Nine years after the financial crisis, global trade is barely growing when compared with overall economic output. Cross-border bank lending is down sharply, as are international capital flows. Immigration in the U.S. and Western Europe faces a deepening public backlash.Nationalist politicians are on the ascent. On Wednesday, the U.K. formally started proceedings to remove itself from the European Union. In the U.S., President Donald Trump pulled out of a Pacific trade pact on his first working day in the Oval Office, declaring, “Great thing for the American worker, what we just did.”For traditional economists, globalization is a pathway to prosperity. Rooted in the works of Adam Smith in 1776 and David Ricardo in 1817, the classical canon has embraced the idea that trade is the basis of wealth, because it makes nations more efficient by allowing each to specialize at what its workers do best.Few of them fully grasped globalization’s downsides in a modern economy. Tying together disparate nations economically also expanded the labor pool globally, pitting workers in wealthy nations against poorly paid ones in developing nations. That greatly boosted the fortunes of the world’s poor, but also created a backlash in the U.S. and Europe. At the same time, freeing financial flows led to debilitating financial excesses that ended in crisis.
Well, yes. All of this was predictable, but the free traders were enthralled by their ideology and were blind to the real-world effect of their policies. Free trade is like a drug, great in the correct dosage but when you overdose, you die.
My goodness, that’s a long winded way of blowing smoke. As we end, they note:
In the U.S., wages and salaries of workers rose 2% a year in the past five years. That’s down from 2.9% in the five years before the crisis.
Who has been in charge during the last five years and what has been the policy? The Obama administration has been busy working on globalization; lowering trade barriers, and the result is …. what? Tens of thousands of American factories closed and ninety million working age Americans permanently sidelined, not even looking for work anymore.
And then there’s this:
“Globalization has made the financial elite who donate to politicians very, very wealthy,” Mr. Trump said last June at a Rust Belt stop in Pennsylvania, “but it has left millions of our workers with nothing but poverty and heartache.”
Haven’t I been reading about this in this very newspaper? The rise in early death; the drug epidemic among the poor out-of-work men and women. The shuttered main streets of flyover America. And the WSJ wonders why working men and women around the world don’t love the free-trading ruling class any more.