Trump and the New Anti-Globalism

The recent U.S. election has beeen puzzling for many people. The prediction modelers clearly got it wrong, but many of the national polls had the election within the margin of error. The exit polls are showing something that has been slowly happening for years – white, uneducated, unskilled, men have turned against the Democratic party and shifted toward the Republiucans. Those demographics who made up the New Deal coalition have left the Democratic party this election in mass numbers. Moreover, many of these voters are evangelical christians, which is not surprising since these voters aligned with the Republicans since the Reagan coalition.

We also see that immigration has played a significant role in this election, specifically illegal immigration. Trump played on the fears of economic threat. The two issues of global trade and immigration have interacted to produce a defiant election. The U.S. has lost its comparative advantage in manufacturing. China, Mexico, most of Latin America, and developing nations in Asia can produce manufactures at some of the lowest costs in history. These nations have the comparative advantage in, and a massive surpluss of, unskilled or semi-skilled labor. Advanced Industrial Nations (AINs), such as the U.S. and those in the EU, have transitioned toward service economies and high technology. The AINs are in a state of economic growth I like to call Innovation Led Growth (ILG). Patents, Research and Development, and Innovation are driving GDP growth in countries like the U.S. Apple’s slogan, “Designed in California. Made in China” sums the transition up perfectly. However, with the loss of comparative advantage in manufacturing, the calls for protectionism have ramped up immensely – as international trade theory, such as Stolper–Samuelson and Ricardo-Viner, would predict. Those workers in the U.S. who used to come right out of college and into an assembly line job are lost. They feel left out of the modern economy in states such as Pennsylvania, Ohio, Wisconsin, Michigan, and the others in the Midwest. Because unskilled labor is a scarce factor of production in the U.S. it is not surprising that these groups would favor protectionism.

Combine this feeling of being left out of the economy with the belief that illegal immigrants are taking the unskilled jobs that American citizens could be benefiting from and you have a recipe for anti-globalism. It doesn’t not matter that illegal immigration actually increases economic growth in counties like the U.S. Frankly, the anti-globalism of the 1990s and early 2000s is nothing compared to what we are seeing now. Citizens gave the economy time to transition. They enjoyed the benefits of the IT boom in the 1990s. They enjoyed the lower prices reaped form free-trade. But now, they are seeing the full fledged consequences of globalization. Donald Trump played on these feelings of anger and resentment. He combined this with a strong anti-trade message and fear of immigration. He played on terrorism, ISIS, and the refugee crisis. But these items are ancillary to the real message – Trade has taken your jobs and I will renogoatiate these trade deals and bring them back. That is the message that won Trump the Rust Belt. That is also the message that resonated with Brexit voters in the UK. That is the message that carried Bernie Sanders in the Democratic Primary. These are early signs of a spreading anti-globalism around the world.

But there are consequences to anti-globalism. Nation-states once lived in a world of mercantilism, where economic growth came at the expense of other nation-states and colonies. Economic growth was a zero sum game. It was violent, subjugating, and expansionist. Empires such as Spain participated in economic extraction of its colonies. Great Britain used a restrictive tax system with trade policies where colonies could only sell to the mother country – such Virginia being restricted to selling tobacco to Great Britain, reducing Britain’s overall cost and leaving dead weight on the table for Virginia. The world was much more destructive and conflictual. When Great Britain emerged as the global hegemon, they repealed the Corn Laws, increased world trade, and benefited from lower global prices. The first wave of Globalization lasted from around 1848 until WWI. The interwar period saw some globalism but it was short lived. Right before WWII the world entered a state of autarky again, as with the Smoot-Hawley tariff in the U.S. and the subsequent grab for land by Italy and Germany, which led to WWII – of course there were serval additional causal mechanisms at work but autarky played a serious role.

However, post WWII the U.S. Led the world into the new economic order – Bretton Woods, The International Monetary Fund, the International Bank for Develpoment and Reconstruction and Development (now the World Bank), the General Agreement on Tariffs and Trade (now the World Trade Organization), and NATO. This new world order led international political economics into a new wave – a wave of globalization and world trade. For a while the AINs benefited – so much so, that developing nations retreated toward Import Substitution and Dependency Thoery. But those nations that instituted Export Led Develooment and harnessed global trade grew and benefited. China (post 1980), Vietnam, South Korea, and many others began to rapidly grow. Globalization has decreased world poverty and benefited the world poor. But as these nations grew, so did their comparative advantage in manufacturing, decimating the unskilled labor in the AINs. In fact, Foreign Direct Investment (FDI) has given way to organic growth in developing and emerging markets. Rather than invest in manufacturing plants in these developing nations, the developing nations are simply doing it themselves and AINs are outsourcing jobs. Even the service economy in AINs has seen competition from countries such as India. This is the natural course of global trade. This is a good thing for the global poor. But it also has consequences for AINs. We know that the AINs must move forward toward capital markets and innovation, but workers have been left behind.

At this point those citizens in the AINs are revolting against the new world order and international trade. Human capital is not fungible – at least not instantly – and thus these populations are rejecting globalism. But, as this anti-globalism rushes across the AINs we must ask whether or not autarky is around the corner? Will the leaders in global trade retreat? Will Donald Trump bail out of deals like NAFTA? If so, this will not bring jobs back to the U.S. The tenants of international trade are clear – these industries are gone. Instead, this will bring back competition among countries in ways that cannot be sorted out peacefully. Many scholars have discussed a triangle of liberalism that can prevent war – Democracy, International Trade and interdependence, and International Organizations. It seems like the latter two are being questioned as isolationist voices are retreating from trade and the organizations that facilitate it. Trump has said he would reduce funding to the United Nations, pull out of NAFTA, and reconsider the U.S. role in NATO. The UK has left the EU, which is the epitome of interdependence and international organizations.

This leads me to beleive we are moving toward an anti-globalist world. A world like that of the late 1930s. Nothing good can come from that – economically or politically. If we combine anti-globalist sentiments with a new form of nationalism it may spell propblems to come in the international order we have become accustomed to. In the UK hate crimes spiked directly after Brexit. Anecdotal evidence suggests a similar effect is happening in the United States. Trump mobilized a set of voters that truly beleive that immigrants and others are creating their economic problems. Also, lets not forget that Bernie Sanders used the same message – anti-trade – to mobilize a competitive primary campaign against Hilary Clinton. These are good indicators that Americans are moving toward isolationist economic policies. Add this to a multipolar international landscape and we have conflict in the making.

Of course, it doesn’t help that Hilary Clinton was a poor candidate. In an environment of corruption, the last thing people wanted was a candidate accused of corruption – deleting 30,000 emails is not a good signal to voters. In any case, I feel that a warning is necessary. The signs are leading toward an international environment rife with potential clashes. If this trend continues in more countries around the world, we may be seeing a move back toward a zero sum game of military and economic relations that will be disastrous for global politics. The prediction that Benjamin Barber spoke of in his book, Jihad vs. McWorld, where modernity would clash against tribalism (defined broadly) may be coming to fruition.