globalisation winners and losers essay

Winners and losers from globalisation

Globalisation involves the increased integration and interdependence of the global economy. Since the 1960s, there has been an increased rate of globalisation, which has been characterised by rising trade, rising exports as % of GDP, greater movement of labour and capital, and an increased interdependence of the global economy.

Globalisation has benefitted some countries more than others. In particular, South East Asian countries, such as Vietnam, Korea and China have seen a growth in living standards due to their export boom. However, countries in Sub-Saharan Africa have struggled to experience improved living standards as they have not seen the same growth in exports.

In the developed world – the US, the UK and the Eurozone, globalisation has been a mixed blessing with some sectors of the economy (e.g. service sector) experiencing rapid growth, but some unskilled workers have been left behind as former manufacturing sectors decline due to greater global competition.

• Firms with a global comparative advantage, e.g. high-tech software firms
• Countries with low-cost labour and infrastructure to export (e.g. Korea, Vietnam, Thailand)

This shows the importance of exports to these developing economies. Since the mid-1980s, there has been a significant growth in exports as % of GDP, especially for countries like Vietnam, Korea and Thailand.

• Highest earners, who are in a position to negotiate higher wages. The World Bank found that between 1988 and 2008, the real income of the world’s top 1% of the world’s earners – went up by more than 60%. ( World Bank )
• New middle class in emerging economies, who are experiencing rising real incomes
• Wealthy who can invest abroad and take advantage of lower tax rates.
• Multinational companies who can take advantage of tax breaks and lower cost labour abroad. For example, Amazon and Google have set up subsidiaries in countries like Ireland and Luxembourg to get lower tax rates. Also, production is increasingly globalised, e.g. Apple design in the US, but manufacture in China.
• Workers who gain employment in export industries.
• Consumers who benefit from lower prices.
• Greater movement of labour has made labour markets more flexible. For example, filling labour vacancies  in health care with foreign born workers
• Unskilled manual labour who have seen a decline in employment opportunities with a structural change to the economy
• Average taxpayers who lose out from tax avoidance schemes of global multinationals.
• The environment which is experiencing global warming and loss of natural resources.
• Manufacturing sector in high-cost labour countries. Manufacturing companies in UK and US have seen a comparative decline as they struggle to compete with lower labour cost competitors.
• While top earners and the middle class have seen rising incomes, the World Bank found the poorest 5% of the world’s population have seen stagnant real incomes from the period 1988-2008. ( World Bank )
• Developing economies who lack the infrastructure to developing exporting manufacturing sector. The agricultural sector has seen comparatively smaller growth in real earnings. Agricultural commodities have low-income elasticity of demand, so with rising real GDP, demand for agriculture does not rise a the same rate.
• Some countries have seen a ‘ brain drain ‘ as young skilled workers move to higher income countries. This is especially an issue for Eastern European economies which have seen a net outer migration to Western Europe. Net migration to Western Europe has created social pressures.

Winners and losers in the US economy

In the US, globalisation has led to a fall in the share of manufacturing as a % of GDP. This in itself is not a ‘bad’ thing. However, a rapid decline in one sector can lead to regional decline and structural unemployment. Areas in the US, have become known as the ‘ rust belt ‘ – former manufacturing cities which have struggled to compete with cheaper imports. Globalisation has accelerated this decline.

• On the other hand, globalisation has led to benefits from the US economy. Cheaper manufactured goods have kept consumer prices low, and with increased disposable income, other US firms have benefitted. But, the benefits have been unequally distributed. Furthermore, the US has been able to specialise in different sectors, such as finance. This has benefitted educated workers, who can gain good jobs in the service sector.

This shows that exports are a smaller percentage of the US economy. Part of this is due to the size of the US, there is more intra-US trade. While the Euro area has seen a rapid growth in exports due to Single Market.

• Sometimes globalisation is a ‘catch all’ issue blamed for all an economies problems. In reality, manufacturing sectors may still have declined – even with less globalisation.
• Globalisation is also quite a vague concept and it is not something new.
• It is worth considering ideas such as Schumpeter’s Creative destruction of Capitalism. Also, it is worth considering the “ Luddite Fallacy “
• A big issue is not globalisation per se, but how we manage the impact of globalisation. It is possible that globalisation can play a key role in improving living standards for the poor, but left to market forces, it is no guarantee.
• There is a tendency to simplify the debate, e.g. in US manufacturing sector decline, finance has done relatively well. However, some US manufacturing firms are still very globally competitive, though the manufacturing process is now more global with different stages of production delegated to different economies.
• Causes of globalisation

5 thoughts on “Winners and losers from globalisation”

Hey can you give some examples of winners and losers of globalisation

Winners tend to be countries in the EU, North America and East Asia because globalisation is rather regional. See Mann 1997 to read more on that.

Losers are countries with low wages, working conditions etc. I realise the text says they are winners but in reality not so much. MNCs exploit this and the workers go through hell. So it depends what perspective you look at it from. Also, the companies that relocate or invest in LEDCs tend to not give as much profit back to the country, therefore the government also does not benefit as much as some think.

Thanks for the notes, I rate you no_1

I see countries in Africa losers because few countries in Africa have got multilateral & bilateral companies so they can’t compete with European countries and most of them are developing countries

Thank you for the notes have benefited alot

Comments are closed.

Globalisation Results: Winners and Losers Term Paper

• To find inspiration for your paper and overcome writer’s block
• As a source of information (ensure proper referencing)
• As a template for you assignment

Why does globalisation generate ‘winners’ and losers?

Why there are winners and losers.

Globalization refers to international interdependence of economies through an increment of economic, social, political and cultural interdependences. Scientific and technological innovation and invention in communication and transport has made the world a global village.

With globalisation, good and services, labour and capital find their way in the country where they can be put into maximum use. Through economic integration, nations get a wider access to the world economy/markets and their dependence on local resources is reduced. For trade to be complete there must be the demand and supply of commodity; globalization is at the centre of international trade; it is supported by trade, environmental, political and social agreements, has supported it.

With the increased globalisation, some economies stand to benefit from the integration while other loses. Whether a country stands to loss or gain depends with the efficiency of production employed in the economy relative to that of its competitor (Schulte, 2000). This paper discusses why there are losers and winners because of globalisation.

Globalisation has created some winners in the integration, some countries have benefited while other has lost in different aspects, and alternatively, there are countries that are benefiting more than others are. The current economic growth of the United States and China has been attributed to globalisation and international trade. Germany has been the world largest exporter followed by United States but of late, 2009, China is catching up with them, and it became the second largest economy in August 2010.

According to Economic survey conducted in 2009 and released in August 2010, china has had a continuous economic growth rate to a point that it surpassed Japan to be the second largest economy in the world.

Although globalization has had many benefits, it has not been able to encompass all sectors. Many nations continue to experience regional disparities. Poverty rates are still high in sub-Sahara Africa although there has been a fall in its rates in South and East Asia.

Statistics from the United Nations (UN) shows that about one billion people live on less than one dollar per day and about 2.6 billion live on less than two dollars. It is believed that this has been because of too little globalization. If globalization is increased, some of these problems can be eliminated.

The benefits of globalization came along with some risks associated with it. These are a result of capital movements among nations. IMF employs policies from time to time that help nations manage some of these risks. It offers technical assistance in some of the macroeconomic policies, the exchange rate and financial sector. Losing can be in the form of material loss or in social attributes like culture and countries pride. The differences in benefits from globalisation can be attributed:

Technological differences

Developed countries have high, efficient technology than developing countries, they are able to produce goods at lower cost than in the developing countries, when they are competing, and they can sell their commodities at relatively low prices than those from the developing countries.

When there is high competition, then local industries in developing countries are not given time to mature and compete with well-developed international companies at the same level. Inefficiency them prevails in developing countries that leads to their deterioration in economies. Some countries have become net consumers since they cannot develop companies and industries that can effectively compete with those in the developed countries.

Comparative and absolute advantages paradigm

International trade operated under the paradigm of absolute and comparative advantage. The concept behind absolute advantage is that households tend to produce what they can produce more cheaply and opt to buy those that they cannot produce effectively. The same concept should be used in countries production. The concept broadly states that if a country can import goods and services more cheaply that they can produce in their county, then there is no point of producing that product or service.

If we have two trading countries, country A and country B, country A has a comparative advantage than country B if it has a marginal superiority in production of certain product. Abundance of factors of production differs with countries. A country will generally tend to produce those products that utilize the most abundant (cheap) factor of production.

