By Italo Colantone, Assistant Professor of Economics, Bocconi University and Piero Stanig, Assistant Professor of Political Science, Bocconi University. Originally published at VoxEU
There has been a revival of nationalism in western democracies. The outcome of the Brexit referendum and the election of Donald Trump as president of the US are two major manifestations of this tendency. In Europe this trend began in the 1990s, and it has been associated with increasing support for radical right parties (Mudde 2007).
In recent paper, we show that globalisation is a key determinant of this phenomenon (Colantone and Stanig 2017). We focus on the competitive shock created by the surge in imports from China between 1988 and 2007. This shock has had a heterogeneous impact across European regions that depends on the historical composition of employment in the region. Using data on legislative elections in 15 western European countries, we find that stronger regional exposure to the import shock determines an increase in support for nationalist parties, a general shift to the right in the electorate, and an increase in support for radical right parties. The policy proposals of these parties tend to bundle support for domestic free market policies with a strong protectionist stance, a combination that has come to be referred to as ‘economic nationalism’. As parties offering this policy mix become increasingly successful, we might see the end – and possibly even a reversal – of globalisation.
The Chinese Import Shock
We built a region-specific indicator for the exposure to Chinese imports following the methodology introduced by Autor et al. (2013). This combined information on yearly national imports from China, by industry, with data on the historical composition of employment in each region. The exposure of regions to the growth in Chinese imports depends on their ex ante industry specialisation. Intuitively, larger import shocks would happen in regions which have a larger share of their workers in the manufacturing sector. Given the same share of manufacturing workers, the variation in exposure to Chinese imports between regions would depend on differences in the specialisation of each region’s manufacturing industry.
The shock would be stronger in regions where relatively more workers were initially employed in those industries in which growth in imports from China was strongest (for example, textiles or electronic goods), and in years when the surge in Chinese imports in those industries was largest.
We performed the analysis at the NUTS-2 level of regional disaggregation. In total, our sample included 198 regions across 15 countries.1 Depending on the country, we sourced employment data either from Eurostat or from national sources. Trade data come from Eurostat Comext or from CEPII-BACI. The industry level of disaggregation is the NACE Rev. 1.1 subsection level. Figure 1 displays the variation in the import shock across regions, based on average regional figures; darker shades indicate stronger exposure.
Figure 1 Map of the Chinese import shock across regions
We assembled election data at the district level for 76 general elections between 1988 and 2007. Data comes from the Constituency-Level Election Archive (CLEA, Kollman et al. 2016), the Global Election Database (GED, Brancati 2016), and national sources. For each district, in each election, we had information on vote shares at the party level.
We linked election results with ideology scores for each party so that we could assess the ideological leaning of a district in an election. To do this we used data from the Comparative Manifesto Project (CMP), which attributes policy positions by using content analysis of party election manifestos. Following the established methodology used by Laver and Budge (1992) and Lowe et al. (2011), we computed two scores for each party in each election: a ‘nationalism’ score, and a ‘right-wing positioning’ score. We then combined these ideology scores with party vote shares to compute several district-level summaries for each election.
We computed, for both nationalism and right positioning:
- The district-level weighted average
- The median voter score and
- The combined vote share of parties above the national median position on that dimension.
Finally, we also computed one district-level summary to address directly the connection between globalisation and radical right success. This was the vote share of radical right parties. We identified these parties using earlier research.2 Figure 2 shows the growth in the vote share for these parties over the sample; each point in the figure is a 3-year moving average.
Figure 2 Vote share for radical right parties
To investigate the impact of globalisation on voting, we regressed the district-level summaries on the region-specific Chinese import shock, computed for the two years prior to each election. To account for the potential endogeneity of the import shock, we instrumented Chinese imports to Europe using Chinese imports to the US, as in Autor et al. (2013), Colantone et al. (2015), and Bloom et al. (2016), among others. This strategy aims to capture the variation in Chinese imports that is due to changes in supply conditions in China, rather than the changes that are due to endogenous domestic factors in Europe. We always included election fixed effects to control for factors that affect all districts of a country at a given point in time – for instance, national economic performance. Independently on the specific summary indicator we employed, we found that a stronger import shock led to:
- An increase in support for nationalist parties
- A shift to the right in the electorate and
- An increase in support for radical right parties.
Our research predicts that a region at the 75th percentile of the import shock would display support for radical right parties by 0.7 percentage points more than a region at the 25th percentile, ceteris paribus. Considering that the average vote share for radical right parties is 5%, with a standard deviation of 7%, this result is not negligible.
Our results contribute to an emerging body of research on the electoral consequences of globalisation. For the US, others have already investigated the effects of trade exposure on polarisation, turnout, and the anti-incumbent vote (Autor et al. 2016, Che et al. 2016, Margalit, 2011, Jensen et al. 2015). In France, Malgouyres (2014) investigated the effect on radical right support, and Dippel et al. (2016) did the same for Germany. In our previous work, we have also adopted a similar identification strategy to show a positive effect of the Chinese import shock on support for the ‘Leave’ option in the Brexit referendum (Colantone and Stanig, 2016a and 2016b).
We found additional evidence by using individual-level data from the European Social Survey. Accounting for basic demographic characteristics and election fixed effects, a stronger import shock in the region of residence pushed voters towards more nationalist and conservative policy positions, and increased the probability of support for radical right parties, in line with our district-level evidence. We also investigated, through interaction terms, how the effects of import competition varied across different categories of voters, based on their employment status and occupation. These effects were largely stable across the groups, even when considering service workers and public sector workers, whose jobs were not directly affected by manufacturing imports from China. Our evidence suggests that the impact of import competition was not confined to groups, such as the unemployed or manufacturing workers, which might have been more directly affected by Chinese imports. On the contrary, as globalisation threatens the success and survival of entire industrial districts, the affected communities seem to have voted in a homogeneous way, regardless of each voter’s personal situation.
