Homecoming — prescriptions for a post-globalisation economy
Globalisation and automation have not been kind to the US middle class these past decades. Economists such as Thomas Piketty, Daron Acemoglu, Gordon Hanson and Anne Case have documented the hits that average Americans have taken in terms of inequality, wage stagnation, job destruction and deaths of despair.
Yet despite 30 years of middle-class malaise, Democratic and Republican administrations alike have pushed laissez-faire policies without creating social safety nets that would have put the “fair” into laissez-faire — as safety nets did in all the other advanced economies in the world. That’s now changing.
The Republican Donald Trump knocked down the free-trade consensus; the Democratic Joe Biden is building up a new worker-centric, place-centric alternative. A new book, Homecoming by FT columnist Rana Foroohar, documents how and why America has entered this “post-global” paradigm, and details how the US political establishment is now pushing a new policy agenda with new priorities, and why this is creating a rare harmony between the American left and right.
The book is a compelling read that will provoke many days of reflection. It is not a book where the causes, consequences and cures are neatly fitted into a crystal of logic. Its strength lies in its rich palette of examples — many based on the author’s interviews of economic actors and policymakers.
When large corporations are blamed for some of the malaise, the charge is made in the course of three chapters on “BigAg” and the US food industry. When erosion of the US industrial basis is lamented, it is done in the context of chapters on the semiconductor industry and the textile industries.
While full of woe, strife and blame, the book is ultimately hopeful. Instead of leaving readers to imagine solutions that could create the new post-globalist paradigm, a multitude of specific examples are explained. Vertical farming and co-operatives could fix the ills of BigAg. Digital currencies might address the faults of the dollar-based international financial system. Job creation in healthcare, childcare and education could provide the jobs that a more local, community-based economy will require.
Homecoming is very much a book about America, but it would have been stronger if it had included two additional chapters. One would have considered how other rich nations avoided the dire US outcomes. Northern Europe dealt with competition from robots at home and China abroad by “protecting workers, not jobs”; southern Europe did it by “protecting both”. Only in America did a consensus form around the “protect neither” option. The second missing chapter would have shown how globalisation raised hundreds of millions of humans out of extreme poverty and pushed billions into the global middle class.
Elsewhere, descriptions of economic mechanisms jar. To cite one example: “Because the dollar is the world’s reserve, the United States is flooded with dollars that must be turned into financial assets, which means the financial system has to work overtime to make that so, encouraging debt and bubbles.” Many international economists would disagree with that logic. But this is a distraction, but not a fatal flaw since the real merit of the book is explaining the mindset behind the reasoning that drove the US policy establishment to turn against beliefs it held without question for decades.
Ultimately, this is a must-have-read book for those in the Davos world. Many FT readers may disagree with statements such as: “far from making us all ‘free,’ the free market changed us from citizens into consumers, increasingly beholden to the increasingly large corporations that outsourced our jobs and mined our personal data even as they sold us the increasingly bright and shiny objects of late-stage capitalism (often on credit).”
Many more will feel uncomfortable with the list of culprits that includes trade agreements, Wall Street, shareholder value, economists and the international financial system. But they should nonetheless read the book.
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It is likely to become a playbook for the post-global era where free trade is pushed aside by worker-centric trade policy, localisation and muscular industrial policy. Where Davos man or woman is pushed aside by policies that leverage international economic interdependencies to advance geostrategic goals, so-called “weaponised interdependence.” Where the interests of Wall Street and multinationals are listened to less, and the interests of “people and place” are listened to more in the Washington halls of power.
This book will help mainstream thinkers comprehend the reasoning of those who, like Foroohar, are dead certain that “globalisation as we’ve known it for the last half century is over”. And, more importantly, what comes next.
Homecoming: The Path to Prosperity in a Post-Global World, by Rana Foroohar, Crown $30, 400 pages
Richard Baldwin is a professor of international economics and editor-in-chief of CEPR’s policy portal VoxEU.org
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