According to this concept, if each country specializes in those products and service that it can produce more efficiently, then production can increase and maximum and efficient resource utilization realized. The concept argues that trade allow each country (trading partner) to specialize in those goods and service that it can have a lower marginal production cost.

The problem with the approach is that there are some countries that do have commodities to produce at low rate, if they have the commodities they then have no the required technology to do it, they thus become consumers of other countries products. On their side, they are missing the chance to innovate and develop measure and methods to make their production effective. Those countries with the expertise and technology gain in that they produce and sell even to those places that might be able to produce their own goods.

Resources distribution

Some countries have better resource distribution than others; this has resulted to some nations having the commodities more needed in the world market than others do. Resources include minerals, climate and other natural resources. A country like Kenya in east Africa has good climatic conditions that favour tourism and production of tea and coffee.

When these commodities are competing with others in the market, the country is likely to have an upper hand. Oil is an important mineral in the world, those countries that have the deposits stands to benefit more than consuming countries. Countries that have higher production have enjoyed form fair trade dealings. Fair trade is an ethical concept where in case of trade there is mutual benefit between the producer, sellers, and consumers benefit from a certain production.

It emphasis on equality in benefits and sometimes dangers caused by a production process; sometimes fair trade is used to refer to how producers are paid, the level of quality of production and efforts made to restore nature. There are different international organizations which support fair trade, they include Fair-trade Labelling Organizations International (FLO), created in 1997 and World Fair Trade Organization (formerly the International Fair Trade Association). The final net effect is countries that have developed better than others have.

Intellectual property and capabilities

People in different countries have different mental capabilities shaped by different attributes, some in born while other has been moulded through talent maturing and education. They are able to produce new commodities to the market and thus stand to benefit from the innovation.

Since they have come up with a commodity, they are able to create a market niche. Some of those countries include China, Japan and Germany that have been known to develop a number of products. They are further supported by mechanisms set by the government and intellectual policies.

Strategic locations, infrastructures and political standing

The location of country in the globe has either positive or negative effect on the business; the more accessible a country is the more the business it will attract and thus results to increased benefits from globalisation. Coastline is the main transport system that is used to trade among countries especially for bulky goods. If a country does not have a coastline then its trade will be hampered; it may need to pass through another country to get its products from abroad. This increases the cost of trade in the country.

For example, Uganda is a landlocked country; the country gets its products using the Kenyan coastline. The trade comes with a cost incurred for the use of the coastline. Currently the country discovered oil deposits in the northern part, with the discovery, countries as Kenya has started to prepare to enjoy spill over benefits. In such a situation, we can see that Kenya has been favoured by its positioning.

Protectionism policies and trading blocs in some countries

Some countries have put barriers to trade, openly while others are hidden in policies; barriers put restriction to international trade. Trade barriers are governmental policies, fiscal and physical barrier; the government may impose restrictions, which burrs the importation or exportation of goods or services from certain countries. On the other hand, there are trade regulations defined in different nations, which restrict trade with specific goods and services.

It may also open its borders to facilitate trade. Most of the trade barriers use the same principle; they impose some cost on trade to raise the prices of the goods in question. When determining import duties, country use the CIF (Cost, insurance and Freight) policy, this means that those goods form inefficient countries will pay higher import taxes than efficient countries. The result is favour in one side of the countries.

Free trade agreement removes these trade barriers except the ones they deem necessary for the nation’s security. Examples of such agreements are North American Free Trade Agreement (NAFTA), European Union (EU), South Asia Free Trade Agreement (SAFTA), Union of South American Nations and European Free Trade Association.

When such countries engage in free trade agreements, they lock other countries who are not members to the agreement from benefiting the trade (Michie, 2003). The countries in a trading agreement benefit at the expense of others who are not part of the deal.

As economies expand and trade with each other with assistance of improved technology, the world is becoming a global village. The enhanced transport and communication networks are the foundations of globalization; however, globalisation has resulted to winners and losers.

Developed countries with unique natural and artificial resources benefit from globalisation more than developing countries. Major factors that lead to winners and losers in globalisation are technological differences, comparative and absolute advantages paradigm, resources distribution, intellectual property differences, strategic locations, infrastructures, and protectionism policies.

Michie, J. (2003). The handbook of globalization. Northampton: Edward Elgar Publishing.

Schulte, J. A. (2000). Globalization: a critical introduction . New York: Palgrave Macmillan.

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Who wins and who loses from globalization? There are (at least) six answers

• Six dominant narratives attempt to answer the question, “Who are the winners and losers of globalization?”
• There is no single right answer; instead, different narratives tell different stories.
• The narratives revolve around (1) the establishment position, (2) left-wing populism, (3) right-wing populism, (4) the critique of corporate power, (5) geoeconomics, and (6) global threats.

The following is an excerpt from the book Six Faces of Globalization . It is reprinted with permission of the authors and Harvard University Press.

It is a confusing time, and our old mental models are increasingly unreliable guides to our complex and evolving reality. We are at a critical juncture: a relatively long period of stability in mainstream thinking about economic globalization has given way to a situation of dramatic flux. During such junctures, narratives assume particular relevance because they offer new ways for us to understand what the problem is and what should be done about it. Narratives provide the tools to contest the old normal and establish the contours of the new.

We are scholars of international trade and investment law who follow these debates intently, and the growing multiplicity of arguments about who wins and who loses from economic globalization reminded us of the confusion of a scrambled Rubik’s cube. The colors were all jumbled up, with each face representing an incoherent and confusing mix of arguments and concerns about trade, inequality, disintegrating communities, corporate power, public health, and environmental catastrophe. 

Could we unscramble this Rubik’s cube? we wondered. Was there a way to arrange the different-colored pieces of the puzzle into coherent narratives, and to fashion a framework to show how these narratives relate to each other? Could this help us to better understand the political moment we found ourselves in and provide us with tools to analyze potential paths forward? As we disentangled the debates that had been playing out in the Western media, six prominent narratives about the winners and losers from economic globalization emerged, which we conceptualize as existing on the six faces of the Rubik’s cube. 

The top face of the cube: everybody wins

According to some economists, if you think that globalization impoverishes countries and destroys communities, you have it all wrong. Sure, you may have lost your job because workers in other countries are paid less, but that is not at all different from losing your job because workers in the factory next door are more efficient or because technological progress has rendered your skills obsolete. The market is simply doing its work. You should improve your qualifications to get a better job; in the meantime, you still benefit from globalization since it gives you access to cheaper products. The process of adjustment may be hard at times, but it is a short-term cost that we have to accept in the interest of long-term prosperity. The end result will be a more efficient economy, lower prices, and more abundant consumer choice. 

In this view, the pushback against economic globalization by people who feel that they have lost out is simply a natural reaction to the creative destruction that necessarily accompanies progress. The appropriate response is to help individuals adjust to the competition unleashed by globalization by offering them retraining and allowing them to share in the gains from trade. Adjustment assistance that eases workers into new jobs not only helps to realize the efficiency gains derived from the reorganization of the international division of labor but also is a political imperative, since it shores up public support for international integration. The bottom line is that the economic gains from trade more than suffice to compensate anyone who may have lost out, so that everyone can ultimately benefit from free markets and liberal trade. 

We call this “everybody wins” view the establishment narrative, because it was the dominant paradigm for understanding economic globalization in the West in the three decades following the end of the Cold War. The view reflected a consensus of the main political parties in most Western democracies and beyond, and it has been espoused by many of the institutions that serve as the guardians of the international economic order, such as the World Bank, the International Monetary Fund (IMF), and the WTO. Many powerful actors still endorse this narrative, arguing that free trade not only increases prosperity but also supports other goals, such as promoting peace. Since the establishment narrative has been ruling the world and also represents the sunniest view of globalization, we visualize it as situated on the top of the cube. 

The four sides of the cube: winners and losers

The establishment narrative now finds itself besieged from all sides. Concerns about the impact of free trade on workers and the environment have bubbled up previously, but discontent with economic globalization tended to be suppressed in mainstream circles in the West. In the decade following the global financial crisis, however, narratives that highlight how economic globalization produces both winners and losers have re turned to the center of political debate. These currents have pushed us off the sunny top of the cube, over the edges, and down to the four faces on the cube’s sides. Instead of relatively limited squabbles between the center-left and center-right on whether, when, and how to redistribute the gains from trade, we now confront four narratives that present a much more fundamental challenge to the assumptions underlying the establishment perspective. 

