across the range of policy fields that shape globalization.
Notes
1 Organization for Economic Co-operation and Development, Under Pressure: The Squeezed Middle Class (Paris: OECD Publishing, 2019), https://doi.org/10.1787/689afed1-en.