A More Inclusive Globalisation
Globalisation has caused a surge in support for nationalist and radical right political platforms. This might endanger the survival of the open world of the past 30 years. President Trump’s withdrawal from the Trans-Pacific Partnership seems to be a move in that direction. Yet, a return to protectionism is not likely to solve the problems of those who have lost ground due to globalisation without appropriate compensation of its ‘losers’, and is bound to harm growth especially in emerging economies. The world rather needs a more inclusive model of globalisation.
See original post for references
Definitely a pleasant read but IMHO wrong conclusion: Yet, a return to protectionism is not likely to solve the problems of those who have lost ground due to globalisation without appropriate compensation of its ‘losers’, and is bound to harm growth especially in emerging economies. The world rather needs a more inclusive model of globalisation.
From an energy point of view globalisation is a disaster. The insane level of fossil fuels that this current world requires for transportation of necessities (food and clothing) is making this world an unstable world. Ipso Facto.
We need a world where goods move little as possible (yep!) when smart ideas and technology (medical, science, industry, yep that’s essential) move as much as possible. Internet makes this possible. This is no dream but a XXIth century reality.
Work – the big one – is required and done where and when it occurs. That is on all continents if not in every country. Not in an insanely remote suburbs of Asia.
Those who believe that globalisation is bringing value to the world should reconsider their views. The current globalisation has created both monopolies on a geopolitical ground, ie TV make or shipbuilding in Asia.
Do you seriously believe that these new geographical and corporate monopolies does not create the kind bad outcomes that traditional – country-centric ones – monopolies have in the past?
Yves Smith can have nasty words when it comes to discussing massive trade surplus and policies that supports them. That’s my single most important motivation for reading this challenging blog, by the way.
Thanks for the blog:)
Another thing is that reliance on complex supply chains is risky. The book 1177 B.C.: The Year Civilization Collapsed describes how the ancient Mediterranian civilization collapsed when the supply chains stopped working.
Then there is the practical issue of workers having next to no bargaining power under globalization. Do people really suppose that Mexican workers would be willing to strike so that their US counterparts, already making ficew times as much money, would get a raise?
Is Finland somehow supposed to force the US and China to adopt similar worker rights and environmental protections? No, globalization, no matter how you slice it,is a race to the bottom.
Sadly protectionism gets conflated with empire building, because protectionism was at its height right before WW1.
I do not agree with the article’s conclusion either.
Reshoring would have 1 of 2 outcomes:
Lots of manufacturing jobs and a solid middle class. We may be looking at more than 20 percent total employment in manufacturing and more than 30 percent of our GDP in manufacturing.
If the robots take over, we still have a lot of manufacturing jobs. Japan for example has the most robots per capita, yet they still maintain very large amounts of manufacturing employment. It does not mean the end of manufacturing at all, having worked in manufacturing before.
Basically our elite sold us a bill of goods is why we lost manufacturing. Greed. Nothing else.
The conclusion is the least important thing. Conclusions are just interpretations, afterthoughts, divagations (which btw are often just sneaky ways to get your work published by TPTB, surreptitiously inserting radical stuff under the noses of the guardians of orthodoxy). The value of these reports is in providing hardcore statistical evidence and quantification for something for which so many people have a gut feeling but just cann’t prove it (although many seem to think that just having a strong opinion is sufficient).
Yes, correct. Intuition is great for coming up with hypotheses, but it is important to test them. And while a correlation isn’t causation, it at least says the hypothesis isn’t nuts on its face.
In addition, studies like this are helpful in challenging the oft-made claim, particularly in the US, that people who vote for nationalist policies are bigots of some stripe.
Thanks for patting me on the back, I appreciate it coming from someone like you.
In all fairness with the guardians of orthodoxy, sometimes they/we need some help in letting pass some research, thus conclusions that apparently contradict or somehow twist the main findings. Lots of nuances out there, so many clever people.
So proof is required to rollback globalization,
but no proof was required to launch it or continue dishing it out?
It’s good to be the King, eh?
KnotRP, as far as the Oligarchy is concerned, they don’t need proof for anything
You are missing the transition costs, which will take ten years, maybe a generation.
America hasn’t just gotten rid of the low level jobs. It has also gotten rid of supervisors and factory managers. Those are skills you can’t get back overnight. For US plants in Mexico, you might have US managers there or be able to get special visas to let those managers come to the US. But US companies have shifted a ton, and I meant a ton, to foreign subcontractors. Some would put operations in the US to preserve access to US customers, but their managers won’t speak English. How do you make this work?
The only culture with demonstrated success in working with supposedly hopeless US workers is the Japanese, who proved that with the NUMMI joint venture with GM in one of its very worst factories (in terms of the alleged caliber of the workforce, as in many would show up for work drunk). Toyota got the plant to function at better than average (as in lower) defect levels and comparable productivity to its plants in Japan, which was light years better than Big Three norms. I’m not sure any other foreign managers are as sensitive to detail and the fine points of working conditions as the Japanese (having worked with them extensively, the Japanese hear frequencies of power dynamics that are lost on Westerners. And the Chinese do not even begin to have that capability, as much as they have other valuable cultural attributes).
That is really interesting about the Japanese sensitivity to detail and power dynamics. If anyone has managed to describe this in any detail, I would love to read more, though I suppose if their ability is alien to most Westerners the task of describing it might also be too much to handle.
I lean more to ten years than a generation. And in the grand scheme of things, 10 years is nothing. The real issue is commitment. Very little manufacturing will be re-shored unless companies are convinced that it is in their longterm interest to do so. Which means having a sense that the US government is serious, and will continue to be serious, about penalizing off-shoring. Regardless of Trump’s bluster, which has so far only resulted in a handful of companies halting future offshoring decisions (all to the good), we are nowhere close to that yet.
