Social Europe

politics, economy and employment & labour

  • Themes
    • Strategic autonomy
    • War in Ukraine
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

Getting deglobalisation right

Joseph Stiglitz 7th June 2022

This year’s gathering of business and political elites in Davos recognised a basic truth—without reckoning with past mistakes.

deglobalisation,deglobalization,Davos
Some rethinking for the men in suits—Davos 2022 (Νέα Δημοκρατία, CC BY-NC 2.0)

The World Economic Forum’s first meeting in more than two years was markedly different from the many previous Davos conferences I have attended since 1995. It was not just that the bright snow and clear skies of January were replaced by bare ski slopes and a gloomy May drizzle. Rather, it was that a forum traditionally committed to championing globalisation was primarily concerned with globalisation’s failures: broken supply chains, food- and energy-price inflation and an intellectual-property (IP) regime that left billions without Covid-19 vaccines just so that a few drug companies could earn billions in extra profits.

Among the proposed responses to these problems are to ‘reshore’ or ‘friend-shore‘ production and to enact ‘industrial policies to increase country capacities to produce’. Gone are the days when everyone seemed to be working for a world without borders; suddenly, everyone recognises that at least some national borders are key to economic development and security.

For one-time advocates of unfettered globalisation, this volte face has resulted in cognitive dissonance, because the new suite of policy proposals implies that longstanding rules of the international trading system will be bent or broken. Unable to reconcile friend-shoring with the principle of free and non-discriminatory trade, most of the business and political leaders at Davos resorted to platitudes. There was little soul-searching about how and why things had gone so wrong or about the flawed, hyper-optimistic reasoning that prevailed during globalisation’s heyday.

Lack of resilience

Of course, the problem is not just globalisation. Our entire market economy has shown a lack of resilience. We essentially built cars without spare tyres—knocking a few dollars off the price today while paying little mind to future exigencies. Just-in-time inventory systems were marvellous innovations as long as the economy faced only minor perturbations, but they were a disaster in the face of Covid-19 shutdowns, creating supply-shortage cascades (such as when a dearth of microchips led to a dearth of new cars).


Our job is keeping you informed!


Subscribe to our free newsletter and stay up to date with the latest Social Europe content. We will never send you spam and you can unsubscribe anytime.

Sign up here

As I warned in my 2006 book, Making Globalization Work, markets do a terrible job of ‘pricing’ risk (for the same reason that they don’t price carbon-dioxide emissions). Consider Germany, which chose to make its economy dependent on gas deliveries from Russia, an obviously unreliable trading partner. Now, it is facing consequences that were both predictable and predicted.

As Adam Smith recognised in the eighteenth century, capitalism is not a self-sustaining system, because there is a natural tendency toward monopoly. Since however the United States president Ronald Reagan and the British prime minister Margaret Thatcher ushered in an era of ‘deregulation’, increasing market concentration has become the norm, and not just in high-profile sectors such as e-commerce and ‘social media’. The disastrous shortage of baby formula in the US this spring was itself the result of monopolisation. After Abbott was forced to suspend production over safety concerns, Americans soon realised that just one company accounted for almost half of US supply.

Political ramifications

The political ramifications of globalisation’s failures were also on full display at Davos this year. When Russia invaded Ukraine, the Kremlin was immediately and almost universally condemned. But three months later, emerging markets and developing countries (EMDCs) have adopted more ambiguous positions. Many point to America’s hypocrisy in demanding accountability for Russia’s aggression, even though it invaded Iraq under false pretences in 2003.

EMDCs also emphasise the more recent history of vaccine nationalism by Europe and the US, which has been sustained through World Trade Organization IP provisions that were foisted on them 30 years ago. And it is EMDCs that are now bearing the brunt of higher food and energy prices. Combined with historical injustices, these recent developments have discredited western advocacy of democracy and the international rule of law.

