7.2 brexit, trump and globalization + Q&A

Question 1

globalization - elephant curve

Answer 1

• reduction in poverty
• inequal distribution of income growth

elephant curve = shows increase real income and percentile of global income distribution

• lower and middle income households = income growth last few decades
• top 1-5% global income distribution = also increase in real income

two groups haven’t won:

• poorest 5%
• upper-middle income group (70-90%) hasn’t seen that much growth

!on a global scale

developed world:

• lower/middle income has not benefitted much (is in the dip of the elephant)
• share of income earned by top 1% stark increase
• class war: labor share of income has declined in advanced economies (more steeply in the US).

Question 2

what happened with globalization in developed countries?
- global trade

Answer 2

from 70s spike globalization with more trade and FDI

-> Stolper-Samuelson:

• advanced econs have scarcity in low-skilled labor
• low-skilled workers are losers from free trade: their incomes should decline when more open trade

Question 3

what happened with globalization in developed countries?
- offshoring as part of FDI

Answer 3

companies offshore labor-intensive work to other countries were wages are cheaper

Question 4

what happened with globalization in developed countries?
- AUTOMATION (more important than trade and offshoring)

Answer 4

= where you use capital (some type of robot)

• many of the lost jobs placed on foreign competition are due to technological change
  80% manufacturing jobs lost are due to changes in technology

visible in:
manufacturing has risen in US and EU if measured by total output and not employment

• industrial (manufacturing) production increases, but manufacturing jobs decline
• !!it does slump with financial crisis
• after financial crisis, instead of re-hiring workers, companies used newer technologies and robots

Question 5

backlash to globalization
material vs non-material

Answer 5

why vote for e.g. Brexit?

1. it is real and driven by economic anxiety/competition
   - globalization + votes against globalization bc eco competition and anxiety
2. real but driven by “othering” or ethnic/racial hostility
   - don’t want others to come into your country, gain in position
3. it isn’t real: globalization is blamed for other things
   - maybe what’s happening: domestic policies that drive inequality + automation and robots (not globalization that causes the problem)
4. everything is fine: no problem with globalization, also not in politics
   = very unlikely

Question 6

was Brexit a response to globalization?

Answer 6

UK now more restrictive on trade + immigration

immigration?
negative relationship between voting leave and the percentage in your area being non-UK born = people living close to migrants less likely to vote for Brexit

• e.g. many remain voters in London (which is really multicultural)
• so it’s not people that see others coming in that want to leave

trade?

positive relationship between voting leave and import shocks

• sceptical of measures: correlate with so much else: if area is hard hit with trade shocks, it’s also probably more manufacturing

surveys:

• remainers say bc economy
• leave bc immigration + sovereignty
  !not the people actually leaving near the migrants -> perhaps more concern about on the whole (general fear of others)

Question 7

was Trump 1 a response to globalization?

Answer 7

maybe

Trump campaigned on mercantilist policies with tariffs + against TPP and NAFTA

• some evidence that exposure to manufacturing job losses leads to less support for incumbents
  but not necessarily due to trade: could also be automation
• Trump supporters are not statistically the poorest people in America (not the biggest losers of the system)
• Trump support is empirically driven more by “othering” or cultural backlash
  see racial inequality attitude

some evidence that it is about trade and globalization, but also a lot of other stuff (like othering) going on

Question 8

the unsatisfactory conclusion about globalization

Answer 8

some but not conclusivevidence that there is a globalization backlash

it’s too early to tell why Trump was re-elected (no voter data yet)
- but likely: eco backlash against high inflation, maybe related to globalization (pandemic as global crisis) + backlash against domestic thing (housing shortages + expensive education)

maybe not either or: economic precarity may heighten cultural/sociopshychological variables

still much more research is needed to answer this really important question

=> there may be a backlash against globalization, but it might be more about cultural explanations