Trump's pro-globalisation critics miss the key questions

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The election of Donald Trump has been celebrated by many of his supporters as the end of globalisation. It is not clear what exactly is meant by that, but still no-one should be surprised it is happening. Much of the impact of globalisation on the middle class of developed countries was predicted over 20 years ago.

CNN headline has Trump declaring globalisation has wiped out the middle classGlobalisation is not the same as trade, and the two are often confused. Trade is companies in one country transacting with customers in another. Globalisation, at least in the commercial sphere, involves large corporations putting different parts of their operations in different parts of the world: pursuing, as the cliche goes, the 'smartest minds and the cheapest hands'.

Much of what is recorded as trade is actually shipments inside the same company (half of China's 'exports' to the US are of this type — Apple products, for instance, being sent back up the company's internal supply chain). Indeed, a substantial portion of America's, Europe's and Japan's industry base is in China, which hopefully will be a disincentive to start a war.

By being able to pick and choose their work forces, company managers or owners acquired immense power over labour, allowing them to suppress pay rates. Hard won worker power has progressively been eroded as corporations have taken advantage of cheaper and more lax workplaces overseas.

In many industries, organised labour is a distant memory; many workers in America have not had a real pay rise in decades. Meanwhile, senior managers' salaries have ballooned. The resentment that this has caused was critical to the election of Trump, and the anti-immigration undercurrent in the Brexit vote. The losers in the middle class, it turns out, are also voters.

Evidence of the destruction of the lower middle class incomes in developing countries is easy enough to find, but one especially startling statistic is that in 2015 the bonuses paid to Wall Street, about $US28 billion, was double the total earnings of all Americans who work full time at the federal minimum wage of $US7.25 and hour. 

Globalisation also has a financial dimension, which has allowed an international banking and finance elite to emerge. The results of 'freeing' up capital were extraordinary. Massive volumes of capital now slosh around the world: over US$4 trillion a day, according to the Bank for International Settlements. This is, in effect, like overlaying a giant casino over the world economy. It is reminiscent of Jorge Louis' Borges' famous story The Lottery in Babylon, except that it is real.

Creating this finance lottery has led to many perverse consequences, including almost destroying the world's monetary system in 2008. For instance, it has not resulted in greater investment into the developing world; investment flowed the other way, from developing countries to the developed world.

 

"In some ways, this represents a return to the early 19th century, when only a fifth of global inequality was owed to the difference between countries."

 

Not everyone has been a loser from globalisation, however. Indeed, a greater number were winners: people in developing economies, especially China. Hundreds of millions of people have emerged from poverty, largely because of the technology and knowledge transfer that came with globalisation (not so much foreign investment or wages).

It has led to a massive shift in economic power. In the 1990s, Europe, North America and Japan accounted for about 90 per cent of the world economy. Now, those developed economies account for less than half of world GDP.

In some ways, this represents a return to the early 19th century, when only a fifth of global inequality was owed to the difference between countries. It was only since the Second World War, when the developed world started to dominate, that nationality came to determine 'as much as two-thirds of our lifetime income'.

It created a heady mix of nationalism and economic advantage. If you belonged to a 'great' country, you also had a great standard of living. This is the very 'greatness' that Trump is trying to recapture in his resolve to 'Make America great again'.

Inequality now tends to be determined by whether or not you belong to the elites within a country, or a well rewarded job type, or have capital to invest. For those in the developed world who are not in the 1 per cent who enjoy such privileges, it means being trapped in an economic cul de sac. We are returning to a familiar problem of class inequality.

Many defenders of globalisation express frustration at the rise of Trump and what they see as an ignorant and self-defeating backlash against its virtues. But they have no answer to the most pressing question: Is the global system there to serve people, or are people there to serve the global system? They also never address a central contradiction of globalisation: that capital is free to move, but for the most part people are not, unless they belong to the elite ranks. The inevitable backlash has begun.

 


David JamesDavid James is the managing editor of businessadvantagepng.com

Topic tags: David James, Donald Trump, globalisation


 

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Existing comments

Cant agree with your premise, namely the overly narrow definition of globalisation as "large corporations putting different parts of their operations in different parts of the world." Ultimately globalisation is much more than that. it is about integration at all levels of society. It needs no defenders; it is inescapable!
Paul Bolster | 08 February 2017


Initially I supported the idea of globalisation as it offered the opportunity for a more interdependent world with less chance of war. However, it was appropriated by the 1 percenters under Thatcher & Reagan, to their benefit at the expense of the rest of the population. Along with deregulation, unfettered capital mobility and political donations democratic institutions have been virtually destroyed. The GFC instigators were not only not jailed for their malfeasance but are reaping greater rewards under both Obama and now Trump.
Tony Walters | 08 February 2017


