Chap 11 globalisation backlash Flashcards
Assumption of Rogowski
economic winners are always political winners. in reality, it happens that in some cases economic losers are political winners
Pareto improvement
at least someone better off, no one worse off (no losers). international economics perspective, fully aware of distributional consequences but believe pareto improvement possible
governments in 1990s options
- protectionism or globalisation without compensation
- should have offered protectionism or globalisation with compensation
compensation seen by international economics
just transfer to losers to make trade openness pareto-improving
compensation seen by public economics perspective
taxing is the trickiest thing one could try to do (if tax profits, lower investments, if tax labour, less people work. etc)
compensation viewed by political economy perspective
people don’t want to be taxed, will do whatever it takes to avoid paying
failure of US trade adjustment assistance programme
aimed at individuals losing jobs because of globalisation which is not enough because it affects entire communities
compensatory policies supported by major socio economic groups
highly educated people so more flexible w employment, safety nets for loss of jobs, retraining programmes
example of city that reinvented itself after globalisation
pittsburg : transformed into a knowledge economy thanks to universities and researchers
failures of representation
major parties consensually supported increased international eco integration (often without compensation) even democrats
SMD (Single member district) / plurality
elect one representative from district, only a few parties usually just two
proportional representation
assign M>1 seats proportional to vote shares, small parties represented
Implications of SMD
- prevent small parties from being represented
- channeling discontent requires «insurgent» candidate in intra-party competition
- if intra-party route fails, no space to be heard
- needs a lot of people unhappy to be heard
Implications of PR
- make even relatively small parties viable
- easier for discontent to be heard
- escape valve for pressures
Political manifestation of backlash in SMD
unexpected/ sudden like Brexit or Trump
Explanation of brexit votes
Significant part of variation in Leave vote explained by Change in relative income. Significant part of variation in CRI explained by China shock.
Places economically declining since 1990s voted to leave
drivers of political response brexit
- anti-elite
- anti-globalization (take back control)
- anti-immigration (misinterpreted correlation/ welfare state congestion)
only group not affected by china shock
retired
anti immigration and brexit puzzle
places with more immigrants were more in favour of remaining in the EU
counterintuitive insight of immigration and trade
political substitutes from point of view of owners of given factors in advanced economies:
- trade harms scarce factor (labor) so decreases labour production, workers compete for fewer jobs who therefore oppose immigration
- protectionism harms abundant factor (capital) so immigration is favoured because it lowers labor costs as labour production increases & wages rise
protectionism as general solution
people blame globalisation and demand protectionism for a lot of economic distress that is not directly related to globalisation itself but technological change
protectionism in public mind
general policy tool to address economic downturns
popular policy also for non trade shocks
protectionism