The establishment narrative looks at the world economy as a whole and treats countries as the relevant actors; it is at these levels and units of analysis that the superior efficiency of a global division of labor in which every country focuses on its comparative advantage is most apparent. The narrative emphasizes absolute rather than relative gains, and the metric it employs is economic, typically gross domestic product (GDP). Proponents of the four challenger narratives do not necessarily contest that economic globalization has produced absolute economic gains at the aggregate level, whether measured nationally or globally. However, they focus on the distribution of those gains, both within and across countries, and derive much of their energy from channeling the disappointment, fears, and anger of the losers. Where these four narratives differ from each other is in which actors they identify as having won or lost, and in why they think it matters. 

On the left of the political spectrum, we see two narratives that emphasize how gains from economic globalization have flowed upward to rich individuals and multinational corporations. The left-wing populist narrative focuses on the ways in which national economies are rigged to channel the gains from globalization to the privileged few. Proponents of this narrative point out that even as countries have seen their GDPs rise, many have also experienced a sharp increase in inequality, with a growing divide between rich and poor and a hollowing out of the middle class. Left-wing populism expresses itself in vertical hostility; its proponents stand up for the ordinary people who have lost out to the corrupt elite. Whereas some proponents point the finger at chief executive officers (CEOs), bankers, and billionaires (the top 1 percent), others take aim at the educated professional class and the upper middle class more broadly (the top 20 percent). Wherever the line is drawn, however, left-wing populists agree that the middle class, the working class, and the poor have lost out. 

Instead of singling out domestic elites, proponents of the corporate power narrative argue that the real winners from economic globalization are multinational corporations, which can take advantage of a global marketplace to produce cheaply, sell everywhere, and pay as little in taxes as possible. These companies use their power to shape international rules in areas that advantage them, such as trade and investment, while lobbying against effective international cooperation on subjects that might disadvantage them, such as taxation. In this way, multinational corporations manipulate the network of domestic and international rules to maximize their profits and minimize their responsibilities. According to the corporate power narrative, economic globalization produces many losers—workers, communities, citizens, even governments—but only one winner: corporations. 

Although both of these narratives focus on the upward redistribution of wealth, they differ in their emphasis. The left-wing populist narrative zeroes in on domestic problems, highlighting the explosion of inequality within countries. The corporate power narrative, by contrast, adopts a transnational approach and treats multinational corporations and the transnational working class as the key actors. The two narratives are often intertwined in places such as the United States and the United Kingdom, where many on the left are broadly critical of owners of substantial capital, whether individual or corporate. In many western European countries, by contrast, where levels of domestic inequality are lower, the corporate power narrative features more prominently, as was evident in the protests across Europe in 2015 and 2016 against the Transatlantic Trade and Investment Partnership (TTIP). 

On the right of the political spectrum, we find two narratives about winners and losers that primarily see the gains from globalization flowing sideways to foreigners and foreign countries. In the right-wing populist narrative, workers, their families, and their communities lose from globalization, both economically and in a cultural sense. This narrative’s emphasis varies in different countries. In the United States, where the loss of blue-collar jobs to China and Mexico has devastated manufacturing communities, the narrative has a strong anti-trade element. In western Europe, anti-immigrant sentiment and concerns about a loss of sovereignty are central features of the narrative, whereas anxieties about the impact of international trade are less pronounced. In the United Kingdom, for instance, many of those who voted for Brexit did not oppose free trade; they rebelled against what they perceived as dictates from the EU institutions in Brussels and longed to regain control over immigration. 

The right-wing populist narrative shares with the left-wing version a deep distrust of elites, but the two narratives part company on what they blame the elite for: whereas left-wing populists fault the elite for enriching themselves at the expense of the working and middle classes, right-wing populists denounce the elite for failing to protect the hardworking native population from threats posed by an external “other.” The right-wing populist narrative thus has a strong horizontal us-versus-them quality, whether expressed through concern about protecting workers from the offshoring of jobs or guarding them against an inflow of immigrants who might compete for those jobs, live off the welfare system, or threaten the native community’s sense of identity. The right-wing populist narrative also highlights geographical divisions within countries, such as the diverging fortunes of thriving cities and declining rural areas. For proponents of the narrative, these geographical divides map onto different value systems: rural areas are bastions for conservative cultural values such as stability, tradition, patriotism, and loyalty, whereas urban centers represent an untethered and amoral “globalism.” For proponents of the narrative, these cultural cleavages are more significant than divisions based on class or income per se. 

The geoeconomic narrative also focuses on an external threat, but of a different kind: it emphasizes economic and technological competition between the United States and China as great-power rivals. Although both countries have gained from economic globalization in absolute terms, in relative terms China has closed the gap on America. Concerns about the interplay of economic security and national security have waxed and waned over the years; the United States treated the Soviet Union as a security threat during the Cold War and Japan as an economic competitor during the 1970s and 1980s. But the United States increasingly perceives China as both an economic competitor and a security threat, lending the geoeconomic narrative an urgency that it did not have during the Cold War. Although the narrative features most prominently in America, it is gaining ground in other Western countries as well, where China is increasingly regarded as a strategic competitor and a potential security threat rather than merely as an economic partner. Instead of applauding trade and investment as enhancing economic welfare and increasing prospects for peace, the geoeconomic narrative emphasizes the security vulnerabilities created by economic interdependence and digital connectivity with a strategic rival. 

Although both the right-wing populist and geoeconomic narratives emphasize external, horizontal threats, they differ in key ways. The former focuses on cultural as well as economic losses, while the latter is more mindful of relative economic power of countries and its capacity to undergird political and military power. The former primarily laments the loss of the manufacturing jobs of the past, while the latter focuses on winning the race in the technologies of the future, such as fifth-generation (5G) networks and artificial intelligence. And the former targets Polish plumbers who undercut local workers, whereas the latter casts a critical eye on Chinese scientists and engineers who might steal Western technology. 

The bottom face of the cube: everybody loses

The narratives we have discussed so far assume either that everyone wins from economic globalization (the top face) or that economic globalization produces both winners and losers (the four faces on the sides). By contrast, on the bottom face of the Rubik’s cube, we locate narratives that see all of us as at risk of losing from economic globalization in its current form. These narratives portray economic globalization as a source and accelerator of global threats, such as pandemics and climate change. Some of these narratives focus on how global connectivity increases the risk of contagion, both of the viral and economic kind. Others warn that the skyrocketing carbon emissions associated with the global diffusion of Western patterns of production and consumption are endangering both people and the planet. These global threats narratives emphasize our common humanity; their proponents call for global solidarity and international cooperation in the face of common challenges. 

Proponents of the global threats narratives start from the observation that everything is interdependent: our economic systems are located within our social and political systems, which in turn are embedded within our environmental ecosystems and planetary boundaries. According to these narratives, we need to redefine the goals of our economies to enable individuals and societies to survive and thrive within the limits of our planet. This can mean emphasizing resilience over efficiency in our supply chains and sustainability over profit-seeking in our economies. Unless we fashion a more sustainable and resilient global economy, they warn, we run the risk that everybody will lose. We will not lose equally, however: some people and some countries will suffer first or worst. Proponents of these narratives argue that we need to be attentive to these distributional questions, either for moral reasons (because we have an obligation to look out for those who are most vulnerable) or for instrumental reasons (because no one will be safe until everyone is safe).

The Winners and Losers of Globalization: Finding a Path to Shared Prosperity

The Real Winners and Losers of Globalization

Branko milanovic.

It is generally thought that two groups are the big winners of the past two decades of globalization: the very rich, and the middle classes of emerging market economies.

The statistical evidence for this has been cobbled together from a number of disparate sources. The evidence includes high GDP growth in emerging market economies, strong income gains recorded for those at the top of the income pyramid in the United States and other advanced economies, as well as what seems to be the emergence of “a global middle class” and casual observations of the rising affluence of Chinese and Indians.

Until now, there was no single source from which these insights could be checked, confirmed, qualified or rejected.

However, thanks to a database of household surveys put together recently by the World Bank, we can actually find out for the first time, from a single and consistent data source, who the real winners and losers of globalization are. The results give us a much more finely grained picture of the effects of the two recent decades of globalization.

The new data set represents a compilation of household surveys from more than 120 countries for the period 1988-2008, “centered” at five-year intervals, at 1988, 1993, 1998, 2003 and most recently, 2008. Household surveys are nationally representative surveys of people’s income or consumption.

