TED MALLOCH: Trumpism vs. Globalism
When you take the 30,000-foot view from high up you can see the larger context and the significant stakes in the contest between Trump and the globalists.
Globalism was Clinton’s core belief and it remains that of the entire Democrat elite.
Open borders, diminished sovereignty, multilateralism, multiculturalism, and everything defined as ‘worldwide’ or global in scope.
World government is the ultimate, long-term end.
Nationalism is its polar opposite.
For Trump, the nation state is supreme and sovereign, borders matter, bilateralism is preferable, national and ethnic identities are rooted in tradition, cultures count, and the intermediating institutions of society: family, church, civic association and place, come first.
Issues are settled by sovereign nation states, which are not going away anytime soon. This is patriotic.
The battle lines are set as never before.
One ideology is pitted against the other; one set of institutions against the other; one cultural outcome against the other.
It is war.
Truth is, globalization has been ebbing while economic and political populism is surging.
Globalists no longer provide the accepted set of rules for the political and economic order. Transnational, multilateral, and supranational organizations and their networks, experts, and regulators are everywhere on the defense. Cosmopolitan and globalist values are not ascendant.
This is what made Trump’s candidacy viable. It is the defining mark of his Presidency.
As a matter of fact, national sovereignty has soared back and is growing stronger, week-by-week, and month-by-month. We see it most clearly in President Trump’s principled realism, he calls “America First.”
Like the 19th century version of populism that rallied against the gold standard, today’s economic populism is similarly anti-establishment, anti-elitist, and opposed to all forms of globalization and globalist governance.
Economic history and economic theory both provide strong reasons to suggest that the advanced stages of globalization are proof statements for the populist backlash, in both its right- and left-wing variants, and everywhere from Brexit and the Trump effect to current European politics (Italy) and unrest throughout Latin America.
Whether along ethno cultural cleavages or along income-class lines, these forms of populism are a predictable and logical result. It should surprise no one, including globalists that the pendulum has swung so far in this opposite direction.
In fact, analytically there are two sides to populism: demand and supply.
Economic anxiety generates a base for populism but does not determine its particular political narrative—that storyline is left to various populist politicians and movements, which are on the rise today, worldwide.
National greatness in one place does not diminish it in another place. There is no reason why all nations cannot articulate their individual greatness and in their self (national) interest interact in the world in a peaceful and benign fashion.
Actually, it is the economics of trade and financial integration that provide the politically contentious backdrop to all globalization.
Trade theory, such as the well-known Stolper-Samuelson theorem, shows that there are sharp distributional implications for open trade—in other words, free trade is not a “win-win.”
Losers are inevitable.
And those who lose are generally low-skilled and unskilled workers. Trade liberalization raises the domestic price of exportables relative to importables.
Go to any Wal-Mart, if you want to check out this phenomenon first hand. Where is everything made?
There is an inherent form of redistribution at work here—the flip side of the benefits of trade.
Overall as globalization advances, trade agreements themselves become more about redistributing and less about expanding the economic pie. The political fallout is clear: globalization, the opposite of national interest, has become more and more contentious, if not unsustainable.
The empirical evidence bears this out. From NAFTA, which has cost the United States some $3.5 trillion over the last decade, to the widening U.S.-China trade deficit, the American economy has enjoyed few overriding efficiency gains from globalization.
Trump is ending both.
What we have, instead, are large trade imbalances, income stagnation among middle earners, and other nasty social side effects.
Talk to any middle-class family or visit any town or factory in the affected dire areas and you can gain first-hand knowledge, up close and personal.
The overall benefits of globalization are zero to negative. Trade was supposed to be based on reciprocity and growth, but it turned out to be a sham.
Have those “left behind”—the “forgotten silent majority,” in Trumpian terms—been compensated from the clear effects of globalization?
No, not really.
The benefits of international trade as originally argued by Adam Smith and its subsequent canonization ignores important historical differences.
A displaced worker in our modern technological age (unlike a day-laborer or farmer in the 18th century) already has a home mortgage, car payments, and tuition for his children, and lots of other overhead.