There is also what I’ve heard referred to as the “next bench” phenomenon, in which products arise because someone designs a new product/process to solve a manufacturing problem.
Unless one has great foresight, the designer of the new product must be aware there is a problem to solve.
When a country is involved in manufacturing, the citizens employed will have exposure to production problems and issues.
Sometimes the solution to these problems can lead to new products outside of one’s main business, for example the USA’s Kingsford Charcoal arose from a scrap wood disposal problem that Henry Ford had.
If one googles for “patent applications by countries” one gets these numbers, which could be an indirect indication of some of the manufacturing shift from the USA to Asia.
Patent applications for the top 10 offices, 2014
1. China 928,177
2. US 578,802
3. Japan 325,989
4. South Korea 210,292
What is not captured in these numbers are manufacturing processes known as “trade secrets” that are not disclosed in a patent.
The idea that the USA can move move much of its manufacturing overseas without long term harming its workforce and economy seems implausible to me.
While a design EE at HP, they brought in an author who had written about Toyota’s lean design method, which was currently the management hot button du jour. After his speech he took questions. I asked “Would Toyota ever separate design from manufacturing?” as HP had done, shipping all manufacturing to Asia.
“No” was his answer.
In my experience, it is way too useful to have the line be able to easily call the designer in question and have him come take a look at what his design is doing. HP tried to get around that by sending part of the design team to Asia to watch the startup. Didn’t work as well. And when problems emerged later, it was always difficult to debug by remote control.
And BTW, after manufacturing went overseas, management told us for costing to assume “Labor is free”. Some level playing field.
Oh gawd! The man talks about the effects of globalization and says that the solution is a “a more inclusive model of globalization”? Seriously? Furthermore he singles out Chinese imports as the cause of people being pushed to the right. Yeah, right.
How about mass imports of cheap workers into western countries in the guise of emigrants to push down worker’s pay and gut things like unions. That factor played a decisive factor in both the Brexit referendum and the US 2016 elections. Or the subsidized exportation of western countries industrial equipment to third world countries, leaving local workers swinging in the wind.
This study is so incomplete it is almost useless. The only thing that comes to mind to say about this study is the phrase “Apart from that Mrs. Lincoln, how was the play?” And what form of appropriate compensation of its ‘losers’ would they suggest? Training for non-existent jobs? Free moving fees to the east or west coast for Americans in flyover country? Subsidized emigration fees to third world countries where life is cheaper for workers with no future where they are?
Nice try fellas but time to redo your work again until it is fit for a passing grade.
How crazy of them to have used generalized linear mixed models with actual data carefully compiled and curated when they could just asked you right?
Aw jeez, mate – you’ve just hurt my feelings here. Take a look at the actual article again. The data sets do not capture some of the most important factors in what they are saying. It is like putting together a paper on how and why white men voted in the 2016 US elections as they did – and forgetting to mention the effect of the rest of the voters involved.
Hey, here is an interesting thought experiment for you. How about we apply the scientific method to the past 40 years of economic theory since models with actual data strike your fancy. If we find that the empirical data does not support a theory such as the theory of economic neoliberalism, we can junk it then and replace it with something that actually works then. So far as I know, modern economics seems to be immune to scientific rigour in their methods unlike the real sciences.
I feel your pain Rev.
Not all relevant factors need to be included for a statistical analysis to be valid, as long as relevant ignored factors are randomized amongst the sampling units, but you know that of course.
Thanks for you kind words about the real sciences, we work hard to keep it real, but once again, in all fairness, between you and me mate, is not all rigour, it is a lot more Feyerabend than Popper.
What you say is entirely true. The trouble has always been to make sure that that statistical analysis actually reflects the real world enough to make it valid. An example of where it all falls apart can be seen in the political world when the pundits, media and all the pollsters assured America that Clinton had it in the bag. It was only after the dust had settled that it was revealed how bodgy the methodology used had been.
By the way, Karl Popper and Paul Feyerabend sound very interesting so thanks for the heads up. Have you heard of some of the material of another bloke called Mark Blyth at all? He has some interesting observations to make on modern economic practices.
I had a similar reaction. This research was reinforcing info about everyone’s resentment over really bad distribution of wealth, as far as it went, but it was so unsatisfying… and I immediately thought of Blyth who laments the whole phylogeny of economics as more or less serving the rich. The one solution he offered up a while ago was (paraphrasing) ‘don’t sweat the deficit spending because it is all 6s in the end’ which is true if distribution doesn’t stagnate. So as it stands now, offshoring arms, legs and firstborns is like ‘nothing to see here, please move on’. The suggestion that we need a more inclusive form of global trade kind of begs the question. Made me uneasy too.
Please don’t pool pundits and media with the authors of objective works like the one we are commenting :-)
You are welcome, you might also be interested in Lakatos, these 3 are some of the most interesting philosophers of science of the 20th century, IMO.
Blyth has been in some posts here at NC recently.
“Gut things like unions.” How so? In my recent interaction with my apartment agency’s preferred contractors, random contractors not unionized, I experienced a 6 month-long disaster. These construction workers bragged that in 2 weeks they would have the complete job done — a reconstructed deck and sunroom. Verbatim quote: “Union workers complete the job and tear it down to keep everyone paying.” Ha Ha! What a laugh! Only to have these same dudes keep saying “next week”, “next week”, “next week”, “next week”. The work began in August and only was finished (not completely!) in late January. Sloppy crap! Even the apartment agency head maintenance guy who I finally bitched at said “I guess good work is hard to come by these days.”
Of the non-union guys he hired.
My state just elected a republican governor who promised “right to work.” This was just signed into law.
