In the book that brought him fame, John Maynard Keynes celebrated the “extraordinary episode in the economic progress of man . . . which came to an end in August, 1914” - the first wave of globalisation, killed off by the Great War.
We have just gone through a second era of globalisation, just as extraordinary as the first. It has made billions of people wealthier and freer. But those who feel left behind by the global economy - above all the native working class of western countries - are now rebelling.
Does this mark another end of globalisation, which we will lament in the way Keynes mourned the open economy of his youth? There are three reasons to think today’s open global economy can withstand the assault .
First, the future is no longer for the west to decide alone. Donald Trump’s “American carnage” speech was only the second of two significant speeches in the same week in January. The first was Chinese president Xi Jinping’s address at Davos: a defence of globalisation and a claim to leadership of the open global economy.
Globalisation itself has shrunk the relative wealth of advanced economies and boosted emerging ones. In developing countries, trade helped lift more than 1bn people out of extreme poverty. The result is much less of the anti-globalist populism that now roils the west.
The emerging world has both a deep interest in keeping globalisation going and greater power to defend it than ever before, and will fiercely contest a return to protectionism.
Second, even without resistance it is harder for the US (let alone smaller economies) to de-globalise than it once was. International commerce today is driven by knowledge flows, which are not stopped by tariffs and walls, and by the large-scale production allowed by cross-border supply chains.
In the economist Richard Baldwin’s words, erecting trade barriers between the US and Mexico is like building a wall in the middle of a factory floor. it would not make domestic industry more competitive. The same goes for the UK leaving the single market.
Third, making good on a protectionist programme would show that anti-globalism cannot deliver: globalisation bears little of the blame for the west’s economic problems, such as the stagnant opportunities of low-skilled native workers. The shrivelling need for manufacturing workers, for example, is in large part the price of success. Just as agriculture feeds entire populations while employing only a tiny fraction of its workers, so manufacturing work will keep shrinking. The remaining jobs will be high-skilled, managing advanced machinery.
With or without protectionism, these forces mean the blue-collar jobs on which some communities and working-class cultures were built are not coming back. Future job growth will be in services, predominantly care-related work. The anti-globalists who promise to bring back factories are selling snake oil, a fact exposed as soon as they put their programmes fully into practice - which is why anti-globalist leaders, for all their bombast, may not push too hard to throw globalisation into reverse.
Conversely, plenty of domestic policies can help the economically left behind. Better redistribution, social insurance against job loss or health misfortunes, education and training, checks on abuse of market power - all could have kept underemployment and wage stagnation at bay. The notion that globalisation constrains national autonomy may sound persuasive in theory; in practice any constraints have hardly been tested.
If western policymakers really try to do all they can for the left behind, they will find a lot of unused national autonomy. Employing it better would demonstrate that globalisation is not to blame. That, in turn, could ensure a better fate for the post-second world war global economy Keynes helped to create than the pre-Great War world he so wistfully remembered.