When household surveys are conducted in a sufficient number of countries, they can be combined to produce a true depiction of global income distribution. Of course, for them to be comparable also requires adjusting incomes that are reported in national currencies. This adjustment is  done by converting incomes into so-called dollars of equal purchasing parity (PPP dollars) such that with $PPP 1 dollar, a person can purchase the same amount of goods and services in any part of the world.

Who gained and who lost?

What parts of the global income distribution registered the largest gains between 1988 and 2008? As figure below shows, it is indeed among the very top of the income distribution and among the emerging global middle class, which includes more than a third of the world’s population, that we find most significant increases in per capita income.

The top 1% has seen its real income rise by more than 60% over those two decades. (All the amounts are expressed in 2005 international dollars.)

An even greater increase was realized by those parts of the global income distribution that lie around the median: almost 80% real increase at the median itself, and some 70% around it.

It is there, between the 50th and 60th percentile of global income distribution (which in 2008, includes people with annual after-tax per capita incomes or consumption between 1,100 and 1,600 international dollars) that we find some 270 million Chinese, 40 million Indians, 35 million Indonesians, and about 20 million people each from Brazil, Egypt and Mexico.

The surprise is also that those at the bottom third of the global income distribution have also made significant gains, with real incomes rising between more than 40% and up to  60%. The only exception is the poorest 5% of the population whose real incomes have increased by 16% only. These numbers however should be taken with a grain of salt because among the very poor, we deal with people whose incomes are less than $PPP 300 and small variations in sample composition and measurement, can change the results by amounts of 10 or 20 dollars, per year, which, translated in percentages, may produce large gains or losses. So, the best we can say is probably that the very bottom of the global income pyramid remained about as equally poor in 2008 as twenty years earlier.

But more substantial and thus more certain increases in income among those slightly less poor allowed the proportion of what the World Bank calls the absolute poor (people whose per capita income is less than 1.25 PPP dollars per day) to decrease from 44% to 23% over approximately the same 20 years.

The biggest “non-winner” (other than the very poorest 5%) of globalization were those between the 80th  and 90th  percentile of  the global income distribution whose real income gains were in single digits. These people, who can be called a global upper-middle class, include many from former Communist countries and Latin America, as well as citizens of rich countries with stagnant real incomes.

How global distribution changed

Global income distribution has thus changed in just two decades, from the fall of the Berlin Wall to the global financial crisis, in a most remarkable way. Without exaggeration, it is probably the profoundest global reshuffle of people’s economic positions since the Industrial revolution.

Very interesting developments happened among the top quartile: the top 1%, and somewhat less so the top 5%, gained significantly, while the next 20% in the global income distribution either gained very little or faced almost stagnant real incomes.

This created polarization among the richest quartile of the world’s population, allowing the top 1% to pull ahead of the other rich and to reaffirm both in fact and in public perception its preponderant role as winners of globalization. The fact that more than 1/4 of absolute income gains went to the top 1%, and more than ½ to the top 5%, probably further reinforced that perception.

Who are the people in the global top 1%, those with 2008 after-tax per capita income above $PPP 42,000? There we find the richest 12% of Americans -- more than 30 million people -- and between 3% and 6% of the richest British, Japanese, German and French. As well as 9% of the richest Singaporeans and Swiss.

It is a “club” still overwhelmingly composed of the “old rich” world of Western Europe, North America and Japan. The richest 1% of the embattled Euro countries of Italy, Spain, Portugal and Greece are all part of the global top 1 percentile. However, the richest 1% of Brazilians, Russians and South Africans belong there, too.

To which countries and income groups do the winners and losers belong? Consider the people in the median of their national income distributions in 1988 and 2008.

In 1988, a person with a median income in China was richer than only 10% of world population.

Twenty years later, a person at that same position within Chinese income distribution, was richer than more than one-half of world’s population. Thus, she leapfrogged over approximately 40% of people in the world.

For India, the improvement was more modest, but still remarkable. A person with a median income went from being at the 10th percentile globally to the 27th, while a person at the same income position in Indonesia went from the 25th to 39th global percentile.

An average person in Brazil gained, too. She went from being around the 40th percentile of global income distribution to about the 66th.

The position of large European countries and the United States remained about the same, with median income recipients there in the 80s and 90s of global percentiles.

So who lost between 1988 and 2008? Mostly people in Africa, some in Latin America and former Communist countries.

In 1988, an African with the median income of the continent had an income equal to two-thirds of the global median. In 2008, that proportion had declined to less than one-half.

These results show a remarkable change in the underlying global income distribution. We now live in a world with a bulge around the median with significantly rising incomes for the entire second third of global income distribution. That is the new “aspiring” global middle class.

We also see growing wealth and (probably) power of those at the very top and, remarkably, stagnant incomes for both the very poorest and the people just below the richest 1%

If emerging market economies continue to post similar growth rates over the next 20 years, we might see the bulge in the figure moving rightward. In that case, people from those countries would enter the ranks of the global upper middle class. And many of them would make it to the top 1-5 percent.

A longer version of this post appeared on The Globalist . Also, follow the discussion about this on From Poverty to Power .

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A logjam of container ships in the so-called global supply chain, moored off Long Beach, California, on 9 October 2021. Photo by Tim Rue/Bloomberg/Getty

The biggest picture

No wonder we cannot agree on how globalisation works and whether it’s a good thing. all the stories we have are flawed.

by Anthea Roberts & Nicholas Lamp   + BIO

Isaiah Berlin understood the parable of the fox and the hedgehog – ‘the fox knows many things, but the hedgehog knows one big thing’ – to illustrate two styles of thinking. Hedgehogs relate everything to a single vision, a universally applicable organising principle for understanding the world. Foxes, on the other hand, embrace many values and approaches rather than trying to fit everything into an all-encompassing singular vision.

Debates about economic globalisation are often dominated by hedgehogs – actors who interpret and evaluate the dynamics and consequences of globalisation through a single lens. Take the narrative that dominated the debate about globalisation in the West from the collapse of the Soviet Union until the global financial crisis in 2008. On this view, economic liberalisation promised to grow the pie so that everyone – developed and developing countries, rich and poor – would be better off. This confident perspective touted free trade as a win-win outcome that would create peace and prosperity for all.

In recent years, this view has been challenged by a variety of narratives that stress that economic globalisation produces many losers. Right-wing populists lament the decay of America’s rust belt, warning of the need to protect the native working class against the offshoring of manufacturing jobs and the onshoring of immigrants. Left-wing populists and critics of corporate power protest that globalisation’s advantages often accrue mainly to rich people and powerful multinationals, hollowing out the middle class. The COVID-19 pandemic and the climate crisis have heightened anxiety about the resilience and sustainability of our economies.

We are at a critical juncture: a relatively long period of stability in mainstream thinking about economic globalisation has given way to a situation of dramatic flux. During such periods, narratives assume particular relevance because they offer new ways for actors to understand what the problem is and what should be done about it.

The interplay of different narratives could be the starting point of a nuanced appraisal of the complexities, uncertainties and ambiguities of economic globalisation. More often, however, debates about economic globalisation devolve into stand-offs among hedgehogs who emphasise the validity of their perspective while seeking to expose their opponents as economically illiterate, politically dangerous or morally bankrupt.

A prime example of such a standoff was the reaction by establishment figures to the critiques of free trade and immigration that animated Donald Trump’s presidential campaign in the United States and the Brexit movement in the United Kingdom. Many curled up into a ball of spikes, disparaging opponents for their stupidity and self-interest. But proponents of the insurgent narratives have been no less at fault: they have drawn much of their energy from their ability to present a radically different perspective, often at the cost of nuance and a willingness to compromise.

None of this is to say that the perspectives brought to light by the hedgehogs are not valid and valuable. Some of them harness the empirical and theoretical tools of particular academic disciplines to build our knowledge of the global economy, polity and environment. Others articulate a particular value system and spell out its ethical ramifications for organising the global flow of goods, people, capital, data and ideas. Each of these perspectives expresses a different viewpoint and sheds light on a piece of the puzzle.

Yet debates dominated by hedgehogs hinder us from moving forward. These debates tend to oscillate between two extremes. On some issues, proponents of different narratives seem to inhabit different worlds, with little or no interaction (silos). Some know a lot about inequality, for instance, but little about great-power competition or how the two might relate. At other times, the advocates of rival approaches clash forcefully, but the sides are so deeply entrenched in their own worldviews that genuine dialogue seems impossible (polarisation).

