A Turning Point for Globalization Inequality, Market Chaos and Angry Voters
Resistance is growing in industrialized countries to the problems caused by globalization and free trade. Populists like Donald Trump have promised relief by erecting new barriers to unhindered trade. But it is a dangerous path. By SPIEGEL Staff
Who could have imagined in 2006 that such an outlandish billionaire like Donald Trump could become president of the United States? Who would have believed that the British would leave the European Union? Who would have thought it possible that a right-wing populist party in Germany would win over 10 percent support in several state elections?
Nobody. Ten years ago, the world was a vastly different place. In 2006, Germany lived through its "Summer Fairytale" of hosting the football World Cup -- an event that was, at the time, still untainted by accusations of corruption -- and presented itself as a cosmopolitan host. Russia was still part of the G-8 and welcomed world leaders to the summit in St. Petersburg. Pope Benedict XVI visited Turkey and prayed in the Blue Mosque. In Berlin, the first Islam conference took place, promoting better integration for the religion. A Romano Prodi-led alliance defeated the populist Silvio Berlusconi in Italian parliamentary elections. And international trade grew by 9 percent while the Chinese economy spiked by almost 13 percent.
Between then and now lie years of crisis. Banks and entire countries had to be bailed out, debt grew and faith in the economy and politics evaporated. Central banks chopped their interest rates again and again to stimulate the economy -- with modest success and significant side-effects: Debt continued climbing around the world while in industrialized countries, savers suffered and middle-class retirement funds in particular took a hit.
Now, in 2016, many people in Western, industrialized countries are worried about losing their jobs, their prosperity and that of their children. They see themselves as the losers of a development that has only helped the elite.
The belief that politics doesn't serve the body politic and that the economy doesn't serve the people has taken firm hold. That only corporations and the rich profit. And that globalization, with its open borders and freedom of movement for both goods and people, is to blame for it all. "Globalists" is the word Trump derogatorily uses for people who promote these values.
'Guarantee for Prosperity'
Populists like the new US president-elect want to introduce a much more closed society of customs and fences. Trump wants to end globalization and "put America first."
In his farewell speech before the United Nations General Assembly in September, outgoing US President Barack Obama resisted that message. The international community of today, Obama said, is threatened with all manner of bigotry, including religious fundamentalism, aggressive nationalism and economic protectionism. It is an approach, he said, that is driven by "a crude populism -- sometimes from the far left, but more often from the far right."
He then went on to deliver a passionate appeal for free trade and open markets. "As imperfect as they are," he said, they are the guarantee for prosperity. Isolation and attempts to defeat globalization, he said, were self-defeating. "Today, a nation ringed by walls would only imprison itself."
The fact that the world has come closer together has improved the lives of billions of men, women and children, the US president went on. In the last 25 years, the number of democratic countries in the world has almost doubled while the share of people living in extreme poverty in the world has plunged from almost 40 percent to less than 10 percent. For Obama, such progress allows for only one conclusion: "We must go forward, and not backward."
But Obama was also critical. Growing support for those who would criticize globalization, he intimated, must be taken seriously by political leaders. Too often, people's real problems have been neglected and their concerns ignored. "Those trumpeting the benefits of globalization have ignored inequality within and among nations," Obama said.
It is a realization that has been too late in coming. For a long time, supporters of globalization assumed that the advantages of world trade equally benefitted all. That was naive. There are winners and losers, real and imagined. The real losers have lost their jobs because their companies couldn't compete internationally. The imagined losers believe that without competition from foreign companies, they would have become more prosperous. Some blame adversity from overseas for their own failures or incompetence.
End of Globalization?
Now, though, those who have lost out are striking back, first in Britain and now in the US. And Italy and France could soon join them.
It is a fact that globalization and free trade have increased global prosperity, but they have also increased inequality in the world's wealthiest nations. They have made the biggest companies more powerful, because business operates globally while politics tends to be a local or regional affair, and made the world more vulnerable to crises, because everything is networked and the debts of American homeowners could lead the entire world to the brink of collapse.
In short, globalization is responsible for a host of problems that would otherwise not exist. And it is therefore in the process of gambling away the trust of people around the world. Already today, global trade growth has slowed and state interference is on the rise.
The world finds itself at a turning point. It must try to eliminate the drawbacks of globalization without destroying its advantages. If, on the other hand, protectionism and populism gain the upper hand, there is a danger that global prosperity could shrink. The age of globalization would be at an end.
That age began in the 1970s when China returned to the global stage and revolutionized the geographic division of labor with its huge army of cheap workers -- a trend that accelerated once the Berlin Wall and the Iron Curtain fell. From that point on, companies began producing their goods in places where wages were lowest, which destroyed vast numbers of jobs in industrialized countries. At the same time, climbing demand from developing economies likewise led to more jobs in the industrialized world. "The feeling was: We're making water into wine and growth is unlimited," says economist Henrik Enderlein, who leads the Jacques Delors Institute in Berlin.
That feeling, as became evident on the morning of Sept. 8, 2008, was disastrously misleading. That was the Monday that investment bank Lehman Brothers filed for bankruptcy in New York.
William White saw the disaster approaching. Formerly the chief economist of the Bank for International Settlements (BIS), sometimes referred to as the central bank for central banks, White has analyzed the causes and consequences of the financial crisis in greater detail than almost anyone. A wiry man with silver hair and sparkling eyes, White is sitting in jeans and a plaid shirt in the bar of the BIS athletic club in Basel. Former colleagues of his are swimming in the pool outside and White remembers co-writing an essay with one of them about the illusions that European politicians indulged in prior to the introduction of the euro.