David Smick makes a pretty darned good argument that whatever the outcome of the November election the winner is likely to preside over a dismantling of the system of globalization that’s dominated the world economy for the last 30 years:
The globalization model of the past 30 years is cracking up. And there appears to be no new model to replace it.
Since April, an ugly economic world has turned uglier. The annual growth rate of total global exports has collapsed. Exports were a crucial engine in powering the U.S. economy out of the worst of the recession in the second half of 2009 and remain important for growth.
Lately, even China and India, which were thought able to decouple from the weakness of the industrialized world, have fallen victim to the seizing up of global trade. The World Trade Organization is slashing its estimates for trade growth. The U.N. Conference on Trade and Development reports that economic growth is weakening worldwide.
Meanwhile, the Doha Trade Round is on life support. The world is at the edge of a currency war with at least 12 countries beyond China manipulating their currencies against the dollar for trade advantage. China is experiencing trade deficits and has slapped tariffs on American-made automobiles in response to U.S. duties on Chinese tires. Leto Research analyst Criton Zoakos argues that rapid Chinese wage inflation and new software-based cost-cutting manufacturing technologies in the United States are helping make the globalization model “obsolete.”
Another casualty: financial liberalization.
Over the period of the last thirty years foreign trade has added about a trillion dollars a year to U. S. GDP (in 2012 dollars) but the income that corresponds with that production hasn’t been distributed evenly within the society. The benefit has accrued overwhelmingly to the highest income earners, to the federal government, and to politicians. It has fostered income inequality.
A collapse of globalization might be uncomfortable and unsettling here but it would be disastrous for Europe and even worse for Brazil, Russia, India, and China. Be prepared for interesting times.
A revitalization of globalization should be a top agenda item for the next four years. We will not benefit by a decline in globalization and increasing world misery presents security threats. Unfortunately, given these two candidates the likelihood of that happening is practically nonexistent.