To be sure, many countries that refuse to support America’s defence of democracy are not democratic anyway. But other countries are, and America’s standing to lead that fight has been undermined by its own failures—from systemic racism and the flirtation with authoritarians by the Donald Trump administration to the Republican party’s persistent attempts to suppress voting and divert attention from the January 6th 2021 insurrection at the US Capitol.

Showing solidarity

The best way forward for the US would be to show greater solidarity with EMDCs by helping them to manage the surging costs of food and energy. This could be done by reallocating rich countries’ special drawing rights (the International Monetary Fund’s reserve asset) and by supporting a strong Covid-19 IP waiver at the WTO.

Moreover, high food and energy prices are likely to cause debt crises in many poor countries, further compounding the tragic inequities of the pandemic. If the US and Europe want to show real global leadership, they will stop siding with the big banks and creditors that enticed countries to take on more debt than they could bear.

After four decades of championing globalisation, it is clear that the Davos crowd mismanaged things. It promised prosperity for developed and developing countries alike. But while corporate giants in the global north grew rich, processes that could have made everyone better off instead made enemies everywhere. ‘Trickle-down economics’, the claim that enriching the wealthy would automatically benefit all, was a swindle—an idea which had neither theory nor evidence behind it.


We need your support


Social Europe is an independent publisher and we believe in freely available content. For this model to be sustainable, however, we depend on the solidarity of our readers. Become a Social Europe member for less than 5 Euro per month and help us produce more articles, podcasts and videos. Thank you very much for your support!

Become a Social Europe Member

This year’s Davos meeting was a missed opportunity. It could have been an occasion for serious reflection on the decisions and policies that brought the world to where it is today. Now that globalisation has peaked, we can only hope that we do better at managing its decline than we did at managing its rise.

Republication forbidden—copyright Project Syndicate 2022, ‘Getting deglobalization right’

Pics
Joseph Stiglitz

Joseph E Stiglitz, a Nobel laureate in economics and professor at Columbia University, is a former chief economist of the World Bank, chair of the US president’s Council of Economic Advisers and co-chair of the High-Level Commission on Carbon Prices. He is a member of the Independent Commission for the Reform of International Corporate Taxation.

You are here: Home / Economy / Getting deglobalisation right

Most Popular Posts

meritocracy The myth of meritocracy and the populist threatLisa Pelling
consultants,consultancies,McKinsey Consultants and the crisis of capitalismMariana Mazzucato and Rosie Collington
France,pension reform What’s driving the social crisis in FranceGuillaume Duval
earthquake,Turkey,Erdogan Turkey-Syria earthquake: scandal of being unpreparedDavid Rothery
European civil war,iron curtain,NATO,Ukraine,Gorbachev The new European civil warGuido Montani

Most Recent Posts

water Confronting the global water crisisMariana Mazzucato, Ngozi Okonjo-Iweala, Johan Rockström and 1 more
Hungary,social media,women Hungary’s ‘propaganda machine’ attacks womenLucy Martirosyan
carbon removal,carbon farming,nature Environmental stewardship yes, ‘carbon farming’ noWijnand Stoefs
IRA,industrial policy,inflation reduction act The IRA and European industrial policyPaul Sweeney
World Bank,Banga,global south The shakeup the World Bank needsAna Palacio

Other Social Europe Publications

front cover scaled Towards a social-democratic century?
Cover e1655225066994 National recovery and resilience plans
Untitled design The transatlantic relationship
Women Corona e1631700896969 500 Women and the coronavirus crisis
sere12 1 RE No. 12: Why No Economic Democracy in Sweden?

Foundation for European Progressive Studies Advertisement

Let’s end involuntary unemployment!

What is the best way to fight unemployment? We want to know your opinion, to understand better the potential of an EU-wide permanent programme for direct and guaranteed public-service employment.

In collaboration with Our Global Moment, Fondazione Pietro Nenni and other progressive organisations across Europe, we launched an EU-wide survey on the perception of unemployment and publicly funded jobs, exploring ways to bring innovation in public sector-led job creation.


