By Enrico Verga, a writer, consultant, and entrepreneur based in Milan. As a consultant, he concentrates on firms interested in opportunities in international and digital markets. His articles have appeared in Il Sole 24 Ore, Capo Horn, Longitude, Il Fatto Quotidiano, and many other publications. You can follow him on Twitter @enricoverga.
International commerce, jobs, and economic migrants are propelled by a common force: profit.
In recent times, the Western middle class (by which I mean in particular industrial workers and office employees) has lost a large number of jobs and has seen its buying power fall. It isn’t true that migrants are the source of all evil in the world. However, under current conditions, they become a locus for the exasperation of the population at twenty years of pro-globalization politics. They are tragically placed in the role of the straw that breaks the camel’s back.
Western businesses have slipped jobs overseas to countries with low labor costs, while the middle class has been pushed into debt in order to try to keep up. The Glass-Steagall law and other brakes on American banks were abolished by a cheerleader for globalization, Bill Clinton, and these banks subsequently lost all restraints in their enthusiasm to lend. The cherry on top of the sundae was the real estate bubble and ensuing crash of 2008.
A damning picture of the results of 20 years of globalization is provided by Forbes, capitalism’s magazine par excellence. Already in 2016, the surprise victory of Trump led to questions about whether the blond candidate’s win was due in part to the straits of the American middle class, impoverished as a result of the pro-globalization politics of figures like Clinton and Obama.
Further support for this thesis is furnished by the New York Times, describing the collapse of the stars-and-stripes middle class. Its analysis is buttressed by lengthy research from the very mainstream Pew Center, which agrees that the American middle class is vanishing.
And Europe? Although the European middle class has been squeezed less than its American counterpart, for us as well the picture doesn’t look good. See for example the analysis of the Brookings Institute, which discusses not only the flagging economic fortunes of the European middle class, but also the fear of prosperity collapsing that currently grips Europe.
Migrants and the Shock Doctrine
What do economic migrants have to do with any of this?
Far be it from me to criticize large corporations, but clearly they – and their managers and stockholders – benefit from higher margins. Profits (revenue minus costs and expenses) can be maximized by reducing expenses. To this end, the costs of acquiring goods (metals, agricultural products, energy, etc.) and services (labor) need to fall steadily.
In the quest to lower the cost of labor, the most desirable scenario is a sort of blank slate: to erase ongoing arrangements with workers and start over from zero, building a new “happy and productive” economy. This operation can be understood as a sort of “shock doctrine.”
The term “economic shock therapy” is based on an analogy with electroshock therapy for mental patients. One important analysis of it comes from Naomi Klein, who became famous explaining in 2000 the system of fashion production through subsidiaries that don’t adhere to the safety rules taken so seriously in Western countries (some of you may recall the scandal of Benetton and Rana Plaza, where more than a thousand workers at a Bangladesh factory producing Benetton (and other) clothes were crushed under a collapsing building).
Klein analyzes a future (already here to some degree) in which multinational corporations freely fish from one market or another in an effort to find the most suitable (i.e. cheapest) labor force. Sometimes relocating from one nation to another is not possible, but if you can bring the job market of other countries here in the form of a low-cost mass of people competing for employment, then why bother?
The Doctrine in Practice
Continuing flows of low-cost labor can be useful for cutting costs. West Germany successfully absorbed East Germany after the fall of the Berlin Wall, but the dirty secret of this achievement is the exploitation of workers from the former East, as Reuters reports.
The expansion of the EU to Poland (and the failed attempt to incorporate the Ukraine) has allowed many European businesses to shift local production to nations where the average cost of a blue or white collar worker is much lower (by 60-70% on average) than in Western European countries.
We see further evidence of damage to the European middle class daily, from France where the (at least verbally) pro-globalization Macron is cutting social welfare to attract foreign investment, to Germany where many ordinary workers are seriously exploited. And so on through the UK and Italy.
The migrant phenomenon is a perfect counterpoint to a threadbare middle class, given its role as a success story within the narrative of globalization.
Economic migrants are eager to obtain wealth on the level of the Western middle class – and this is of course a legitimate desire. However, to climb the social ladder, they are willing to do anything: from accepting low albeit legal salaries to picking tomatoes illegally (as Alessandro Gassman, son of the famous actor, reminded us).
The middle class is a silent mass that for many years has painfully digested globalization, while believing in the promises of globalist politicians,” explains Luciano Ghelfi, a journalist of international affairs who has followed Lega from its beginnings. Ghelfi continues:
This mirage has fallen under the blows it has received from the most serious economic crisis since the Second World War. Foreign trade, easy credit (with the American real estate bubble of 2008 as a direct consequence), peace missions in Libya (carried out by pro-globalization French and English actors, with one motive being in my opinion the diversion of energy resources away from [the Italian] ENI) were supposed to have created a miracle; they have in reality created a climate of global instability.
Italy is of course not untouched by this phenomenon. It’s easy enough to give an explanation for the Five Stars getting votes from part of the southern electorate that is financially in trouble and might hope for some sort of subsidy, but the North? The choice of voting center right (with a majority leaning toward Lega) can be explained in only one way – the herd (the middle class) has tried to rise up.
I asked him, “So in your opinion, is globalization in stasis? Or is it radically changing?”
I think unrestrained globalization has taken a hit. In Italy as well, as we have seen recently, businesses are relocating abroad. And the impoverished middle class finds itself forced to compete for state resources (subsidies) and jobs which can be threatened by an influx of economic migrants towards which enormous resources have been dedicated – just think of the 4.3 billion Euros that the last government allocated toward economic migrants.
This is an important element in the success of Lega: it is a force that has managed to understand clearly the exhaustion of the impoverished middle class, and that has proposed a way out, or has at least elaborated a vision opposing the rose-colored glasses of globalization.
In all of this, migrants are more victims than willing actors, and they become an object on which the fatigue, fear, and in the most extreme cases, hatred of the middle class can easily focus.
What Conflicts Are Most Relevant Today?
At the same time, if we observe, for example in Italy, the positions taken by the (pro-globalization?) Left, it becomes easier to understand why the middle class and also many blue collar workers are abandoning it. Examples range from the unfortunate declarations of deputy Lia Quartapelle on the need to support the Muslim Brotherhood to the explanations of the former president of the Chamber of Deputies, Laura Boldrini, on how the status of economic migrant should be seen as a model for the lifestyle of all Italians. These remarks were perhaps uttered lightly (Quartapelle subsequently took her post down and explained that she had made a mistake), but they are symptomatic of a certain sort of pro-globalization cultural “Left” that finds talking to potential voters less interesting than other matters.
From Italy to America (where Hillary Clinton was rejected after promoting major international trade arrangements that she claimed would benefit middle-class American workers) to the UK (where Brexit has been taken as a sort of exhaust valve), the middle class no longer seems to be snoring.
We are currently seeing a political conflict between globalist and nationalist forces. Globalists want more open borders and freer international trade. Nationalists want protection for work and workers, a clamping down on economic migrants, and rules with teeth aimed at controlling international trade.
If for the last twenty years, with only occasional oscillation, the pro-globalization side has been dominant in the West, elections are starting to swing the balance in a new direction.
Meanwhile, many who self-identify as on the Left seem utterly uninterested in the concerns of ordinary people, at least in cases where these would conflict with the commitment to globalization.
If the distinction between globalism and nationalism is in practice trumping other differences, then we should not let ourselves be distracted by bright and shiny objects, and keep our focus on what really matters.