Globalization – as promoted by the United States over the past 70 years – has led to the greatest reduction in poverty and the biggest decline in interstate conflict in human history.
It has allowed freedom to grow and flourish: Markets for goods and services are less fettered by government interference, and more individuals can decide for themselves what to buy, where to travel, and where to live and work. But that hasn’t prevented many people around the world from arguing that globalization has harmed our security and prosperity.
At its core, globalization creates wealth by encouraging communication, collaboration, and competition. And it increases security because cooperation limits the risk of unnecessary conflict. Uncoupling from global supply chains would raise the cost of producing everything, further fueling inflation, while restricting trade would reduce freedom of consumer choice and make the world less secure.
Unfortunately, recent events have strengthened the rising chorus of voices in the United States and around the world arguing that we should de-globalize, dismantle international supply chains, reduce international trade, curtail immigration, and discourage international investment.
The COVID-19 crisis followed more than a decade in which the United States backed away from global economic engagement by slowing the implementation of previously negotiated trade agreements and renegotiating existing ones, raising tariffs, and undermining the World Trade Organization.
Now, we have the unprovoked Russian invasion in Ukraine, which has appropriately led to Russia being ostracized from the global economy, disrupting global agricultural and energy markets.
While it’s true that not everyone in the United States or elsewhere in the world has benefitted from the globalization of the past half century, we should not retreat within our own borders.
One major flaw has been that globalization fails to effectively discipline free ridership – that is, refusing to comply with rules while expecting that will comply.
Many countries use government-owned or -supported enterprises to compete, which disadvantages private enterprise and contributes to job loss in the United States. Many also interfere in the market to limit the ability of foreign firms to compete, using regulatory tricks to inhibit sales of foreign products. Both of these tactics violate commitments made either bilaterally or in the framework of the WTO.
The United States isn’t perfect in this regard but judging from our win/loss record at the WTO, we’re hardly the most egregious offender. So tightening the WTO’s disciplinary procedures would serve American interests. We also shouldn’t hesitate to curtail access to our own market to address bilateral abuses.
Similarly, many less developed countries use low wages and lax environmental standards to reduce production costs to attract investment and promote their own exports. This unfair competition has cost many American workers their jobs, and contributed to the decline in the U.S. steel, shipbuilding, and textile sectors.
Our trade policy has tried to tackle this phenomenon, but it’s complex, so it resists one-size-fits-all solutions.
Finally, the United States has taken a hands-off approach to the domestic dislocations driven by globalization, generally letting the chips fall where they may when domestic industries come under pressure from foreign competition.
In cases where the competition is free of subsidies or other distortions, it’s probably appropriate to let matters run their course. But when an American player is in an unfair fight with a government-supported foreign competitor, a more active policy would yield a better result for American society.
In either case, if American workers need to be “upskilled” or perhaps move to a growing region, we should consider whether it’s fair that those workers bear those costs all by themselves.
Climate change and tectonic geopolitical shifts like Russian revanchism and China’s demand for a better seat at the table are other downsides of globalization. As these have gathered pace in the past 10 years, many people and communities haven’t been able to adapt to the rapid industry and job dislocations that have ensued. Too many feel not just left behind, but betrayed, and their anger is driving more and more leaders in the U.S. and Europe to call for bringing manufacturing back home and putting the brakes on immigration – whatever the cost.
These are potentially dangerous developments. Restricting trade and using taxes, tariffs, and subsidies to manipulate the market would make goods and services more expensive and less competitive. Withdrawing from security mechanisms like NATO would invite further conflict.
“Make it here at home” has a nice ring to it, but we must have no illusions: That path leads to poverty and conflict.
But there are changes we can make.
It’s easy to imagine a policy strategy that would keep markets open while disciplining free ridership and other abuses of the global system – one that would do a better job of promoting appropriate structural changes in the U.S. economy by acknowledging the stresses on our communities and families.
Developing, funding, and implementing such a strategy will take leadership and vision at all levels of our politics. But we’re running out of time.
Matthew Rooney, Director of Outreach and Strategic Partnerships at the George W. Bush Institute. The views expressed are the author's own.