TAKE THE SURVEY HERE

Hans Böckler Stiftung Advertisement

The macroeconomic effects of re-applying the EU fiscal rules

Against the background of the European Commission's reform plans for the Stability and Growth Pact (SGP), this policy brief uses the macroeconometric multi-country model NiGEM to simulate the macroeconomic implications of the most relevant reform options from 2024 onwards. Next to a return to the existing and unreformed rules, the most prominent options include an expenditure rule linked to a debt anchor.

Our results for the euro area and its four biggest economies—France, Italy, Germany and Spain—indicate that returning to the rules of the SGP would lead to severe cuts in public spending, particularly if the SGP rules were interpreted as in the past. A more flexible interpretation would only somewhat ease the fiscal-adjustment burden. An expenditure rule along the lines of the European Fiscal Board would, however, not necessarily alleviate that burden in and of itself.

Our simulations show great care must be taken to specify the expenditure rule, such that fiscal consolidation is achieved in a growth-friendly way. Raising the debt ceiling to 90 per cent of gross domestic product and applying less demanding fiscal adjustments, as proposed by the IMK, would go a long way.


DOWNLOAD HERE

ILO advertisement

Global Wage Report 2022-23: The impact of inflation and COVID-19 on wages and purchasing power

The International Labour Organization's Global Wage Report is a key reference on wages and wage inequality for the academic community and policy-makers around the world.

This eighth edition of the report, The Impact of inflation and COVID-19 on wages and purchasing power, examines the evolution of real wages, giving a unique picture of wage trends globally and by region. The report includes evidence on how wages have evolved through the COVID-19 crisis as well as how the current inflationary context is biting into real wage growth in most regions of the world. The report shows that for the first time in the 21st century real wage growth has fallen to negative values while, at the same time, the gap between real productivity growth and real wage growth continues to widen.

The report analysis the evolution of the real total wage bill from 2019 to 2022 to show how its different components—employment, nominal wages and inflation—have changed during the COVID-19 crisis and, more recently, during the cost-of-living crisis. The decomposition of the total wage bill, and its evolution, is shown for all wage employees and distinguishes between women and men. The report also looks at changes in wage inequality and the gender pay gap to reveal how COVID-19 may have contributed to increasing income inequality in different regions of the world. Together, the empirical evidence in the report becomes the backbone of a policy discussion that could play a key role in a human-centred recovery from the different ongoing crises.


DOWNLOAD HERE

ETUI advertisement

The four transitions and the missing one

Europe is at a crossroads, painfully navigating four transitions (green, digital, economic and geopolitical) at once but missing the transformative and ambitious social transition it needs. In other words, if the EU is to withstand the storm, we do not have the luxury of abstaining from reflecting on its social foundations, of which intermittent democratic discontent is only one expression. It is against this background that the ETUI/ETUC publishes its annual flagship publication Benchmarking Working Europe 2023, with the support of more than 70 graphs and a special contribution from two guest editors, Professors Kalypso Nikolaidïs and Albena Azmanova.


DOWNLOAD HERE

Eurofound advertisement

#AskTheExpert webinar—Key ingredients for the future of work: job quality and gender equality

Eurofound’s head of information and communication, Mary McCaughey, its senior research manager, Agnès Parent-Thirion, and research manager, Jorge Cabrita, explore the findings from the recently published European Working Conditions Telephone Survey (EWCTS) in an #AskTheExpert webinar. This survey of more than 70,000 workers in 36 European countries provides a wide-ranging picture of job quality across countries, occupations, sectors and age groups and by gender in the context of the Covid-19 pandemic. It confirms persistent gender segregation in sectors, occupations and workplaces, indicating that we are a long way from the goals of equal opportunities for women and men at work and equal access to key decision-making positions in the workplace.


WATCH HERE

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us

RSS Feed

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube