Stop Blaming Globalization: Most Problems Are Homemade

The move towards globalization made some believe that history is linear. This is certainly not the case.

Backlash against globalization

The continuing backlash against globalization, as well as the resulting retrenchment, which frequently takes the form of nationalism, demonstrates two facts: First, globalization is subject to setbacks. And second, the multilateral trade regime is both fragile and perhaps somewhat flawed.

The backlash against globalization has globalists looking for pathways forward. This is all the more necessary as the dangers the world faces, both economic and political, are serious and growing.

Mounting nationalistic tendencies in the United States, Russia, China, Brazil, Italy, Poland, Hungary, India, the Philippines and many other countries, are continuing to fragment the international consensus. This spread of nationalism is disrupting the established political and economic order.

Trade and prosperity

Fragmentation of this consensus now threatens to destabilize the world and jeopardize the rapid economic growth and relative stability experienced since the Second World War. Bulwarks of stability, such as the World Trade Organization (WTO), are under attack. So are other multilateral institutions.

At the core, though, the backlash against globalization is misdirected. In most cases, the primary reason for the electorate’s frustration is the inequality of economic opportunity within countries.

Some wrongly blame this inequality on international and regional trade agreements. Some blame immigration. Others more correctly place the blame on lack of education, poor infrastructure, poor governance and a lack of access to capital.

Nationalism is no solution

Regardless of the causes identified above, most people would agree that inequality of opportunity has marginalized large segments of the population in many countries. In Europe, the United States and even across Africa, inequality of opportunity has fueled immigration by the “have-nots” which, in turn, has fueled resentment and nationalism.

One important point that should be clear is that: The recourse to nationalism that is so temptingly offered by the populists does little to address the problem of – largely – domestic inequality.

The inequality battle revisited

Even so, one question that warrants reflection is this: Where did the West go wrong in its journey towards a more globalized world and the resulting nationalism?

Our political and economic leaders share much of the responsibility. They have not taken adequate steps to address the rising inequality of opportunity.

In pursuit of their respective self-interests, they have also failed to establish an environment that would nurture satisfactory employment opportunities and improve governance.

For politicians, long-term thinking has been overtaken by short-term political opportunism. It is easier politically for politicians to blame “globalization” – instead of acknowledging the severe policy errors they have made at home.

No short-term solutions for long-term problems

Unfortunately, there are no short-term solutions to redress these problems. It is particularly distressing that many of the problems Western societies are experiencing are due to failures in their educational systems.

This cannot be due to a lack of money or wealth. Instead, it is due to a lack of proper attention to other issues, such as how we educate those born in disadvantaged circumstances. Another shortfall is the failure to properly educate prospective business leaders.

Education always takes (too) long

Complicating the debate is the realization that any realistic solutions to educational issues, if properly defined and arrived at, take at least one generation to implement.

Since most politicians are notoriously fixated on the short-term election cycle, they are unwilling to invest the necessary political capital to address mid- to long-term educational issues.

In addition to the standard courses in literacy, math and science, there is an urgent need for high school students from all walks of life to understand two core issues. The first is basic economics, and the second is civics – the rights, obligations and the theoretical and practical aspects of being a citizen in a democracy.

High school students should graduate with knowledge of supply and demand, return on investment, gains from trade, comparative advantage, externalities and the tragedy of the commons.

They should also have a basic understanding of the cornerstone principles underlying the international trading system (non-discrimination, transparency, etc.), as well as the rights, obligations and the philosophy underlying democratic regimes.

Too focused on business as usual

For business school students, the bar should be set even higher. In addition to more advanced economic knowledge, including principles related to taxation, business school graduates should have an advanced knowledge of political economy, development economics, environmental economics, ethics and global governance issues.

This includes the business and societal risks posed by inequality, political uncertainty, corruption, racism, gender issues and the failure of rule-based systems, in particular judicial systems protecting democracy, property rights, investment and trade.

Unfortunately, these subjects are seldom taught in business schools, or for that matter in other university curricula.

Conclusion

The fight against globalization and the resistance to globalism is at its heart a contemporary form of anti-intellectualism.

Both global prosperity and global progress depend upon a common understanding of how an interdependent world functions – economically, politically and socially.

To get there, we must ensure that students understand basic economics and basic governance issues. We must move beyond the idea that school, in particular business school, is merely a vehicle for amassing personal or shareholder wealth.

Don’t get me wrong: There is nothing wrong with making money and shareholders also deserve a fair return on their investment. But making money is much more enjoyable when everyone around us is also enjoying stability and prosperity.