The End of Globalisation

Luc Vallée

Globalisation, a force for good in general, is at risk of losing its status ... again! But this time the threat may not come from youths eager to demonstrate and/or unionized workers wanting to protect their high paying jobs. Although these segments of the population are likely to participate in the second wave of attacks on globalisation, the core of the protests is likely to come from much more powerful interest groups: business leaders, high skilled workers, consumers and even government.

In the past business leaders have been ambivalent about opening boarders. In the one hand, they recognized the value of competition and valued the opportunity to grab new markets by expanding internationally. Yet, on the other hand, those businesses that had the hardest time adapting to this changing environment have been more reluctant to embrace free-trade and supported at least some form of protectionism.

High skilled workers have also generally benefited from globalisation and the more so when their skills could be protected by intellectual property rights. For a while this protection seems like it would offer a permanent bonanza to makers of “content” but the Internet and the Napsters of this world are rapidly changing the rules of the game. And the rest of high skilled workers who could not benefit from such dynamics increasingly feel the heat of Chinese and Indian Ph.D.s. Already an engineering degree which requires years of investment in education and hard work (compared to finance for instance) has become a commodity. As a result, most engineers in America earn next to nothing compared to other (protected) professionals. This has incited many to enrol into costly MBAs and other management programs to pull themselves out of an increasingly miserable situation.

Moreover, consumers who were the major benefactors of cheap goods until recently are now indebted or jobless. The other side of the split personality of consumers (they need to work as well in order to consume) is taking over and making many realize that they are puns in a game which is not being played with their genuine interests in mind; in spite of the rhetoric from the multinationals and their lobby.

Finally, governments which have been backing free trade for several decades are sensitive to the new found preoccupations of their constituents. And while they had to assume more powers to deal with the financial crisis, their interest and incentives to intervene in the affairs of the markets have increased substantially. Regulation is making a come back and free trade will not be exempted from its grip.

The danger is that this new coalition of protectionists tips the balance of power too far into the other direction and kills the goose laying the golden eggs. Unbridled emotions of the mob combined with justified moral outraged could produce a swing of the pendulum that would kill incentives and destroy the benefits provided by the efficient allocation of resources of a market economy.

Free Traders are indeed in need of a plan. Body of the Article