In order to grapple with complex issues such as economic globalisation, we need to develop more fox-like approaches that seek to overcome the silos and polarisation that are the hallmark of contemporary debates. The fact that hedgehogs have been dominating public debates about economic globalisation not only impedes our understanding of complex phenomena but makes it difficult for us to appreciate and accommodate the different values at stake. It is time for a more foxy approach.

T he first step to developing such an approach is to understand what the hedgehogs have been saying about economic globalisation. In our book Six Faces of Globalization: Who Wins, Who Loses, and Why It Matters (2021), we identify six main narratives driving debates in the West about the virtues and vices of economic globalisation. These narratives provide the storylines through which people perceive reality and communicate their understandings and values. They fall into three broad categories: win-win, win-lose and lose-lose narratives.

The establishment narrative has been the dominant frame for understanding economic globalisation in the West over the past three decades. It sees globalisation as an unstoppable but overwhelmingly beneficial force. It focuses on rising productivity and declining poverty rates, emphasising economic efficiency and the virtues of countries and companies playing to their comparative advantage. This ‘everybody wins’ view has been espoused by many institutions that serve as the guardians of the international economic order, such as the World Bank, the International Monetary Fund and the World Trade Organization.

The establishment narrative has now been dislodged from its dominant position. In the decade following the global financial crisis, previously marginalised narratives have made their way to the centre of political debate. While the establishment narrative assumes that everyone wins, four other hedgehog narratives argue that economic globalisation produces both winners and losers. Where they differ is in who wins and who loses, what causes these distributive outcomes, and why they are problematic.

On the Left of the political spectrum, we see two narratives that emphasise how gains from economic globalisation have flowed upward to rich individuals and multinational corporations. On the Right of the political spectrum, we find two narratives that see the gains from globalisation flowing sideways to foreigners and foreign countries.

The Left-wing populist narrative focuses on the ways in which national economies are rigged to channel the gains from globalisation to the privileged few. Even as countries have seen their economies grow, many have also experienced a sharp increase in inequality, with a growing divide between rich and poor and a hollowing-out of the middle class. Whereas some proponents point the finger at chief executive officers, bankers and billionaires (the top 1 per cent of the global population), others take aim at the educated professional class and the upper middle class more broadly (the top 20 per cent). Either way, the poor and working class have lost out.

Proponents of the related corporate power narrative argue that the real winners from economic globalisation are multinational corporations, which can take advantage of a global marketplace to produce cheaply, sell everywhere, and pay as little in taxes as possible. These companies use their power to shape international rules in areas that advantage them, such as trade and investment, while lobbying against effective international cooperation on subjects that might disadvantage them, such as taxation. According to this narrative, economic globalisation produces many losers – workers, communities, citizens, governments – but only one winner: corporations.

The sixth hedgehog narrative argues that we are all at risk of losing from economic globalisation

The Right-wing populist narrative shares with the Left-wing version a deep distrust of elites, but the two narratives part company on what they blame the elite for: whereas Left-wing populists fault the elite for enriching themselves, Right-wing populists deride the elite for failing to protect the hardworking native population from threats posed by an external ‘other’. The Right-wing populist narrative thus has a strong horizontal us-versus-them quality, whether expressed through concern about protecting workers from the offshoring of jobs or guarding them against an inflow of immigrants who might compete for those jobs, live off the welfare system, or threaten the native community’s sense of identity.

The geoeconomic narrative focuses on a different kind of external threat: the economic and technological competition between the US and China as great-power rivals. Although both countries have gained from economic globalisation in absolute terms, in relative terms China has closed the gap on the US. The US increasingly perceives China as both an economic competitor and a security threat, lending the geoeconomic narrative an urgency that it did not have during the Cold War. Instead of applauding international trade and investment as enhancing economic welfare and increasing prospects for peace, the geoeconomic narrative emphasises the security vulnerabilities created by economic interdependence and digital connectivity with a strategic rival.

Sometimes these different narratives overlap. For instance, many members of the Trump administration embraced both the Right-wing populist narrative and the geoeconomic one, while presidential candidates such as Elizabeth Warren embodied both the Left-wing populist critique and the corporate power one. At other times they diverge. For instance, the protests against the Transatlantic Trade and Investment Partnership in Europe were much more strongly motivated by the corporate power narrative than the Left-wing populist one. Different narratives focus on different concerns. While the Right-wing populist narrative laments the loss of the manufacturing jobs of the past, the geoeconomic one focuses on winning the race in the technologies of the future, such as fifth-generation (5G) networks and artificial intelligence.

These win-win and win-lose narratives differ from the sixth hedgehog narrative, which argues that we are all at risk of losing from economic globalisation in its current form. This lose-lose narrative portrays economic globalisation as a source and accelerator of global threats such as pandemics and the climate crisis. Some versions focus on how global connectivity increases the risk of contagion of both viruses and supply chain shocks. Others warn that the skyrocketing carbon emissions associated with the global diffusion of Western patterns of production and consumption are endangering both people and the planet.

This global threats narrative emphasises our shared humanity; its proponents call for global solidarity and international cooperation in the face of common challenges. They argue that we need to redefine the goals of our economies to enable individuals and societies to survive and thrive within the limits of our planet. This can mean emphasising resilience over efficiency in our supply chains and sustainability over profit-seeking in our economies. Without change, they warn, we run the risk that everybody loses – though some people and countries are likely to lose first and worst.

T rained in a world that values hedgehogs, the most common question we encountered in our research was ‘So, which narrative is correct?’ We also found that proponents of the individual narratives were quick to point out the ways in which their narrative was right and others wrong – a classic hedgehog move. Both approaches missed a deeper point.

As with any partial representation of a more complex reality, each narrative contains some truth but does not tell the whole truth. Each narrative highlights important aspects of the process of economic globalisation and expresses values that are deeply held by significant numbers of people. Each narrative reveals and obscures. Rather than defending one narrative as the correct one, we need to adopt more fox-like approaches that embrace multiple perspectives, holding them in tension and combining their insights.

At the analytical level, adopting a more fox-like approach helps in developing better understandings of complex issues. As the political scientist Philip E Tetlock explains in his book Expert Political Judgment (2005), what experts think matters far less than how they think. Tetlock finds that hedgehog-like thinkers who know one big thing are often overly confident and inclined to (over)extend the explanatory reach of their expertise into new domains. Yet they are often far less accurate in their predictions than fox-like thinkers who stitch together diverse sources of information to produce more provisional conclusions.

Take the backlash against the French president Emmanuel Macron’s diesel tax as an example. From the perspective of the establishment and global threats narratives, the tax made perfect sense: making fossil fuels more expensive is a market-based way of reducing carbon emissions. The policy failed, however, because Macron did not consider how the tax would appear from the populist perspectives that fuelled the ‘yellow vest’ protests. Right-wing populists saw the tax as an affront to rural ways of life by city-dwelling elites, while Left-wing populists noted how it burdened poorer populations without equally targeting the habits of the rich, such as flying.

If the art of advocacy lies in convincing others to view the world through the lens of your preferred narrative, the art of policymaking requires examining issues through diverse lenses. The question of whether a country should use the telecommunications company Huawei for its 5G networks is not just about whether Huawei’s products are cheap, reliable and economically efficient; it is also about whether a country is comfortable entrusting its critical infrastructure to a company that is subject to the Chinese government in an era of increased security concerns and geopolitical rivalry. Similarly, understanding the spread and impact of the virus SARS-CoV-2 requires an appreciation of the systemic risks arising from global connectivity as well as the variability resulting from domestic inequalities.

The synthesising mind takes in information from disparate sources, knitting it together into a more coherent whole

A fox-like approach can also help overcome some of the mutual incomprehension that plagues economic debates. A fox-like approach encourages us to step into the shoes of the proponents of narratives with which we disagree. It does not require us to adopt their narrative – we may still contest some of the narrative’s empirical claims, value judgments and policy prescriptions. But if we attempt to see economic globalisation through the lens of another narrative in a charitable and empathetic way, we will gain a better understanding of that narrative’s internal logic, appeal and prescriptions, and a clearer vision of the blind spots and biases of our own preferred narratives and policy options.