Immigrants and Mexicans had nothing to do with it. They’re not an impact in my city. “Right to work” is nothing other than a way to undercut quality of work for “run-to-the-bottom competitive pay.”
Now I await whether my rent goes up to pay for this nonsense.
They look at the labor cost, assume someone can do it cheaper. They don’t think it’s that difficult. Maybe it’s not. The hard part of any and all construction work is getting it finished. Getting started is easy. Getting it finished on time? Nah, you can’t afford that.
I’ve noticed that the only people in favor of globalization are those whose jobs are not under threat from it. Beyond that, I think the flood of cheap Chinese goods is actually helping suppress populist anger by allowing workers whose wages are dropping in real value terms to maintain the illusion of prosperity. To me, a more “inclusive” form of globalization would include replacing every economist with a Chinese immigrant earning minimum wage. That way they’d get to “experience” how awesome it is and the value of future economic analysis would be just as good.
I’m going to question a few of the author’s assumptions.
First off, economic nationalism is not necessarily right wing. I would certainly classify Bernie Sanders as an economic nationalist (against open borders and against “free” trade). Syriza and Podemos could arguably be called rather ineffective economic nationalist parties. I would say the whole ideology of social democracy is based on the Swedish nationalist concept of a “folkhem”, where the nation is the home and the citizens are the folk.
Secondly, when discussing the concept of economic nationalism and the nation of China, it would be interesting to discuss how these two things go together. China has more billionaires than refugees accepted in the past 20 years. Also it is practically impossible for a non Han Chinese person to become a naturalized Chinese citizen. And when China buys Boeing aircraft, they wisely insist on the production being done in China. A close look at Japan would yield similar results.
So China is Turmpism on steroids. Israel obviously is as well. Why do some nations get to be blatantly Trumpist while for others these policies are strictly forbidden?
One way to look at Globalization is as an updated version of the post WW1 Versailles Treaty which imposed reparations on a defeated Germany for all the harm they caused during the Great War. The Globalized Versailles Treaty is aimed at the American and European working classes for the crimes of colonialism, racism, slavery and any other bad things the 1st world has done to the 3rd in the past.
Of course during colonialism the costs were socialized within colonizing states and so it was the people of the colonial power who paid those costs that weren’t borne by the colonial subjects themselves, who of course paid dearly, and it was the oligarchic class that privatized the colonial profits. But the 1st world oligarchs and their urban bourgeoisie are in strong agreement that the deplorable working classes are to blame for systems that hurt working classes but powerfully enriched the wealthy!
And so with the recent rebellions against Globalization, the 1st and 3rd world oligarchs are convinced these are nothing more than the 1st world working classes attempting to shirk their historic guilt debt by refusing to pay the rightful reparations in terms of standard of living that workers deserve to pay for the crimes committed in the past by their wealthy co-nationals.
And yes, this applies to Bernie Sanders as well. During that iconic interview where Sanders denounced open borders and pushed economic nationalism, the Neoliberal interviewer immediately played the global guilt card in response.
Interesting. Another way to look at it is from the point of view of entropy and closed vs open systems. Before globalisation the 1st world working classes enjoyed a high standard of living which was possible because their system was relatively closed to the rest of the world. It was a high entropy, strongly structured socio-economic arrangement, with a large difference in standard of living between 1st world and 3rd world working classes. Once their system became more open by virtue (or vice) of globalisation, entropy increased as commanded by the 2nd Law of Thermodynamics so the 1st world and 3rd world working classes became more equalised. The socio-economic arrangements became less structured. This means for the Trumpening kind of politicians it is a steep uphill battle, to increase entropy again.
Yes, I agree, but if we step back in history a bit we can see the colonial period as a sort of reverse globalization which perhaps portends a bit of optimism for the Trumpening.
I use the term open and closed borders but these are not precise. What I am really saying is that open borders does not allow a country to filter out negative flows across their border. Closed borders does allow a nation to impose a filter. So currently the US has more open borders (filters are frowned upon) and China has closed borders (they can filter out what they don’t want) despite the fact that obviously China has plenty of things crossing its border.
During colonialism the 3rd world had a form of open borders imposed on it by the colonial powers, where the 3rd world lost control of who what crossed their borders while the 1st world themselves maintained a closed border mercantilist regime of strict filters. So the anti-colonialist movement was a form of Trumpist economic nationalism where the evil foreigners were given the boot and the nascent nations applied filters to their borders.
So the 3rd world to some extent (certainly in China at least) was able to overcome entropy and regain control of their borders. You are correct in that it will be an uphill struggle for the 1st world to repeat this trick. In the ideal world both forms of globalization (colonialism and the current form) would be sidelined and all nations would be allowed to use the border filters they think would best protect the prosperity of their citizens.
Another good option would be a version of the current globalization but where the losers are the wealthy oligarchs themselves and the winners are the working classes. It’s hard to imagine it’s easy if you try!
What’s interesting about the concept of entropy is that it stands in contradiction to the concept of perpetual progress. I’m sure there is some sort of thesis, antithesis, synthesis solution to these conflicting concepts.
To overcome an entropy current requires superb skill commanding a large magnitude of work applied densely on a small substratum (think of the evolution of the DNA, the internal combustion engine). I believe the Trumpening laudable effort and persuasion would have a chance of success in a country the size of The Netherlands, or even France, but the USA, the largest State machinery in the world, hardly. When the entropy current flooded the Soviet system the solution came firstly in the form of shrinkage.
We need to think more about it, a lot more, in order to succeed in this 1st world uphill struggle to repeat the trick. I am pretty sure that as Pierre de Fermat famously claimed about his alleged proof, the solution “is too large to fit in the margins of this book”.
