What the researchers writing in a paper for the National Bureau of Economic Research, Jesús Fernández-Villaverde, Tomohide Mineyama & Dongho Song, attempt to quantify is how the rise in global trade has changed the political landscape in the United States (and elsewhere probably but that’s not included in the scope of this work).
There’s no question, globalization affects everyone, but it’s the way in which it touches people and businesses that predicts their political response. In aggregate, we’re all better off as a result but it’s globalization’s losers that have changed the political landscape.
In brief: “..individuals in regions more exposed to import competition are significantly more likely to oppose globalization, especially when they hold little financial wealth.” Moreover “..[Firms] those operating in trade-exposed industries respond to import shocks by sharply increasing lobbying expenditures. These outlays far exceed campaign contributions..”
If that were the end of the story we could move on, but as the research shows there are knock on effects from the disafeccetd that go on to create semi-permanent self reinforcing trends. Thus, tariffs for example, become political currency and their use-case entrenches their value.
Worryingly the work also shows, as tariffs reduce aggregate welfare the support for globalization falls further and as this [I’m not sure about this bit] slows Chinese growth aggregate returns on investment fall leading to even less support for globalization. Finally, as all this reduces more and more household’s income more anti-globalization support emerges.
The paper is dense but if you’d care to dive deeper you can access it via this link How Globalization Unravels.
A thought occurred to me looking the work over. Democracy’s fundamental flaw, as it’s mostly practiced today, and its greatest strength is giving society’s have-nots a say (for most of history it didn’t).
This is supposed to prevent revolutions and reduce societal conflict but at the same time, as we see in this work, it can lead to aggregate economic outcomes that are not for society-in-aggregate’s benefit.
I’ve never been completely convinced that it’s the least bad of all the other systems either; but that’s probably just the ‘have’ in me speaking.
Happy Sunday.