Merely switching careers or retraining is not so simple for many people. Truthfully, it is more than difficult, especially for middle-aged workers who have generally worked one job and in one place.
The share of U.S. imports in GDP went from less than 7 percent in 1975 to more than 18 percent in recent years, but the imbalance has provided little of what’s called trade adjustment assistance.
Because it is very costly—and politicians on all sides of the spectrum make a lot of promise they simply do not keep.
All economists know that trade causes job and income losses for some groups. Those same economists deride the notion of “fair trade” as a kind of fiction, but that’s clearly not the case as we see with anti-dumping rules and countervailing duties.
These are dubbed “trade remedies” for a reason. And don’t forget what might be called “social dumping”—where one country literally dumps its unemployment potential elsewhere or subsidizes inefficient production forever, regardless the cost.
What about operational mobility and the so-called benefits of financial globalization? The distinction between short-term, “hot money” and financial crises and long-term capital flows, such as foreign direct investment, is significant. One is disruptive, the other enhancing. One is patient and the other imprudent. So why is it that the timing of financial globalization and the occurrence of banking crises coincide almost perfectly?
Recurrent boom-and-bust cycles are familiar to less developed countries, but now appear to have spread to the European Union and the United States. Financial globalization has, like trade, exerted a downward pressure on the labor share of income.
Has anyone ever heard this line? “Accept lower wages, or we will move abroad!”
The other week, a gentleman in Ohio was interviewed who ran a large battery-manufacturing unit there and had recently moved, as the boss, to Mexico. When asked about the thousands of workers in Ohio. “They are gone,” he said. “We hired far cheaper Mexican ones in Juarez at just a fraction of their hourly wage.”
Those with lower skills or qualifications are the least able to shift or move across borders and are most damaged by this sort of risk shifting. But soon, so too, will be the accountants, architects, engineers, software developers, and every other white-collar worker.
It has also become harder to tax global mobile capital. That is because capital moves to the lowest rate tax haven and uses transfer pricing to disguise profits. Taxes on labor and consumption are much easier to collect, and they have gone increasingly up and up.
Globalization, we were told, had a big upside.
This is the bill of goods the public has been sold for decades. In fact, globalization has only helped the few: exporters, multinationals, and the large international banks, as well as certain professionals and the very top management.
It surely helped some countries, such as China, which rapidly transformed peasant farmers into low-cost manufacturing workers, thereby reducing poverty. But all those jobs were at the cost of “old jobs” in America’s Rust Belt. In effect, globalization was a definite and planned wealth transfer from one place to the other, which has gone largely unreported.
There is another side of the not-so-glossy globalization coin: increased domestic inequality and exacerbated social division.
The benefits and monetary flows sold to the unknowing public turned out to be all one-sided and went exclusively to the very highly skilled, to employers, to cities, to cosmopolitans, and to elites—not to ordinary working people.
The United States and Europe have been ravaged by financial crises, decades without a raise in pay or the standard of living for the masses and by the effects of austerity—while the few got richer.
Globalization gutted the existing social contract and ushered in a stigma of unfairness—in what Trump calls “a rigged system.”
The playing field was hardly level. The winners took all and Goldman Sachs bankers always seemed to come out on top, whether they were selling distressed mortgage debt or shorting it (sometimes simultaneously).
In the end, the economics of globalization and of globalist agency are, we have discovered, not politically sustainable.
Economic integration (in the EU or globally) has definite and unacceptable real costs that the people cannot and will not bear.
This explains the rise of economic and political populism.
Economic populism and its political cousin, political populism, are an antidote and a reality check to excessive globalization and globalist values and institutions.
You spell that Donald J. Trump.
Looking back 2016 was a watershed, historic year. The Clinton globalists did not want to lose to the Trump nationalists. They did not want their world or their ambitions for globalism disrupted.
They have been.
Theodore Roosevelt Malloch, is Chairman and CEO of The Global Fiduciary Governance LLC, a leading strategy thought leadership company. Ted is based out of London, England.