My little entropy epiphany goes like this: it’s like boxes – containers, if you will, of energy or money, or trade goods, the flow of which is best slowed down so everybody can grab some. Break it all down, decentralize it and force it into containers which slow the pace and share the wealth. Nationalism (my opinion) can do this – economic nationalism. And of course other people think oh gawd, not that again – it’s so inefficient for my investments- I can’t get fast returns that way… but that’s just the point.
I like your epiphany susan.
Don’t you mean “It was a LOWER entropy (as in “more ordered”), strongly structured socio-economic arrangement, with a large difference in standard of living between 1st world”?
The entropy increased as a consequence of human guided globalization.
Of course, from a thermodynamic standpoint, the earth is not a closed system as it is continually flooded with new energy in the form of solar radiation.
Yes, thank you, I made that mistake twice in the post you replying to.
The reigning social democratic parties in Europe today are not the Swedish traditional parties of yesteryear they have morphed into neoliberal austerians committed to globalization and export driven economic models at any cost (CETA vote recently) and most responsible for the economic collapse in the EU…
I wonder they chose Chinese imports as the cause of the right-wing shift, when they themselves admit that the shift started in the 1990s. At that time, there were few Chinese imports and China was not even part of the WHO.
If they are thinking of movements like the Lega Nord and Vlaams Blok, the reasons are clearly not to be found in imports, but in immigration, the welfare state and lack of national homogeneity, perceived or not.
And the beginnings of the precariat.
So it is not really the globalization of commerce that did it, but the loss of relevance of national and local identities.
One cause does not exclude the other, they may have worked synergistically.
Correlation does not imply causation, but lack of correlation definitely excludes it.
The Lega was formed in the 1980s, Vlaams Blok at the end of the ’70s. They both had their best days in the 1990s. Chinese imports at the time were insignificant.
I cannot find the breakdown of Chinese imports per EU country, but here are the total Chinese exports since 1983:
China was not a significant exporter until the 2001 inclusion in WTO: it cannot possibly have caused populist uprisings in Italy and Belgium in the 1990s. It was probably too early even for Pim Fortuyn in the Netherlands, who was killed in 2002, Le Pen’s electoral success in the same year, Austria’s FPOE in 1999, and so on.
The timescales just do not match. Whatever was causing “populism”, it was not Chinese imports, and I can think of half a dozen other, more likely causes.
Furthermore, the 1980s and 1990s were something of an industrial renaissance for Lombardy and Flanders: hardly the time to worry about Chinese imports.
And if you look at the map. the country least affected by the import shock (France) is the one with the strongest populist movement (Le Pen).
People try to conflate Trumpism and Brexit with each other, then try to conflate this “anglo-saxon” populism with previous populisms in Europe, and try to deduce something from the whole exercise.
That “something” is just not there and the exercise is pointless. IMHO at least.
European regionalism is often the result of the rise of the EU as a new, alternative national government in the eyes of the disgruntled regions. Typically there are three levels of government, local, regional (states) and national. With the rise of the EU we have a fourth level, supra-national. But to the Flemish, Scottish, Catalans, etc, they see the EU as a potential replacement for the National-level governments they currently are unhappy being under the authority of.
Why isn’t it working? – Part 1
Capitalism should be evolving but it went backwards.
Keynesian capitalism evolved from the free market capitalism that preceded it.
The absolute faith in markets had been laid low by 1929 and the Great Depression.
After the Keynesian era we went back to the old free market capitalism of neoclassical economics.
Instead of evolving, capitalism went backwards. We had another Wall Street Crash that has laid low the once vibrant global economy and we have entered into the new normal of secular stagnation.
In the 1930s, Irving Fisher studied the debt deflation caused by debt saturated economies. Today only a few economists outside the mainstream realise this is the problem today.
In the 1930s, Keynes realized only fiscal stimulus would pull the US out of the Great Depression, eventually the US implemented the New Deal and it started to recover. Today we use monetary policy that keeps asset prices up but cannot overcome the drag of all that debt in the system and its associated repayments.
In the 1920s, they relied on debt based consumption, not realizing how consumers will eventually become saturated with debt and demand will fail. Today we rely on debt based consumption again, Greece consumed on debt. until it maxed out on debt and collapsed.
In the 1930s Keynes realized, income was just as important as profit as this produced a sustainable system that does not rely on debt to maintain demand.
Keynes was involved with the Bretton-Woods agreement after the Second World War and recycled the US surplus to Europe to restore trade when Europe lay in ruins. Europe could rebuild itself and consume US products, everyone benefitted.
Today there are no direct fiscal transfers within the Euro-zone and it is polarizing. No one can see the benefits of rebuilding Greece, to allow it to carry on consuming the goods from surplus nations and it just sinks further and further into the mire.
There is a lot to be said for capitalism going forwards rather than backwards and making the same old mistakes a second time.
Someone who has worked in the Central Bank of New York and who Ben Bernanke listened to, ensuring the US didn’t implement austerity, Richard Koo:
The ECB didn’t listen and killed Greece with austerity and is laying low the Club-Med nations.
Someone who knows what they are doing, after studying the Great Depression and Japan after 1989.
Let’s keep him out of the limelight; he has no place on the ship of fools running the show.
DEBT on Debt with QEs+ ZRP ( borrowing from future) was the ‘solution’ by Barnake to mask the 2008 crisis and NOT address the underlying structural reforms in the Banking and the Financial industry. He was part of the problem for housing problem and occurred under his watch! He just kicked the can with explosive credit growth ( but no corresponding growth in the productive Economy!)and easy money!
We have a ‘Mother of all bubbles’ at our door step.Just matter of time when it will BLOW and NOT if! There is record levels of DEBT ( both sovereign, public and private) in the history of mankind, all over the World.
