Why Democracy Will Not Save Us From the Globalization Divide

Those of us interested in trying to understand the deep political divide that has emerged in the U.S., the UK and other capitalist democracies trace the gulf to citizens’ starkly contrasting experiences of globalization.

The prescient and prolific Harvard political economist Dani Rodrik suggests we’ve entered an era of hyperglobalization, in which globalization has become an end in itself that drives policy choices and constraints rather than serving as a means to prosperity.

Rodrik argues that negotiation of international trade agreements has been captured by lobbyists, with gains accruing narrowly to powerful transnational businesses such as financial institutions and pharmaceutical companies.

As a consequence, he points out, we are witnessing an “insurrection against business and political elites” by workers bypassed by the gains of globalization.

In his work, Rodrik considers two ways of reining in hyperglobalization: intensified global economic governance or greater reliance on domestic economic control.

Rodrik makes the case for the latter. His argument rests on two premises: any effort to derive global standards would encroach on and deny the norms and preferences of varying societies; and inclusion, transparency and accountability of policy making do not operate effectively at a global level. The excesses of globalization are very real, and must be balanced by greater national autonomy if we are to avoid still deepener societal fissures and to begin healing the enormous societal divide between those thriving in a globalized world and those who are struggling.

Fair points.

But there’s a problem. The argument for enhanced national autonomy implicitly assumes that democratic accountability functions well at a national level. Is this true? Is this so in the contemporary U.S.? Is it true in a UK mired in a divisive and debilitating process of exiting the European Union?

Can we assume that the policies pursued by the U.S. government are any more the “will” of the American people than international trade or other agreements reached between negotiators in closed processes?

British exit from the European Union was indeed the result of a popular referendum. But the ill-advised referendum itself was a result of political maneuvering by governing elites who sought to avoid the costs of political leadership. (Put differently, it makes a great deal of democratic sense to hold a referendum on whether to build a new water treatment plant across town. Does it make equal sense to hand over to the public a decision on something with such far-reaching, multifarious and irreversible consequences for the national welfare as membership in the European Union? No. Doing so was, therefore, a gross abdication of political leadership.)

Is domestic policy making any more accountable and any less subject to control by powerful and wealthy elites than the international agreements about which Rodrik so insightfully voices skepticism? Did the American people demand steel and aluminum tariffs? Have we asked the administration to gut the Consumer Financial Protection Bureau?

Did the public clamor for the U.S. federal government to abandon the Obama-era Clean Power Plan and to withdraw from a Paris Climate Agreement based on voluntary national contributions?  Did advocates of ordinary taxpayers have more than marginal input into the recent tax bill?

More directly to the point, do ANY of these policies serve the interests of those who have been left out of the gains from globalization? Or, in contrast, are these policies simply political tools to reward and retain rich and powerful political supporters, while simultaneously mobilizing a political “base”?

Sadly, we cannot – at least at present — rely on domestic democratic accountability to ensure the “sane” globalization Rodrik justifiably calls for. Rodrik is an astute student of economic incentives. At present, political incentives encourage exploitation and exacerbation of societal divisions. These divisions carve a path to political power.

No doubt, the dynamics of globalization deepen the economic and social divide. But our political leadership is dedicated to exploiting this divide, not to healing it.

Without democratic renewal, domestic politics will remain part of the problem.

The Folly of Brexit Reveals the Folly of “America First”

I have written in past weeks about the ways in which the current U.S. administration is investing in societal division as a political strategy.

Aluminum and steel tariffs are a prime example, for tariffs unleash a zero-sum dynamic both within U.S. society and between the U.S. and its global partners. This stands in contrast to the sort of positive-sum process potentially generated by investment in job training and apprenticeships.  This will be the subject of next week’s post.

But first, I want to consider a prior point about deep divisions in contemporary society and the paths by which capitalist democracies can – and should not — navigate these tensions. Recent analyses of divisions in capitalist democracies emphasize the tension between those who’ve gained most and those who’ve been hurt by the advance of globalization.

There is substantial evidence for this cleavage in the U.S. as well as in the UK, where characteristics of those supporting a British exit from the European Union — who tend to be older, less educated and more opposed to immigration and multiculturalism than those who voted to remain in the EU — overlap in significant ways with supporters of the current occupant of the White House.

The “country name first” response to globalization (as in “America first” or “Britain first”), while politically expedient, is both socially divisive and ultimately damaging to national prosperity. Exit from the EU has taken the UK down such a path, and the contradictions of Brexit become more evident over time as the British government struggles to control the damage.

British Prime Minister Theresa May gave a major policy speech last week outlining Britain’s conception of its future economic relationship with the European Union. What the speech ironically revealed is that British exit – much like the implementation of tariffs in the U.S. – is a narrow political project that can only bring damage to the national economy and the country’s place in the world.

In her speech, Theresa May valiantly endeavored to reconcile a “people’s exit” with a prosperous and globally engaged future for the UK. Unfortunately, the speech revealed all too starkly that these ends are entirely irreconcilable.

 

Image result for BRexit take back control images

May began her speech with a nod to populism: the entire project is about the British people, not the “privileged few.” The implication, of course, is that European integration is an elite project whose benefits accrue to a narrow element of society.

 

There are elements of truth to this claim. The tragedy is that British policy makers, rather than tackling issues of inequality, have pursued a path of division and destruction in exit from the EU. Without doubt, the country will be considerably worse off following exit, and of course poorer, more vulnerable segments of the population will bear the costs of reduced economic opportunity and sharply reduced fiscal resources.

The same is unquestionably true in the U.S., where an “America first” policy course can only redound to the detriment of the very people those who hew this path cynically claim to defend.

 

What also became evident in Theresa May’s “Mansion House” speech is the deep contradiction between the UK’s struggle to extricate itself from the EU with minimal economic damage and the objective of a post-exit UK that is “modern, open, outward-looking, tolerant . . .”

May advances proposals that commit the UK to essentially identical regulations to the EU in order to minimize barriers between the British and EU markets – while maintaining the fiction that the UK will nonetheless be sovereign in devising its own regulatory environment.

At one point that should embarrass the politicians responsible for Brexit, the Prime Minister notes that “businesses who export to the EU tell us that it is strongly in their interest to have a single set of regulatory standards that mean they can sell into the UK and EU markets.” This statement of a reality well understood by proponents of integration unwittingly gives the lie to longstanding propaganda that “barmy Brussels bureaucrats” are responsible for excessive EU regulation imposed on UK markets.

The unfolding process of British exit from the EU illuminates the folly of a hollow strategy of “taking back control” in a globalized world more clearly each day. The folly and danger of “America First” grows equally more apparent.