Globalisation is an elastic term, interpreted by many according to a ‘What’s in it for me?’ attitude. Accordingly it can mean exploiting others to enrich self, or sharing resources with those in need. Inequality in the world promotes tension and conflict. In the never ending struggle between the ‘Haves’, and the ‘Have nots’, the ‘Haves’ always seem to exhibit more determination to increase the divide between the groups than the ‘Have nots’ to decrease it. This is the opposite of the spirit of the early Christians who practiced, without specifically formulating it, the solution to so many problems, “From each according to their ability, to each according to their need”. This inspirational concept flowers only if it comes from the heart, but dies if force is used to try to promote it.
Robert Liddy | 08 February 2017


It seems that it's been human nature to take advantage of others through millennia. But what is unique to this period in history is that both usury and manumission are not part of the elite's lexicon (they are cloaked in different terminology to avoid accountability) ... I agree with James :" the inevitable backlash has begun" ... and it will be a global backlash this time.
Mary Tehan | 08 February 2017


Perhaps "the hundreds of millions" who have emerged from poverty such as in China have simply learnt how to cheat and deceive to their own advantage from the large global corporations. The 'have nots" got up in France with the storming of the Bastille and in Russia with the ditching of the Tsar. The third great revolution, if it follows the time span between the two mentioned above, should be upon us in the not too distant future. The hoi polloi is not quite as tolerant and not as powerless as those who preceded the first two revolutions.
john frawley | 08 February 2017


Thanks David, this is a nice article, but one of contrasts in which the second half contradicts or at least balances out the first half. Overall the globalisation of trade has been a wonderful thing, and there have been relative and even absolute losers in developed countries. And the system does need ground rules and regulations, as in what was attempted in the TPP, and which will inevitably come again to spread agreed worldwide acceptable standards of commercial law, working conditions, pay etc. Sovereign governments and trading blocks of these are much more powerful than globalised corporations even if they have taken time to realise that. And governments do need to govern for all their people and compensate and retrain the losers, but barriers to trade will just hurt everyone and especially the poorest in the world.
Eugene | 08 February 2017


Criticism of Trump’s anti-globalisation policies are that they will not work. Many opposed to Trump have long recognised the problems of globalisation. It can be described as Anarchic Capitalism, capitalism practising by mammoth international companies that ignore rules, exert pressure to alter rules or promise social disruption if their demands are not met. They see themselves as beyond the law and specifically taxation. When Trump nominates key globalisation players to cabinet and removes the few controls on the financial system that Obama installed you don’t have to wonder too hard. He has constantly emphasised that he ignores rules. In many cases rules were enacted to stop ruthless exploitation by the powerful. Trump has a history of exploiting the less powerful and bragging about it. A benefit of globalisation has been the attack on poverty. This is a by product of multinationals seeking the lowest cost labour, it has been achieved by lowering other standards, especially OHS. Deaths at work had virtually disappeared in the West. Now work mortality rates are higher than ever. Globalisation can work much better than it has, but not with Trump in charge.
Bruce | 08 February 2017


Didn't some bloke write about about capital once? Wasn't it called "Das" something-or-other? Thre was a lot to like in your analysis.
David Healy | 08 February 2017


Thanks for your article. I do think though, that rather than just globalisation, it is neo-liberal economics that are to blame for the erosion of working conditions, pay and the associated costs to communities. Privtisation campaigns by right-wing governments (i.e. Kennet in Victoria) beholden to big business interests have destroyed social structures and public economic benefits. This loss is massive and has ramifications for our health, happiness and economic well-being. We need to redress and rewind these losses to the public good, and stop believing TINA (there is no alternative). We need to reclaim power from corporations and reclaim democracy for the good of us all.
Karen | 09 February 2017


The main issue is the power of international capitalism and multi-national companies. It is unfortunate that government economic policy makers did not take notice of the analysis of Ted Wheelwright and Brian Fitzpatrick about international capitalism and multi-national companies in their book 'The Highest Bidder' which was first published more than fifty years back. Government economic policy makers around the world and especially Ronnie Reagan in America and Maggie Thatcher in England preferred the economic philosophy of the neo-liberal Milton Friedman, who was totally opposed to social and humanitarian government policies. The election of Donald Trump as American president is a victory for big business, white supremacy, racial bigotry and religious bigotry. Trump won the American election because of the apathy and laziness of eligible voters; approximately 57% of eligible people voted and only about 30% of eligible people under the age of thirty bothered to vote. However, the election of Trump is irrelevant to most people around the world because the influence of America in respect of political and economic policy has been waning for the last thirty odd years. Countries such as Germany and China have more influence than America and leaders such as Angela Merkel and Xi Jinping are more sensible than any American leader of the past 50 years. Australia is very well off with 99.9% of people being well educated and financially well off with good jobs It is also bemusing that most mainstream political parties and media organisations have become alienated from the majority of people and rely on 'Mickey Mouse' public relations surveys and mythical focus groups for their political strategies.
Mark Doyle | 09 February 2017