DEBT has been used as a panacea for all the financial problems by CBers including Barnake! Fed’s balance sheet was than less 1 Trillion in 2008 ( for all the years of existence of our Country!) but now over 3.5 Trillions and climbing!
Kicking the can down the road is like passing the buck to some one (future generations!). And you call that solution by Mr. Barnake? Wow!
Will they say again ” No one saw this coming’? when next one descends?
Why isn’t it working? – Part 2
The independent Central Banks that don’t know what they are doing as can be seen from their track record.
The FED presided over the dot.com bust and 2008, unaware that they were happening and of their consequences.
Alan Greenspan spots irrational exuberance in the markets in 1996 and passes comment. As the subsequent dot.com boom and housing booms run away with themselves he says nothing.
This is the US money supply during this time:
Everything is reflected in the money supply.
The money supply is flat in the recession of the early 1990s.
Then it really starts to take off as the dot.com boom gets going which rapidly morphs into the US housing boom, courtesy of Alan Greenspan’s loose monetary policy.
When M3 gets closer to the vertical, the black swan is coming and you have an out of control credit bubble on your hands (money = debt).
We can only presume the FED wasn’t looking at the US money supply, what on earth were they doing?
The BoE is aware of how money is created from debt and destroyed by repayments of that debt.
“Although commercial banks create money through lending, they cannot do so freely without limit. Banks are limited in how much they can lend if they are to remain profitable in a competitive banking system.”
The BoE’s statement was true, but is not true now as banks can securitize bad loans and get them off their books. Before 2008, banks were securitising all the garbage sub-prime mortgages, e.g. NINJA mortgages, and getting them off their books. Money is being created freely and without limit, M3 is going exponential before 2008.
Bad debt is entering the system and no one is taking any responsibility for it. The credit bubble is reflected in the money supply that should be obvious to anyone that cares to look.
Ben Bernanke studied the Great Depression and doesn’t appear to have learnt very much.
Irving Fisher studied the Great Depression in the 1930s and comes up with a theory of debt deflation. A debt inflated asset bubble collapses and the debt saturated economy sinks into debt deflation. 2008 is the same as 1929 except a different asset class is involved.
1929 – Margin lending into US stocks
2008 – Mortgage lending into US housing
Hyman Minsky carried on with his work and came up with the “Financial Instability Hypothesis” in 1974.
Steve Keen carried on with their work and spotted 2008 coming in 2005. We can see what Steve Keen saw in 2005 in the US money supply graph above.
The independent Central Banks that don’t know what they are doing as can be seen from their track record.
Good to see studies confirming what was already known.
This apparently surprised:
It is only surprising for people not part of communities, those who are part of communities see how it affects people around them and solidarity with the so called ‘losers’ is then shown.
Seems like radical right is the preferred term, it does make it more difficult to sympathize with someone branded as radical right…. The difference seems to be between the radical liberals vs the conservative. The radical liberals are too cowardly to propose the laws they want, they prefer to selectively apply the laws as they see fit. Either enforce the laws or change the laws, anything else is plain wrong.
Socialism for the lower classes, capitalism for the upper classes? That will turn out well. Debt slaves and wage slaves will revolt. That is all the analysis the OP requires. The upper class will respond with suppression, not policy reversal … every time. Socialism = making everyone equally poor (obviously not for the upper classes who benefit from the arrangement).
Regrettably today we have socialism for the wealthy, with all the benefits of gov regulations, sympathetic courts and legislatures etc. etc.
Workers are supposed to take care for themselves and the devil take the hind most. How many workers get fired vs the 1%, when there is a failure in the company plan?
The Romans are the basis. Patricians, Equites and Plebs. Most of us here are clearly plebeian. Time to go place some bets, watch the chariot races and gladiatorial fights, and get my bread subsidy. Ciao.
Globalisation created winners and losers throughout the world.
The winners liked it, the losers didn’t.
Democracy is based on the support of the majority.
The majority in the East were winners.
The majority in the West were losers.
The Left has maintained its support of neoliberal globalisation in the West.
The Right has moved on.
There has been a shift to the Right.
Democracy is all about winners and losers and whether the majority are winning or losing.
It hasn’t changed.
CAPITAL is mobile and the Labor is NOT!
Globalization( along with communication -internet and transportation) made the Labor wage arbitration, easy in favor of capital ( Multi-Nationals). Most of the jobs gone overseas will NEVER come back. Robotic revolution will render the remaining jobs, less and less!
The ‘new’ Economy by passed the majority of lower 80-90% and favored the top 10%. The Losers and the Winners!
80-90% of Bonds and Equities ( at least in USA) are owned by top 10 %. 0.7% own 45% of global wealth. 8 billionaires own more than 50% of wealth than that of bottom 50% in our Country!
The Rich became richer!
The tension between Have and Have -Nots has just begun, as Marx predicted!
In the West the rewards of globalisation have been concentrated at the top and rise exponentially within the 1%.
How does this work in a democracy?
It doesn’t look as though anyone has even thought about it.
I think it’s about time that we stopped referring to opposition to globalization as a product or policy of the “extreme right”. It would be truer to say that globalization represents a temporary, and now fading, triumph of certain ideas about trade and movement of people and capital which have always existed, but were not dominant in the past. Fifty years ago, most mainstream political parties were “protectionist” in the sense the word is used today. Thirty years ago, protectionism was often seen as a left)wing idea, to preserve standards of living and conditions of employment (Wynne Godley and co). Today, all establishment political parties in the West have swallowed neoliberal dogma, so the voters turn elsewhere, to parties outside the mainstream. Often, it’s convenient politically to label them “extreme right”, although in Europe some left-wing parties take basically the same position. If you ignore peoples’ interests, they won’t vote for you. Quelle surprise! as Yves would say.