To develop more fox-like approaches, we need to get better at integrative thinking. This is difficult in today’s environment. Universities typically organise their research and teaching along disciplinary lines and thereby encourage depth, specialisation and mastery over breadth, connectivity and creativity. Policymakers often work in a relatively siloed fashion as different departments take charge of a problem and keep a tight hold of the drafting pen. Yet complex phenomena such as economic globalisation involve a multitude of interconnected issues that do not fall neatly within the disciplinary and subject-matter lines along which much of our knowledge production is organised.

The Nobel Prize-winning physicist Murray Gell-Mann was of the view that: ‘In the 21st century , the most important kind of mind will be the synthesising mind.’ The synthesising mind takes in and evaluates information from disparate sources, knitting it together into a more coherent whole. The ability to hold (at least) two diametrically opposed ideas or narratives in one’s head and, instead of simply picking one, produce a synthesis that is superior to either has been found to be a common quality among exceptional business leaders. Increasingly, we are seeing trade policies in Washington, DC , Brussels and beyond that seek to integrate insights from different perspectives instead of simply championing the establishment narrative or replacing it wholesale with another narrative.

Although Trump’s defeat revived optimism among some commentators about a reset on economic globalisation, the new US president Joe Biden’s approach integrates insights from multiple narratives. Biden’s trade agenda embraces the establishment narrative’s enthusiasm for trade’s potential to generate prosperity while tempering it with a commitment to prioritising the welfare of US workers (a concern of both Right-wing and Left-wing populists), an awareness of the need for greater regulation of corporate power (including in the areas of taxation and antitrust), and a determination to compete aggressively with China economically and technologically while attempting to cooperate on global threats such as the climate crisis and pandemics. The Biden administration has continued many of Trump’s protectionist and geoeconomic trade policies, while also seeking to work with allies and reaching out to China on issues of common interest, such as the climate crisis.

Similar movements are evident in Brussels. Long a staunch proponent of the establishment narrative, the European Union has been updating its trade policy to achieve greater resilience with respect to critical goods, spearhead its own semiconductor manufacturing to protect its industrial position, and impose a carbon border adjustment mechanism to pursue greater sustainability within a global trading system. Europe is also seeking to incorporate insights from different narratives in its approach to China, with the European Commission declaring that:

China is, simultaneously, in different policy areas, a cooperation partner with whom the EU has closely aligned objectives, a negotiating partner with whom the EU needs to find a balance of interests, an economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternative models of governance.

I f we move past either/or arguments about which narrative is right, where might more integrative thinking about economic globalisation lead us? Although we do not have a definite answer, our survey of competing hedgehog narratives suggests that the debate’s centre of gravity is shifting away from the old establishment consensus in at least two respects: questions of distribution, both within and between countries, are increasingly central; and noneconomic values, whether environmental, social or security-related, are increasingly qualifying or outweighing a primary focus on efficiency and growth.

When it comes to distributive questions, advocates of the establishment narrative traditionally endorsed a two-step approach. The first imperative was to maximise the size of the pie by opening markets to international trade and investment. Distributional questions about how the pie was divided were left to the domestic level. Economic thinking in this mould focused on increasing efficiency so as to promote economic growth for the country as a whole. A growing economy meant that the winners could compensate the losers and still be better off. Whether the winners actually did compensate the losers was a matter for messy politics rather than elegant models.

A common theme that emerges from the other narratives is that distribution is highly significant. It is not enough to increase the size of the pie; the way the pie is sliced is just as important, and sometimes more so. Left-wing populists zero in on the distribution of wealth and opportunity among socioeconomic classes within a particular country. For them, growth is pointless if it is not broadly shared. The Right-wing populist narrative argues that distribution also matters horizontally in geographic space. It contrasts dynamic cities that move ahead with rural communities that decay when factories close.

Relative gains may also be important at the international level. The geoeconomic narrative notes that, although China and the US both gained from economic globalisation in absolute terms, China’s relative success in closing the gap has sharpened strategic competition between the two. Instead of producing a win-win situation that increased peace and prosperity for all, the changing global balance of power now threatens peace and prosperity. Distributional questions, both within and among countries, are becoming central to policymaking.

We need to find ways to more openly discuss and balance different values in our pluralistic societies

Another common theme in the narratives pushing back against the free-trade orthodoxy is the focus on values other than economic efficiency, whether they be human wellbeing, environmental protection, community cohesion or national security. The establishment narrative tends to either ignore nonmonetary values or treat them as reducible to economic measures. The challenger narratives argue that overall ‘welfare’ cannot be represented solely in economic metrics; sometimes other values are more important than wealth and might not be commensurable with money. Even if disability payments, welfare handouts and cheaper products mean that laid-off manufacturing workers are materially better off than their parents, what they have lost in pride and status will likely outweigh any material gains.

The idea that values other than wealth maximisation matter is an essential element of the global threats discourse. Environmentalists and their allies ask us to recast economic growth as a means to an end rather than an end in itself. They remind us that not all economic growth contributes to human wellbeing, especially when it is pursued without respect for planetary boundaries. ‘Today we have economies that need to grow, whether or not they make us thrive,’ notes the economist Kate Raworth ; ‘what we need are economies that make us thrive, whether or not they grow.’

Noneconomic values also animate the other challenger narratives. The Right-wing populist narrative prizes the ties that bind families, communities and nations, and it values tradition, stability, loyalty and hierarchy. Its advocates see work as important not just for providing an income but also for conferring a sense of identity, self-worth and dignity, which in turn helps in building stable families and communities. Even if trade encourages greater efficiency and cheaper production, it can damage the social fabric, particularly when change is rapid and highly concentrated in specific geographic regions or industrial sectors.

Sometimes economic growth is helpful in achieving these noneconomic goals; sometimes it stands in tension with achieving them. Proponents of these nonestablishment narratives concur that we cannot focus solely on growing the size of the pie or even on dividing it fairly – we must also acknowledge that the things that we value might not form part of a single pie. This conclusion means that we need to find ways to more openly discuss and balance different values in our pluralistic societies. As the philosopher Michael Sandel explains :

Liberal neutrality flattens questions of meaning, identity, and purpose into questions of fairness. It therefore misses the anger and resentment that animate the populist revolt; it lacks the moral and rhetorical and sympathetic resources to understand the cultural estrangement, even humiliation, that many working-class and middle-class voters feel; and it ignores the meritocratic hubris of elites.

T here is no one view that accurately captures the virtues and vices of globalisation. Instead of buying into the worldview of a single hedgehog narrative, we need to develop more fox-like ways of thinking about complex issues. This approach requires an ability to appreciate the insights of and values held by proponents of different narratives, as well as a culture of respectful debate where different tradeoffs are openly assessed. How should we weigh tradition against economic progress, the wealth of the nation against the wellbeing of particular regions or groups, and the importance of nationality against the value of global and cosmopolitan identities, for instance?

Debates about economic globalisation need to move past either/or battles about which narrative is right. The ability to integrate insights from different narratives and a willingness to explore synergies and navigate tradeoffs will become hallmarks of successful policymaking. Efficient supply chains are no longer good enough; we need them to be secure and resilient as well. Climate policy must not only be economically and technologically feasible; it must also be equitable and inclusive. The choice is not US-China cooperation, competition or confrontation, but how to navigate all three in different domains and at different times.

Looking at an issue through many narrative lenses requires a lot from us, both cognitively and normatively. But it is also the best chance we have of devising approaches that respond to the kaleidoscopic complexity of today’s challenges.

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Winners and Losers over Two Centuries of Globalization

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• Jeffrey G. Williamson  

Part of the book series: Studies in Development Economics and Policy ((SDEP))

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The world has seen two globalization booms over the past two centuries, and one bust. The first global century ended with the First World War and the second started at the end of Second World War, while the years in between were ones of anti-global backlash. This chapter reports what we know about the winners and losers during the two global centuries, including aspects almost always ignored in modern debate — how prices of consumption goods on the expenditure side are affected, and how the economic position of the poor is influenced. It also reports two responses of the winners to the losers’ complaints. Some concessions to the losers took the form of anti-global policy manifested by immigration restriction in the high-wage countries and trade restriction pretty much everywhere. Some concessions to the losers were also manifested by a ‘race towards the top’ whereby legislation strengthened losers’ safety nets and increased their sense of political participation. The chapter concludes with four lessons of history and an agenda for international economists, including more attention to the impact of globalization on commodity price structure, the causes of protection, the impact of world migration on poverty eradication and the role of political participation in the whole process.

