Globalisation in trouble - part II

For some time, the pressure on manufacturing jobs was offset by more women working, by construction and finance jobs, and by relatively full employment. However, these adaptations are no longer working and employment gains going forward are likely to be slow. This is leading many outside of the usual academic and labour communities to wonder if the “rising tide” is lifting only a few boats. It would not be surprising if there were pressure to reduce the footloose nature of companies, though how that would be done without widespread collateral damage is still a puzzle.

Where does this leave globalisation?

It is likely to continue but in a more fragmented and contentious way than in the past. Ordinary people in rich countries are not benefitting and suspect there is a fixed game. Western multinationals face a difficult future with constrained growth prospects. Developing country companies have growing domestic markets but uncertain access to foreign markets, given the developing backlash against perceived unfairness.

The knowledge that protectionism in the 1930s brought about disaster has so far been a deterrent. But will governments mired in deep recession and high unemployment continue to be wise? If they do start to balkanise global markets, economic growth will not be impossible, but it will be much slower and less sustainable.

On the other hand, if neither real incomes nor jobs and wealth grow in the rich countries, it is hard to see how the poor nations will be able to rely on an export-led growth model. There may be a modest amount of decoupling possible, but in the end, we are all doomed to the same boat.

If the “two tens” of 10 per cent US unemployment and 10 per cent Chinese growth are not compatible, which will fall? Until a new coalition for globalisation emerges in the rich countries, it may be a bumpy ride.