Yes, there are many reasons to be skeptical of too much globalization such as energy considerations. I think another interesting one is exchange rates.
One of the important concepts of MMT is the importance of having a flexible exchange rate to have full power over your currency. This is fine as far as it goes but tends to put hard currencies against soft currencies where a hard currency can be defined as one that has international authority/acceptance. Having flexible exchange rates also opens up massive amounts of financial speculation relative to fluctuations of these currencies against each other and trying to protect against these fluctuations.
“”Keynes’ proposal of the bancor was to put a barrier between national currencies, that is to have a currency of account at the global level. Keynes warned that free trade, flexible exchange rates and free movement of capital globally were incompatible with maintaining full employment at the local level””
“”Sufficiency provisioning also means that trade would be discouraged rather than encouraged.””
Local currencies can work very well locally to promote employment but can have trouble when they reach out to get resources outside of their currency space especially if they have a soft currency. Global sustainability programs need to take a closer look at how to overcome this sort of social injustice. (Debt or Democracy)
As has already been pointed out so eloquently here in the comments section, economic nationalism is not necessarily the preserve of the right, nor is it necessarily the same thing as nationalism.
In the UK the original, most vociferous objectors to EEC membership in the 70s (now the EU) were traditionally the Left, on the basis that it would gradually erode labour rights and devalue the cost of labour in the longer term. Got that completely wrong obviously….
In the same way that global trade has become synonymous with globalisation, the immigration debate has been hijacked and cynically conflated with free movement of (mainly low cost, unskilled) labour and race when they are all VERY different divisive issues.
The other point alluded to in the comments above is the nature of free trade generally. The accepted (neoliberal) wisdom being that ‘collateral damage’ is unfortunate but inevitable, but it is pretty much an unstoppable or uncontrollable force for the greater global good, and the false dichotomy persists that you either embrace it fully or pull up all the drawbridges with nothing in between.
One of the primary reasons that some competing sectors of some Western economies have done so badly out of globalisation is that they have adhered to ‘free market principles’ whilst other countries, particularly China, clearly have not with currency controls, domestic barriers to trade, massive state subsidies, wage suppression etc
The China aspect is also fascinating when developed nations look at the uncomfortable ‘morality of global wealth distribution’ often cited by proponents of globalisation as one of their wider philanthropic goals. Bless ’em. What is clear is that highly populated China and most of its people, from the bottom to the top, has been the primary beneficiaries of this global wealth redistribution, but the rest of the developing world’s poor clearly not quite so much.
The map on it’s own, in terms of the English one time industrial Midlands & North West being shown as an almost black hole, is in itself a kind of ” Nuff Said “.
It is also apart from London, where the vast bulk of immigrants have settled.
The upcoming bye-election in Stoke, which could lead to U-Kip taking a once traditionally always strong Labour seat, is right in the middle of that dark cloud.
The problem from the UK ‘s position, I suggest, is that autarky is not a viable proposition so economic nationalism becomes a two-edged sword. Yes, of course, the UK can place restrictions on imports and immigration but there will inevitably be retaliation and they will enter a game of beggar my neighbour. The current government talks of becoming a beacon for free trade. If we are heading to a more protectionist world, that can only end badly IMHO.
Unless we get some meaningful change in thinking on a global scale, I think we are heading somewhere very dark whatever the relative tinkering with an essentially broken system.
The horse is long gone, leaving a huge pile of shit in it’s stable.
As for what might happen, I do not know, but I have the impression that we are at the end of a cycle.
That ‘CYCLE” was dragged on ‘ unnaturally’ with more DEBT on DEBT all over the World by criminal CBers.
Now the end is approaching! Why surprise?
This is quite interesting, but only part of the story. Interestingly the districts/provinces suffering the most from the chinese import shock are usually densely populated industrial regions of Europe. The electoral systems in Europe (I think all, but I did not check) usually do not weight equally each district, favouring those less populated, more rural (which by the way tend to be very conservative but not so nationalistic). These differences in vote weigthing may have somehow masked the effect seen in this study if radical nationalistic rigth wing votes concentrate in areas with lower weigthed value of votes. For instance, in Spain, the province of Soria is mostly rural and certainly less impacted by chinese imports compared with, for instance, Madrid. But 1 vote in Soria weigths the same as 4 votes in Madrid in number of representatives in the congress. This migth, in part, explain why in Spain, the radical rigth does not have the same power as in Austria or the Netherlands. It intuitively fits the hypothesis of this study.
Nevertheless, similar processes can occur in rural areas. For instance, when Spain entered the EU, french rural areas turned nationalistic against what they thougth could be a wave of agricultural imports from Spain. Ok, agricultural globalization may have less impact in terms of vote numbers in a given country but it still can be politically very influential. In fact spanish entry more that 30 years ago could still be one of the forces behind Le Penism.
I dunno aboout this one.
All this statistical math and yada yada to explain a rise in vote for radical right from 3% in 1985 to 5% now on average? And only a 0.7% marginal boost if your the place really getting hammmered by imports from China? If I’m reading it right, that is, while focusing on Figure 2.
The real “shock” no pun intended, is the vote totals arent a lot higher everywhere.
Then the Post concludes with reference to a “surge in support” — 3% to 5% or so over 30 years is a surge? The line looks like a pretty steady rise over 3 decades.
Maybe I’m missing sommething here.
Also what is this thing they’re callling an “Open World” of the past 30 years? And why is that in danger from more balanced trade? It makes no sense. Even back in the 60s and 70s people could go alll over the world for vacations. Or at least most places they coould go. If theh spent their money they’d make friends. Greece even used to be a goood place people went and had fun on a beach.
I think this one is a situation of math runing amuck. Math running like a thousand horses over a hill trampling every blade of grass into mud.