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Williamson, J.G. (2005). Winners and Losers over Two Centuries of Globalization. In: Wider Perspectives on Global Development. Studies in Development Economics and Policy. Palgrave Macmillan, London. https://doi.org/10.1057/9780230501850_6

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Winners and Losers: Perspectives on Globalization from the Emerging Market Economies

Subscribe to the economic studies bulletin, carol graham carol graham senior fellow - economic studies.

September 1, 2001

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In the past few years, routine meetings on the operations of the international financial institutions or on the future of free trade have filled the streets of usually peaceful cities like Seattle, Prague, and Quebec with riot police, tear gas, and protesters lashing out at globalization. The protests raise immediate and pressing logistical questions for local officials, but they also pose a more fundamental question: do the protesters represent wider popular sentiment against globalization and market policies in the world’s developing countries? Are they a sign that globalization is facing a backlash in the developing world?

The protesters claim that globalization is bad for poor people in poor countries. A large body of evidence, however, suggests the opposite—though clearly globalization can result in unsettling experiences for many who live in the developing world. My recent research with Nancy Birdsall and Stefano Pettinato suggests that globalization has brought substantial benefits and opportunities for upward mobility for many low-income individuals in the emerging economies. Yet these same opportunities entail new vulnerabilities and new risks for others.

Ironically, while the protesters focus on the plight of the poor, the groups most dissatisfied with globalization in the developing countries themselves tend to be closer to the middle of the income distribution than to the bottom. Their dissatisfaction does not portend a looming and inevitable backlash against globalization, but it does suggest that policymakers in these countries should pay attention to the insecurities of the middle class as well as those of the poor.

A genuine backlash against globalization would not take the form of demonstrations on the streets of D.C. or Seattle. Rather, it would materialize in ballot boxes in countries like Poland or Peru. In Latin America, which has led the world in implementing market reforms, many countries that once seemed modelperformers are now facing economic and political uncertainty. Argentines, for example, who were recently threatened with possible spillover effects from the economic crisis in Turkey, are facing increasing questions about the sustainability of their own currency regime, which has been central to their macroeconomic stability for more than a decade. Will voters in Latin America turn against markets and integration with the world economy?

The answer is “probably not.” In Latin America, despite widespread debate over making the market model more equitable and efficient, only one political candidate, Hugo Chavez, has so far been elected to office promising to reverse integration into global markets—and that was in Venezuela, where reform was still incomplete. But matters are far from settled. In elections last June in Peru, one of the countries that has gone furthest in implementing market reforms, Alejandro Toledo ran on a pro-market platform and barely defeated former president Alan Garcia, who gained notoriety in the late 1980s by rejecting market principles—Toledo’s margin of victory was less than 5 percent.

Who Wins and Who Loses?

Market reforms—in particular, establishing macroeconomic and fiscal stability and liberalizing trade regimes—are a prerequisite for integrating developing nations into the global economy. In Latin America, the turn to the market has delivered large—and tangible—benefits for a region plagued with high inflation, economic instability, and daunting external debt. Countries that have embraced reform have gained control of inflation, reestablished stable (if not high) growth, and liberalized and expanded the diversity of trading regimes. Most have also privatized loss—making public enterprises and insolvent social security systems.

Although market reforms are often viewed as being harsh on the poor, in reality the effect can be quite positive. Because the poor are least able to protect themselves from high inflation, for example, its elimination is particularly beneficial for them. And in many countries, market reforms have also reoriented public spending to the poor.Before reform, social spending went disproportionately to social security systems that covered limited and relatively privileged parts of the labor force, while basic social services, such as primary health and education, were severely underfunded.

Market reforms can also remove economic distortions that block the productive potential of the poor. Removing such distortions as rationed credit (because of negative real interest rates) and rigid and overprotective labor regulations that discourage hiring have helped the poor in many developing countries, as evidence from Chile, Mexico, and Peru suggests.

The same reforms that have enabled many of the poor to move well up the income distribution ladder, however, have made people somewhat higher up that ladder newly vulnerable. Many who once enjoyed middle-class status and held secure public-sector jobs have fallen into or near poverty. Relative mobility trends in reforming countries can be surprisingly volatile. Over a 10-year period many more people in Peru will move up—and down—several income quintiles than will people in the United States.

If market reforms have had different effects on people in different parts of the income distribution, what effect have they had on inequality? As our own research, building on the work of several other scholars, has shown, inequality can increase even in countries where average incomes have risen and poverty has fallen. And, indeed, aggregate measures report a mixed effect, with inequality going down in some emerging market countries and increasing slightly in others.

One trend driving the increase in inequality has been a recent upsurge in the rewards to skilled labor. Although economists had predicted that open trade would reward unskilled labor, which is in ample supply in Latin America, the greatest rewards have gone to skilled labor, which is scarce.

A related trend is top-driven inequality: vast wealth among those at the top of the income ladder relative to the rest of society, where income distribution is more equal. According to an Inter-American Development Bank study by Miguel Szekely and Marianne Hilgert, the wealthiest 10 percent of individuals in many Latin American countries earn roughly 3 times what those in the next decile earn, compared with a roughly 1.5 to 1 ratio in the United States.

One cause of top-driven inequality is the rising wage premium to educated workers. Another may be a possible increase in wealth at the top, as more open capital markets enhance opportunities for high returns. In addition, taxes on mobile capital are probably declining, while in developing countries, shallow financial sectors and underdeveloped capital markets may be limiting investment opportunities for small savers and borrowers.

The uneven benefits of globalization and market reforms no doubt explain why public opinion in the developing nations is so mixed. Those who see themselves as losers are not necessarily the poor, but rather newly vulnerable members of the middle class who perceive that gains from market reforms have gone disproportionately to the top of the income distribution.

Frustrated Achievers

Most research on subjective well-being finds that once people have reached a certain income level, their sense of well-being is determined by relative rather than absolute income. Except for the very poorest countries, these findings hold across countries, regions, and development levels. My own survey research, conducted jointly with Stefano Pettinato, generally supports these findings.

What explains these negative perceptions? In Peru, the frustrated achievers had average income, but were more urban and older than nonfrustrated upwardly mobile respondents. In Russia, they had slightly lower than average income—and also more income volatility—than their counterparts who were more content. For the most part, they were not the poorest in the sample, but rather tended toward the middle of the distribution. In Peru, while poorer respondents were much more likely to answer that their economic condition was unchanged, those in the middle were much more likely to say that it was worse.

The implications for public support for globalization are clear. In a regionwide public opinion survey of Latin America, respondents who were more satisfied with their lives were, on average, more likely to favor the market and to be satisfied with democracy. The surveys in Russia yielded similar findings. In both Russia and Peru, the frustrated achievers were less satisfied with their jobs and more critical about their economic situation vis-à-vis others in their country. These frustrations, which may influence future economic and political behavior in the emerging economies, must be addressed.

Opportunity and Insecurity

Policymakers in emerging market countries could use three strategies to reduce insecurity and enhance upward mobility—not only among the middle class, but alsoamong the poor. The first would be to make social services more widely available. Education policies, especially, could give a broader section of society access to jobs in the high-skill economic sectors. The second strategy would be to remove distortions in markets and in government policies that block the productive potential of low-income groups. Among these distortions I include excessive inequality. And the third would be to make safety nets and other forms of unemployment insurance more broadly available.

The first and most obvious way to enhance the mobility and opportunity of both the poor and the middle class is to improve access to good quality postsecondary education, including vocational education. Such a policy shift, however, will take time to bear fruit. It will also take sustained political commitment, institutional development, and substantial resources.

Fundamental to making better education more widely available is a more comprehensive social contract for delivering essential social services in general. The world’s advanced economies have vigorously debated the merits of targeted versus more universal social welfare policies (with supporters of universal policies arguing that tightly targeted policies cannot sustain the political support needed to preserve public funding). Meanwhile, many developing countries that have turned to the market have increased targeting of public social spending and reduced absolute poverty, even during times of fiscal austerity. At the same time, shifts in the rewards to different education and skill cohorts, coupled with cuts in the size and scope of public services, have led to a perception and often a reality of increased insecurity for groups in the middle of the income distribution. It is time to revisit the targeting debate. At least some targeting is usually desirable when public resources are limited. Nevertheless, it is necessary to craft a broader and more politically sustainable social contract, which includes middle-income groups as well as the poor.

