Tony Blair Institute Trade Report: Hyberglobalization is Dead. Long Live Hyperglobalization
Last week, the Tony Blair Institute for Global Change released a report on trade. The Institute, according to a Guardian interview with Tony Blair himself, is a response to “frightening authoritarian populism” triggered by the effects of globalization.
A report on trade to help us deal with the authoritarian populist surge in response to trade policy? Fantastic! As it turns out, this is a topic I chatted about with the Broadbent Institute in Canada just last month.
Alas, the recipes in the report are not going to help. It’s the same old neoliberal “market first” frame that fails to recognize the harms to workers that have resulted. You can’t fight authoritarian populism driven by the effects of globalization by promoting the very things that contributed to that populism in the first place.
2016
The United States and the UK both experienced political shocks in 2016. In the United States, the rise of the authoritarian right was a wake-up call to many that the old version of globalization had major shortcomings that had to be addressed. Those shortcomings became even clearer after the pandemic, when rampant shortages of goods due to fragile supply chains left us without life-saving equipment. It turns out that the private sector failed to take into account supply chain concentration or geopolitical risk.
French economist Thierry de Montbrial commented, back in 1977, that
“{f}ree trade is, of course, a myth (an Anglo-Saxon myth in particular!) . . . . [I]n our mentality, we stick to the idea that free trade is an ideal to be achieved and think that we owe our prosperity in the last twenty years to this ideal.”
The report is dismissive of the role trade played in Brexit. The issue isn’t whether Brexiteers are for or against free trade, but whether the effects of trade policy contributed to the economic precarity that is an important driver of authoritarian populism.
More Hyperglobalization
“If the goal is to address authoritarian populism driven by the effects of globalization, then it’s important to be clear about what hyperglobalization is and how it contributed to the thing we’re trying to fix. ”
The report states that the era of hyperglobalization is over but also seems to think that hyperglobalization is merely lots of trade. Dani Rodrik is credited with coining the term after the financial crisis; his view is that hyperglobalization isn’t merely lots of trade but instead that the result of a type of globalization, where the market comes first, and national priorities come second. It’s pretty easy to see how that kind of structure is good for mobile capital and not so good for workers, or democracy.
If the goal is to address authoritarian populism driven by the effects of globalization, then it’s important to be clear about what hyperglobalization is and how it contributed to the thing we’re trying to fix.
Instead, the report offers no critique of what came before, but instead laments fragmentation that is now occurring. The report advocates more liberalization, more cross-border investment, and more agreements to reduce the frictions that mobile capital might meet as it flits about the globe. That’s hyperglobalization. But the costs of that kind of interdependence are precisely what the financial crisis, 2016, the pandemic, and the Russian invasion of Ukraine should have highlighted as risks in the system. Interdependence, like fragmentation, has costs. We need a system that manages for both.
To rebuff authoritarian populism, we have to reduce the drivers of economic populism by promoting a version of globalization that addresses the flaws that got us here.
Some Specific Concerns with the Report
Beyond these structural concerns, some specific ones are worth flagging here:
Labor: The report recognizes that trade allows companies to “exploit cost and scale advantages” and the “outsourcing “ of tech jobs to “lower-wage economies.” Good start. But it neglects to connect the dots: those “cost” advantages are too often grounded in labor (and environmental, and tax) arbitrage. Just as economic precarity was an important driver of the authoritarian turn in the 1930s, so it is today. Blair’s interview suggests he understands the connection between wage stagnation and globalization, but it’s not addressed in this report.
One American answer to the arbitrage problem has been to include enforceable labor standards in trade agreements. Labor commitments are mentioned in the May 8 agreement between the UK and the United States. But they’re nowhere to be found in this report. It’s hard to see how we’re going to solve for authoritarian populism if we don’t address the effects of of hyperglobalization on people’s economic well-being. Rodrik himself put out a paper in 2021 on trade and inequality. It’s worth reading.
·Resilience: The report mentions resilience and discusses CPTPP as a mechanism for addressing overdependence on both the United States and the PRC. But CPTPP and that generation of trade agreements were crafted during the era of hyperglobalization. The supply chain rules don’t really promote regional integration – they mostly amplify the ability of goods (especially inputs), services, and capital to flow freely. For that reason, they (intentionally) embed existing PRC supply chain dependencies,.
Climate Ambition: Climate policy is addressed as a source of friction resulting from governments “projecting climate ambition.” Getting rid of friction in service of trade and investment flows – that is probably as close to a description of hyperglobalization as you’d get from Dani Rodrik himself.
Tech: The gist of this part of the report is that the UK has robust digital services exports but that foreign market access might not last forever in the wake of a rise in “digital protectionism,” so digital trade agreements are needed. Digital protectionism apparently includes barriers to data flows, data localization, and “divergent” privacy regimes.
So when the report mentions forming a council with the United States to “manage regulatory divergence,” we should understand that, according to this report, divergence is a trade barrier. The current American administration considers foreign regulatory regimes that impede American corporate interests to be, by definition, trade barriers.
Any country that wants to regulate the tech industry in a way that differs from the United States — beware.
More Elitist Dunking on Manufacturing
The report gives short shrift to manufacturing, despite the fact that deindustrialization and rising authoritarian populism have a strong connection, and despite the fact that the report seems to recognize that the UK/European industrial base is essential to security.
The report reduces the concern over manufacturing jobs in the United States to “nostalgia politics.” Those attached to the old system, usually economists and always elites, are fond of this characterization.
But if the goal is to address authoritarian populism stemming from the effects of globalization, then we have to recognize that those effects are driven by choices we made about the rules of globalization. Those rules were designed to reward capital at the expense of labor. That is the neoliberal model. And neoliberalism gave us hyperglobalization. That model contributed not only to deindustrialization in advanced economies, but premature deindustrialization in less advanced economies.
The real nostalgia seems to be for the era of hyperglobalization.