Brexit, only the Beginning

Nationalist, anti-immigrant, anti-foreign trade, anti-globalization concerns have given rise to right wing extremist political groups in many developed countries. Britain’s nationalist movement has just resulted in a decision to leave the EU. Donald Trump immediately congratulated them and promised we will “do the same” when he is elected. He might be elected, regrettably, after stoking concerns into fears and promising inappropriate and unworkable solutions–e.g., deporting 11 million immigrants and building an impenetrable wall at the expense of Mexico (his equivalent of “same.”) Similar movements are growing in France, Italy, Germany, and elsewhere.

The cause of this begins with the third wave of globalization (yes, there were two before this one in the history of the world). Beginning around 1980, major developed countries set off on a third wave, driven by the dreams of vast profits for the corporations of their countries, as they would expand their operations around the world. Expand by both selling abroad and producing abroad. Open borders was a key component of the “Washington Consensus,” developed by economists supportive of supply side economics under the leadership of Ronald Reagan in the US and Margaret Thatcher in Britain.

On the surface, there was nothing wrong with the objective of “open borders,” essentially meaning unfettered “globalization.” In the imagination of policy makers (including those at the World Bank and the IMF), this would benefit all. Western corporations investing in the economic “South” (such as sub-Saharan Africa) would hire local workers and those economies would grow and prosper. People would be raised out of poverty. Western consumers would benefit by access to products not available domestically, and from much cheaper products.

But, the theory did not work out as planned for everyone. The neediest countries were not attractive to the big Western corporations. They didn’t have institutions, property rights, rule of law, or infrastructure. Too much risk for investors. Instead, Western corporations mostly invested between themselves, with exceptions of certain Asian countries which had at least minimally acceptable conditions, such as China. Where the Western companies did invest in poorer countries, the Consensus advice (and IMF and World Bank demands) were for reduced government and privatization of state owned enterprises–but in those countries, government provided the majority of employment. People lost their jobs and didn’t get hired elsewhere. It was a disaster for many lesser developed countries.

For the Wester countries, their corporations prospered, and Western countries reaped increased taxes. Western consumers saved a lot of money, since Chinese labor costs delivered products to us at a fraction of the cost when produced domestically. The few benefitted lesser developed countries, such as China, advanced rapidly, bringing millions out of poverty. The West was happy.China was happy. Much of the world was not.

But it all moved too fast. There was no planning for safety of workers losing their jobs. In my home state of North Carolina, a center for furniture and textiles, many factories and mills closed. They couldn’t compete. Even sofas could be delivered from China at far less than as produced locally. Governments did not address the displacement of workers in their 50’s, with little alternatives nearby. We could have offered training in new upmarket skills and relocation. But the ethos of the neoliberal economic policies did not include worker protections–in fact, it preached “flexibility” for corporations with respect for workers. Translation–less and less protections for workers, more and more for corporations.

And the architects of globalization did not contemplate the huge demand for immigration from poorer countries to richer ones, or how to deal with that in a fair and equitable way, between all developed countries.

Compounding all this was an rapidly expanding era of technology and financialization. Technology resulted in reduced jobs in some fields. Hundreds of toll takers at the Golden Gate Bridge were displaced by FasTrak scanners which automatically authorize or charge as the car whizzes by.

Also compounding was the era of slower growth globally which is extending. As explained by Thomas Piketty and by Mohammed El-Arian, this has contributed to exacerbating the wealth and income disparity. The Gini index of inequality has spiked to historic levels in many developed countries. It is undoubtedly true that a large portion of the immigrant drive is due to inequality–the search by poorer people to risk their lives to get to a better life for their children. And, it is also undoubtedly true that ISIS and terrorism is fed by hatred resulting from Western opulence, vs. Middle Eastern deprivation and war. And by resentment for US interference in the affairs of the Middle East.

So, the third wave of globalization is now in reversal, beginning with the UK. Others are likely to take similar actions–close borders to immigrants, and severely control foreign trade where there is fear of displacement for local workers.

There are great benefits to globalization, but in the above ways we went about it wrong– without sufficient planning, especially for the dislocated in our own countries, and for the condition of citizens in underdeveloped countries. Because of these failures, and the factors leading to increasing inequality in many countries, citizens are frustrated and angry, both in developed countries, and also the lesser developed. Leaders like Trump are capitalizing on these concerns and directing blame inappropriately, for their own political benefit.

Brexit is just the beginning of a global movement to close borders, restrict immigration, and slow globalization. Too bad, because (a) managed more properly, there are great benefits to globalization, and (b) it cannot really be stopped. Due to social media, technology, transportation, etc., is is still moving forward, just at a slower pace for a while.

I have a vision of a better world for all, a “one world,” where my wealthy neighbors and I find a way to concern ourselves for the welfare of those who live in  Bangladesh, Syria, or The Sudan. Looks like that vision is going to be delayed.

Let’s work toward the better solutions to globalization, toward resuming a “one world” advance in a more orderly fashion.

 

 

 

 

 

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