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.

Graphic: Global Export and Economic Growth

Graphic: Global Export and Economic Growth

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.

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petertx 11/17/2016
1. Globalisation and Free Trade are not two sides of a coin
A great article. Thanks! I take issue with how you assume globalisation and free trade go hand-in-hand. Countries with high growth rates, e.g., China and India, are protectionist. Their import tariffs are higher, especially in sectors where they perceive growth opportunities. Free trade is only advantageous if (1) everybody plays ball and (2) you are market dominant and do not need to grow domestic industry. You seem to believe that globalisation is some kind of natural phenomenon. In fact, it largely exists because of effective subsidies. To give just two examples. We heavily tax local transport for environmental reasons, but we do not tax global transport. Lastly, we turn a blind eye to the army of slave labour made up of political prisoners in China, yet we marvel at their low unit labour costs.
Inglenda2 11/17/2016
2. The Trump vote was for more honesty in politics
When an American Pesident says Frau Merkel has credibility, he obviously does not do this without some sort of motive. Whether this statement was a blatant lie, propaganda, or an antempt to intervene in the next German general election may be a matter for discussion. Whatever the case, Barack Obama is an extraordinary actor, who is able to depict properties which are not his own. He received a peace prize in advance of actions, which he had promised, but never carried out. It would appear that despite all his speeches, about western values, he not ready to return the prize which he has not earned. Trump may be less intelligent, but is open with his statements, even if many of us do not agree with what he says. The only values Obama and Merkel seem to know, are Dollar and Euro. That is why they fear a division of industrial Nations. Honesty, morals and patriotism only play a role in western policies, when they can be used as a tool to yet more power.
praha7 11/17/2016
Until governments around the world act responsibly and tackle the problems outlined in the article it is pointless to blame the electorates for attempting to find their own solutions. At the moment we have governments of whatever colour that have fallen for the neo-liberal economic idea and consequently offer no choice to the voters. The result of this is obvious and, despite the handwringing of the main street media, the people will continue to search for a solution. That the solutions they find, like Trump or Brexit, may be contradictory and may not provide the answers, they are nonetheless real and have a large effects. If the world becomes protectionist then the blame will lie with all those who, instead of concentrating their efforts on solving the problems that globalisation has caused, are still trying to force more globalisation on populations that are clearly signalling that they have had enough.
verbatim128 11/18/2016
4. Globalization, how far?
USA Today just quoted Mrs. Merkel, unrepentant as ever, from her first meeting with President Obama on Thursday: ""It is my conviction that globalization — and I think we share this conviction — globalization needs to be shaped politically, it has to be given a human face, but we cannot fall back to pre-globalization times," Merkel said at a joint press conference after meeting with Obama in Berlin."" Someone ought to have told her that "the human face", Dubcek's idealistic attempt to shape communism in 1968, was socially, economically and politically a failure. She borrowed the wrong phrase, and it is even more expedient for "globalization" then it was for communism.
tonypappas 11/18/2016
5. Awakening To Freedom
The European pundits like the elitist establishment, who pontificate and posture and like to label those who disagree with them with code words like MISOGYNIST and other intellectual sounding words, have no feeling or understanding of the average citizen who gets up every morning, rain or shine and goes to work and deals with the reality, burdens and costs of every day life. They are fed up with paying for and submitting like sheep to an increasingly authoritarian and cold elitist aristocracy. If the EU does not reform it's attitude towards it's people and become more Democratic and responsive to their needs, the odds are with the national elections coming up, that it won't last another two years. Those that scoff at this prediction should look and remember, at what has already happened in the UK and the USA. !
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