PARIS, (MILLAT+APP/AFP) – Governments stung by the
political backlash from disgruntled voters left worse off by
three decades of globalisation are now scrambling for solutions,
but there is no easy fix and the populist remedies on offer
risk making things even worse, analysts say.
Globalisation has been a boon for many, but western elites
should have addressed its inequalities much earlier instead of
sweeping them under the rug.
“Rich countries have too often forgotten those who lost
out, the workers threatened by imports from low-cost countries,”
Radu Vranceanu, a professor at the French Essec business school,
told AFP.
More than 20 years ago the man behind the annual Davos
forum, Klaus Schwab, warned of a “mounting backlash” which could
threaten economic activity and social stability.
“You have to listen to the people who have entrusted you
with leadership,” the founder of the World Economic Forum wrote
in the New York Times. “But in the end, it’s not enough just to
listen. You have to solve the issues. You have to address…
the root causes.”
Two decades on, the chickens have come home to roost:
Britain’s shock vote to leave the European Union and Donald
Trump’s US election victory are seen as a cry of protest by
voters who feel they are getting poorer while the rich get
richer.
The issues of growing income inequality and what to do
about it are likely to dominate discussion when political and
business elites gather in Davos next week.
“The share of wealth taken by the highest income brackets
has risen in almost all countries over the past decade, both in
developed and in developing countries” said French economist
Thomas Piketty, a best-selling writer on modern capitalism and
inequality who also runs a wealth database.
-‘Deepen inequality’ –
======================
Even the International Monetary Fund (IMF), a champion
of free trade, recently acknowledged that “international trade
can deepen inequality in developing countries”.
But some observers say often-heard calls for “fairer
globalisation” have done little to change reality.
“This talk today seems bland and naive,” Xavier Timbeau,
director of French economic think tank OFCE, told AFP.
Still reeling from sudden changes in the political
landscape, elites are seeking a response to the anti-establishment
voter backlash, but no consensus has emerged.
Even before taking office, Trump threatened protectionist
measures against Chinese and Mexican imports and claimed credit
when automaker Ford and others dropped plans for new investment
in Mexico.
European governments are also scratching their heads. Two
junior ministers in the French government, Christophe Sirugue and
Matthias Fekl, have come up with an idea for a “Buy European
Act” and a “Made in Europe” label.
Such initiatives can be seen as forms of mild isolationism,
but OFCE’s Timbeau suspects there may be a new form of economic
selfishness at work.
– ‘No more goodwill’ –
======================
“We are entering a stage in which there is no more
goodwill in developed countries towards developing countries.
On the contrary, everybody is defending their own interests
against the others,” he said. “Everybody is looking out for
number one.”
Apart from being perceived as unfriendly, such strategies
may also be counter-productive, warned Vranceanu, at Essec.
“Trump’s protectionist threats could diminish the American
economy’s capacity to develop. They run counter to his promise as
a candidate to give the US a strong growth push,” he said.
There are more productive ways to level the playing field,
such as taxes on products from countries which don’t respect
climate agreements or which use “social dumping” to keep prices
low, said Thomas Guenole, a political scientist and author of
a book called “Unhappy globalisation”.
“If such taxes are high enough, they will restore the
local economy to competitiveness” and put the brakes on offshore
production, he told AFP, perhaps even encourage a return,
so called “re-shoring”.
Whatever cure is attempted, 2015 Nobel prize winner Angus
Deaton warned in a recent article, governments must ensure it’s
not worse than the disease.
– ‘True bogeymen’ –
===================
“We cannot ignore those who are hurting, but we need to
ensure that our ‘fixes’ don’t make the problem worse,” he
wrote.
The biggest problem facing economies are business leaders
“getting rich on the backs of others while not contributing
anything of value to the economy”, according to Deaton.
“The true bogeymen are the rent-seekers who have captured
so much of our government. The inequality that they have wrought
is the inequality that needs to be eliminated,” he said, citing
as an example bankers who seek looser regulation and then lobby
governments for taxpayer money if their banks fail.
“The resulting bailouts have given breathtaking sums of
public money to people who were already fabulously rich,”
he said.