One Bank Asks: Is Globalization Dead?

One Bank Asks: Is Globalization Dead?

For the better part of three years, voters in Western democracies have been force-fed a steady stream of baseless bullshit about the purported ills of globalization and progressivism.

This firehose of poisonous rhetoric comes courtesy of would-be populist “heroes” who have seized on the misfortunes of disaffected segments of the electorate in order to capitalize politically off people’s fears and prejudices.

It’s an exceedingly unfortunate strategy that takes the easy way out by perpetually blaming an amorphous “them” for “our” problems. Implicit in that ideology is nationalism and xenophobia and implicit in those two nefarious “isms” is the reversal of human progress.

That’s what you’re seeing manifest itself currently in the Trump administration’s misguided (and that’s putting it mildly) foray into protectionism – an effort Trump claims will help usher in a veritable renaissance for long dead American industries but which, in reality, will merely prop those industries up like the Norwegian blue in the Monty Python sketch while simultaneously wreaking downstream havoc and pissing off the rest of the world in the process.

Everyone with any sense knows the prescription for growing income inequality isn’t simply isolationism. Turns out, it’s a little more complicated than that. In the same vein,  the demise of the Western middle class (where that’s actually a real thing as opposed to just a campaign slogan hijacked in the service whipping people into an anti-establishment frenzy) isn’t going to be reversed by pairing an inward-looking foreign policy stance with a horse-sized dose of supply-side economics. That’s so fucking laughable that it’s difficult to find the right words to convey the inherent absurdity of it. And no, the fact that people have gotten one-off bonuses and free Ding Dongs, isn’t “proof” that trickle down is “working this time”.

But disaffected voters who have fallen on hard times are a vulnerable lot – in short, they’re gullible. And that’s what makes this whole semi-global populist uprising so unfortunate. It doesn’t “help” the people it purports to help. Instead, it feeds off their fears and prejudices in order to bolster the fortunes of political opportunists and demagogues.

This is the part and parcel of the threat to globalization the world is now trying desperately to fend off. And as BofAML writes in a new note, populism is far from vanquished. To wit, from Barnaby Martin’s latest:

Populism has been an all too familiar theme over the last few weeks, with a strong “protest vote” being registered in the Italian general elections and the rumblings of a potential tit-for-tat trade war emerging. The reality is that populism hasn’t disappeared — far from it as Chart 3 shows. At its heart, populism remains a story about righting wealth and income inequality. Note in Chart 4 how well the Italian elections encapsulate this theme: across Italy’s regions,the 5 Star vote share appears to have been strongly correlated to GDP per capita.


As Martin goes on to remind you, this isn’t (or at least it shouldn’t be) about “Frexit” or “Italexit” because after all, those events would have disastrous wealth effects. Rather, this is about precisely what we noted above. Here’s Martin again:

The current brand of populist politics is more inward looking and seeks to play on voters’ fears about globalization and migration. Populism, therefore, has become more about protectionism: putting up barriers to entry and reworking free trade.

Against this rather disconcerting backdrop, what is the outlook for globalization?

On that score BofAML suggests there are multiple reasons not to despair. For instance, Martin notes that “while world trade has had a tough time since 2012 given the fall in commodity prices —growing at or less than the level of world GDP growth — the WTO have estimated a pickup in world trade in ’17 and ‘18 (albeit modest).”


The bank also writes that the evolution of current account balances in the post-crisis world suggests that with the possible exception of Germany (and you know the story there), current account balances are more sustainable now than they were pre-Lehman. Additionally, Martin says this about the chart on the right below:

International migrants have risen from 2.8% of the world’s population in 2000, to 3.3% in 2015. Globalization in this respect — empowering workers to seek better opportunities outside of their borders — looks to be flourishing.


There’s more in the full piece, but the bottom line is that it’s probably not accurate to suggest that the world has moved into full-on “deglobalization” mode.

I would go one step further and say it will ultimately prove impossible to reverse globalization. This horse has left the barn.

And no orange-faced pseudo-autocrat or shrieking blond Nazi is going to be able to put the brakes on.


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