I bet the China factor is just a referent for an entire constellatio of forces that probably don’t lend themselves (no pun intended) partiicularly well to social science and principal component analysis — as interesting as that is for those who are interested in that kind of thing (which I am acctually).
Also, I wouldn’t call this “free trade”. Not that the authors do either, but trade means reciprocity not having your livelihood smashed the like a pinata at Christmas with all your candy eaten by your “fellow countrymen”. I wouldn’t call that “trade”. It’s something else.
Regarding your first point, it is a small effect but it is all due to the China imports impact, you have to add the growth of these parties due to other reasons such as immigration to get the full picture of their growth. Also I think the recent USA election was decided by smaller percentage advantages in three States?
Globalisation is nothing but free trade extended to the entire world. Free trade is a tool used to prevent competition. By flooding countries with our cheaper exports, they do not develop the capacity to compete with us by making their own widgets. So, why are we shocked when those other countries return the favor and when they get the upper hand, we respond in a protectionist way? It looks to me that those countries who are now competing with us in electronics, automobiles, etc. only got to develop those industries in their countries because of protectionism.
Why is this surprising to anyone?
Frank would never have sung this, even drunk! . . . .even in Vegas . .
Trade Be a Lady
They say we’ll make a buck
But there is room for doubt
At times you have a very unbalanced way of running out
You say you’re good for me
Your pickins have been lush
But before this year is over
I might give you the brush
Seems you’ve forgot your manners
You don’t know how to play
Cause every time I turn around . . . I pay
So trade get your balances right
Trade get your balances right
Trade if you’ve ever been in balance to begin with
Trade get your balances right
Trade let a citizen see
How fair and humane you can be
I see the way you’ve treated other guys you’ve been with
Trade be a lady with me
A lady doesn’t dump her exports
It isn’t fair, and it’s not nice
A lady doesn’t wander all over the world
Putting whole communities on ice
Let’s keep this economy polite
let’s find a way to do it right
Don’t stick me baby or I’ll wreck the world you win with
Trade be a lady or we’ll fight
A lady keeps it fair with strangers
She’d have a heart, she’d be nice
A lady doesn’t spread her junk, all over the world
In your face, at any price
Let’s keep society polite
Go find a way to do it right
Don’t screw me baby cause i know the clowns you sin with
Trade be a lady tonight
Refugees in great numbers are a symptom of globalization, especially economic refugees but also political and environmental ones. This has strained the social order in many countries that have accepted them in and it’s one of the central issues that the so-called “right” is highlighting.
It is no surprise there has been an uproar over immigration policy in the US which is an issue of class as much as foreign policy because of the disenfranchisement of large numbers of workers on both sides of the equation — those who lost their jobs to outsourcing and those who emigrated due to the lack of decent employment opportunities in their own countries.
We’re seeing the tip of the iceberg. What will happen when the coming multiple environmental calamities cause mass starvation and dislocation of coastal populations? Walls and military forces can’t deter hungry, desperate, and angry people.
The total reliance and gorging on fossil energy by western countries, especially the US, has mandated military aggression to force compliance in many areas of the world. This has brought a backlash of perpetual terrorism. We are living under a dysfunctional system ruled by sociopaths whose extreme greed is leading to world war and environmental collapse.
Who created the REFUGEE PROBLEMS in the ME – WEST including USA,UK++
Obama’s DRONE program kept BOMBING in SEVEN Countries killing innocents – children and women! All in the name of fighting Terrorism. Billions of arms to sale Saudi Arabia! Wow!
Where were the Democrats and the Resistance and Women’s march? Hypocrites!
“Our lifestyle is non-negotiable.” — Dick Cheney.
What happened with Denmark that suddenly dissapeared?
Globalisation has caused a surge in support for nationalist and radical right political platforms.
Just a reminder that nationalism doesn’t have to be associated with the radical right. The left is not required to reject it, especially when it can be understood as basically patriotism, expressed as solidarity with all of your fellow citizens.
Trump’s withdrawal from the Trans-Pacific Partnership seems to be a move in that direction.
Well, that may be true as far as Trump’s motivations are concerned, but a major component (the most important?) of the TPP was strong restraint of trade, a protectionist measure, by intellectual property owners.
Yet, a return to protectionism is not likely to solve the problems of those who have lost ground due to globalisation without appropriate compensation of its ‘losers’…
Japan has long been ‘smart’ protectionist, and this has helped prevent the ‘loser’ problem, in part because Japan, being nationalist, makes it a very high priority to create/maintain a society in which almost all Japanese are more or less middle class. So, it is a fact that protectionism has been and can be associated with more egalitarian societies, in which there are few ‘losers’ like we see in the West. But the U.S. and most Western countries have a long way to go if they decide to make the effort to be more egalitarian. And, of course, protectionism alone is not enough to make most of the losers into winners again. You’ll need smart skills training, better education all around, fewer low-skill immigrants, time, and, most of all strong and long-term commitment to making full employment at good wages national priority number one.
and is bound to harm growth especially in emerging economies.
Growth has been week since the 2008, even though markets are as free as they’ve ever been. Growth requires a lot more consumers with willingness and cash to spend on expensive, high-value-added goods. So, besides the world finally escaping the effects of the 2008 financial crisis, exporting countries need prosperous consumers either at home or abroad, and greater economic security. And if a little bit of protectionism generates more consumer prosperity and economic stability, exporting countries might benefit overall.
The world rather needs a more inclusive model of globalisation.
Well, yes, the world needs more inclusivity, but globalization doesn’t need to be part of the picture. Keep your eyes on the prize: inclusivity/equality, whether latched onto nationally, regionally, ‘internationally’ or globally, any which way is fine! But prioritization of globalization over those two is likely a victory for more inequality, for more shoveling of our wealth up to the ruling top 1%.