Globalization isn’t the problem. It’s neoliberalism

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Brexit, the election of Donald Trump and the raise of right-wing populist movements in Europe have all been attributed in part to growing anger at the effects of globalization. The idea that free-trade agreements, companies sending jobs overseas and immigration are responsible for the loss of manufacturing jobs in the United States was a rallying cry of the Trump campaign. Popular anger is also exacerbated by the growing wealth and income inequality of the past decades. The middle-class has declined, while the poor struggle, and the wealthy prosper. The situation has created resentment towards those who benefit from globalization, the elite who control multinational corporations and financial institutions, and the political establishment whose policies favor the former. However, globalization is not to blame for the rise in wealth and income inequality. The culprit is neoliberalism, or better said a neoliberal form of globalization.

Globalization is the process by which different areas of the world become more interconnected and interdependent. This process has been possible by technological advances in transportation and communication that have reduced temporal and spatial distances. When we call customer service and someone in India answers, we can thank globalization. When we can eat a Big Mac in Shanghai or Beijing, we can thank globalization. When we can use devices that fit in our pockets to organize an international Women’s March or demonstrations to protest the crisis in Venezuela, we can thank the technology that has made globalization possible. Despite the criticism, globalization has its benefits. We can purchase products from around the world at affordable prices. We can also find and share information around the world (like this article) at a speed never seen before. The pace of technological advance is not giving signs of slowing down. It is thus unlikely that the process of increasing interconnectedness and interdependence will stop, which makes the anti-globalization rhetoric seem like a losing argument.

Instead of focusing on globalization, criticism should be directed towards the ideology that has shaped this process over the past decades, neoliberalism. With its argument that society as a whole benefits from free trade, unfettered markets (i.e. deregulation of business, finance and labor relations), low—or almost zero—corporate taxes, and less government involvement in social welfare and other programs, neoliberalism has greatly influenced the way international business relations and national economies have developed.

However, deregulation of the business and financial sectors, and corporate tax cuts are the main reasons for the widening wealth gap in the U.S. In an article by Christina Pazzanese in the Harvard Gazette, the second in a series about inequality, Harvard Kennedy School (HKS) Professor Christopher Jencks explains that tax policy has increased income inequality, while “deregulation, globalization, and speculation in the financial service industry” have helped double “the share of income gains flowing to the top 1 percent” of society. Emmanuel Saez, professor of economics at University of California Berkeley, also argues that without “drastic regulation and tax policy changes” income concentration by the top 1 percent of the population cannot be prevented. Furthermore, Pazzanese points out that the Great Recession and subsequent Wall Street bailout showed “the unfairness of fiscal inequality.” Tax policy and deregulation of business and finance allowed for the speculation that both raised the income share of the wealthiest sector of the population and caused the recession of 2007. In the midst of the crisis, those most affected by the economic downturn were left like the third-class passengers of the Titanic, to fend for themselves in the frigid waters of a dark sea with no lifeboats.

Another area where neoliberalism has negatively affected people is labor rights. In the first article of the Harvard Gazette series, Alvin Powell explains that the drop in union membership over the last three decades has had an economic and political impact on workers. The decline of unions weakened workers’ bargaining power, leading the increasing number of nonunionized workers to earn less than union members. Along with their effect on wages, unions have lost their ability to be a political force on behalf of worker’s rights. In the article, HKS lecturer Marshall Ganz and Harvard Law School Professor Benjamin Sachs (in Pazzanese’s article) blame the demise of unions on a series of legislative actions and court decisions that undermined the economic and political power of unions.

Political inequality is the issue that most alarms scholars in Powell’s and Pazzanese’s articles. As the political influence of unions—and with it workers—has eroded, wealth accumulation has increased the political influence of the top section of society. The influence of money in politics has made legislators more receptive to the demands of the biggest campaign donors. Thus, economic inequality creates political inequality. The scale of power is tipped by the weight of those with the most wealth. Neoliberal policies that exacerbated wealth inequality, brought financial crises, and undermined the power of unions and the government to act on behalf of the people have also created political inequality, threatening the democratic system in which everyone is meant to have an equal voice in the decision making process. It is not surprising there is popular resentment towards the political establishment that allowed neoliberalism to determine the role—or lack thereof—government plays in guaranteeing the welfare of its citizens and the type of globalization that dominates the world economy.

Resentment against the effects of neoliberal policies is not a new phenomenon. Latin America experienced its own wave of popular anger after these types of policies helped bring financial crises and economic instability in the 1990s and early 2000s. Instead of right-wing movements, Latin America witness the rise of left-wing populist leaders like Hugo Chávez in Venezuela, Luiz Inacio Lula da Silva in Brazil, Néstor Kirchner and his wife Cristina in Argentina, Evo Morales in Bolivia, and Rafael Correa in Ecuador. Now, the effects of a neoliberal from of globalization are being felt in the nations that most forcefully advocated for it. The political establishments in the U.S., France, Germany and the United Kingdom have to contend with populist forces that seem to threaten their hold on power. It is not clear how and if this popular backlash will really change the direction economic policy has taken over the last decades. There was little economic reform after the Great Recession. Despite its anti-globalization rhetoric, Trump’s election does not seem to be a movement away from neoliberal policies. We still have to wait for the elections in France and Germany to see how much support right-wing populism really enjoys in Europe’s largest economies.

European elections’ results aside, what we need is a type of globalization that is not determined by the tenets of neoliberalism. We need politicians who are more responsive to the needs of the people, who can draft a more equitable tax policy, who can safeguard the economy from the dangerous speculation and predatory practices that disproportionally affect the middle and working class. Fair labor practices are also necessary to help prevent income inequality. Investments in and access to good public education are essential for future economic prosperity. Especially, investments in the area of technical education are needed to cope with the rapid pace of automation that—more than trade and immigration—is responsible for the loss of jobs in various areas of the economy.

These ideas are anathema to the advocates of neoliberalism. However, a society with low levels of wealth and income inequality is not only morally desirable but also less likely to experience waves of popular resentment. Additionally, when people earn a decent salary, the purchasing power of the population increases and the economy grows. The richest 20 percent could tame its wild desire for infinite wealth in favor of a more just and stable society and economy. Perhaps, this is the dream of an idealist. But if we do not point out the flaws of neoliberalism in the hope of bringing change, this seemingly impossible idea will remain a dream.