Globalization and its disconnect
Updated: 2016-07-28 07:50
By Stephen S. Roach(China Daily)
But the stakes may be greater if today's more powerful globalization were to meet a similar fate, because the scope of Globalization 2.0 is far broader, including growing trade in many so-called intangibles－once non-tradable services.
The sharpest contrast between the two waves of globalization is in the speed of technology absorption and disruption. It took only five years for 50 million US households to begin surfing the internet, whereas it took 38 years for a similar number to gain access to radios.
Sadly, the economics profession has failed to grasp the inherent problems with globalization. In fixating on an antiquated theory, they have all but ignored the here and now of a mounting worker backlash. Yet the breadth and speed of Globalization 2.0 demand new approaches to cushion the blows of this disruption.
Unfortunately, safety-net programs to help trade-displaced or trade-pressured workers are just as obsolete as theories of comparative advantage. The US' Trade Adjustment Assistance program, for example, was enacted in 1962 for the manufacturing-based economy of yesteryear, and a Peterson Institute report says only 2 million workers have benefited from it since 1974.
The design of more enlightened policies must account for the powerful pressures now bearing down on a much broader array of workers. The hyper-speed of Globalization 2.0 suggests the need for quicker triggers and wider coverage for worker retraining, relocation allowances, job-search assistance, wage insurance for older workers and longer-duration unemployment benefits.
As history cautions, the alternative－whether it is Brexit or the US' new isolationism－is an accident waiting to happen. It is up to those of us who defend free trade and globalization to prevent that, by offering concrete solutions that address the very real problems that now afflict so many workers.
The author, a faculty member at Yale University and former chairman of Morgan Stanley Asia, is the author of Unbalanced: The Codependency of America and China