Policymakers should aim to increase not only the supply of quality education, but also the demand for it. A wide body of literature, including work by economists Steven Durlauf and George Akerlof, has shown how inequality patterns can be perpetuated by persistent social norms and low expectations. In societies where the poor have no tradition of reaching higher-level education, policymakers should encourage low-income people to invest in their children’s future.

The second policy strategy is to address distortions in markets and failures in government policies. Many countries in the developing world, particularly in Latin America, have greatly improved their macroeconomic frameworks and reduced such distortions. Yet removing distortions alone is not enough. Merely replacing poorly performing public monopolies with private ones, as some countries have done, is unlikely to diminish inequality or to provide new opportunities for the poor or near poor. Adequate regulatory policies, which level the economic playing field for participants of all income levels, are essential, as are supply-side policies that facilitate the participation of the poorest citizens.

The same policy package should address inequality. Economists have shown that excessive concentration of income and assets impedes economic growth. And my recent research suggests that high inequality has additional costs in that it creates frustrations in even the most upwardly mobile individuals. These frustrations, in turn, may erode political support for market-enhancing policies that deliver sustained growth and also cut poverty.

A third essential strategy is to provide adequate safety nets. The lack of reliable safety nets can itself result in market distortions, encouraging workers to minimize risk and guarantee job security through whatever mechanisms are available, even extremely inefficient ones such as overly rigid labor laws. And the insecurity resulting from inadequate safety nets in the face of economic volatility and changing rewards to labor sectors is surely one cause of the frustrations of our achievers.

Two kinds of safety nets are necessary. One is social insurance, such as unemployment insurance, which encourages workers to try to get ahead by protecting them from the risk of income loss caused by macroeconomic volatility and other economic shocks. The second type of safety net protects the poorest who fall behind because of low skills or because poor health and other circumstances keep them from participating even in the low-skilled sector of the economy. This issue has received attention, but usually in the context of fiscal adjustments. Policymakers must develop more permanent institutions that can expand and contract as needed and provide a buffer at times of cyclical fluctuations and during downturns caused by externally driven shocks. They must also do more to manage macroeconomic volatility.

Averting Backlash

Globalization and the turn to the market have clear benefits for developing countries, both in terms of aggregate growth and poverty reduction and in terms of mobility and opportunity for low-income people. Yet new opportunities have come hand-in-hand with new vulnerabilities. Not surprisingly, public opinion about globalization and market reforms is mixed. While the street protests in the industrialized countries focus on the poor, in the developing countries people in the middle strata seem as vulnerable if not more so and also more negative in assessing their progress with the turn to the market.

That those negative perceptions exist does not mean that a backlash against globalization is inevitable. At this juncture most publics seem to be aware that self-imposed isolation from the rest of the world has high costs. Yet policymakers must address the causes of these negative perceptions—precisely so that they do not become the source of a backlash.

Reducing insecurity and distributing the benefits of reform more equitably could go a long way toward building broader and more sustainable support for continuing ,arket policies. And persuading poor people in poor countries that opportunities exist will make them much likely to invest in their children’s education—and therefore in their future in an integrated glorabl economy.

Emerging Markets & Developing Economies

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September 18, 2024

Vera Esperança Dos Santos Daves De Sousa, Landry Signé

September 4, 2024

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August 29, 2024

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Article Contents

1 introduction, 2 narrative analysis, 3 lamp’s three narratives re-labelled, 4 why do a narrative analysis.

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How Should We Think about the Winners and Losers from Globalization? A Reply to Nicolas Lamp

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Bernard Hoekman, Douglas Nelson, How Should We Think about the Winners and Losers from Globalization? A Reply to Nicolas Lamp, European Journal of International Law , Volume 30, Issue 4, November 2019, Pages 1399–1408, https://doi.org/10.1093/ejil/chz070

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How should we think about the winners and losers from globalization? What role can narrative analysis play in doing so? We argue that to be useful, identifying politically relevant narratives on the distributional effects of globalization, and the role played by trade agreements in fostering such effects, must have an empirical basis. Characterizing different narratives and inferring from each the implications for the (re-)design of international agreements without analysis whether the suggested policy reforms will help losers from globalization does not advance matters. Effectively employed, narrative analysis can extend our knowledge of the politics of trade and policy towards globalization more generally. To do so, it must have an analytical foundation, centre on the relationship of the narrative to the facts, ask which narrative is more persuasive based on empirical evidence and assess whether inferred policy implications will address the core issues of concern to those who employ the narrative.

We tell ourselves stories in order to live. – Joan Didion, ‘The White Album’

In his article in this issue, Nicolas Lamp argues that there are three answers to the question ‘how should we think about the winners and losers from globalization?’ suggested by three different narratives: a so-called ‘Trump narrative’, an ‘establishment narrative’ and a ‘critical narrative’. 1 In presenting the narratives, Lamp takes no view on their merits; his purported goal is simply to characterize what he regards as salient narratives and infer from each the implications for the (re-)design of international economic agreements. In this commentary, we take issue with the approach taken to his research question. We do so as international economists. Before proceeding, we briefly characterize some differences in the approaches taken by economists and lawyers on such policy questions since we believe these are important in understanding our critique of the article.

International trade lawyers and economists are both interested in understanding and addressing the perceived undesirable social outcomes that accompany globalization (which we understand as the international integration of markets in what follows – that is, economic openness). There has been extensive research and analysis by economists that investigates the effects of economic openness and international cooperation (trade agreements). This shows that integration (openness) boosts gross domestic product and average per capita incomes and that there are distributional effects, both within and across countries. The latter is particularly salient from a global equity perspective; one of the major consequences of globalization has been to reduce cross-country wealth disparities and absolute poverty in numerous low-income countries.

International legal scholarship on the economic and social dimensions of international integration has tended to centre on a human rights perspective and on using trade and other international legal frameworks to promote the justiciability of economic, social and cultural rights. The main interest of international trade lawyers is on the consistency of actions in light of some legal benchmarks – for example, national statutes or trade agreements. The question of the rationale for an adopted policy measure or its effectiveness in achieving a given goal is not a central concern. When focusing on government or private behaviour, lawyers ask whether this complies with international law and the arguments that can be (or have been) taken to the relevant tribunal(s). Insofar as current law is deemed inadequate, lawyers may suggest changes to statutes and/or trade agreements to fill the gap, but whether this will in fact serve to address a perceived problem is often a matter of presumption or assumption. Legal scholarship is not focused on identifying first-best policies or on the consideration of the trade-offs associated with alternative policies.

Economists, in contrast, tend to be concerned with tracing cause and effect. They are trained to ask ‘why’ one observes a given (undesirable) outcome – that is, to analyse the likely cause(s) – so as to be able to identify the source of a problem and target a policy response accordingly. Economists are also trained to assess the relative merits of alternative policy responses (proposals) in terms of their effectiveness and efficiency in realizing a given (political) objective and identifying the trade-offs associated with different policy options. Economists will want to see evidence that trade agreements are an important source of inequality, macro-economic imbalances, ‘unfair’ trade or whatever and that rewriting extant agreements is likely to have a significant impact in improving whatever the issues of concern are. Ultimately, economists are interested in the impact and effectiveness of policies, which calls for the empirical analysis of cause and effect.

These differences in approaches can lead to different perceptions of phenomena such as the distributional effects of globalization. International trade lawyers tend to look at this through the lens of trade treaties, without establishing whether there is a strong empirical basis for attributing distributional outcomes at a given point in time to international agreements (cooperation). A corollary is that there may be no empirical basis for suggestions to change the rules of the road embodied in a trade agreement. Whether more desirable outcomes will be (can be) achieved by reforming international agreements depends on the changes addressing the cause of an undesirable outcome. If they do not, little will be achieved.

Whether the narratives presented by Lamp are empirically founded, whether the policy implications that are attributed to each narrative will help address the central issue identified by each story or, more fundamentally, whether these policy implications would help losers is not addressed. Lamp’s approach can be regarded as one where what matters is how public opinion evaluates different narratives of globalization – that is, understanding what makes for a ‘winning’ argument. This makes it uninteresting to ask about the relationship of the narrative to the facts of the matter (the purpose of the narrative is persuasion, not analysis) and to ask which narrative is more persuasive, based on empirical evidence – the approach that would be applied by economists. By not offering a conceptual framework for evaluating the alternatives, but simply juxtaposing one against the other, the presumption is that persuasiveness will be determined in the political process of which the narratives are a part. Our bias as economists is that engaging with the question of winners and losers of globalization must involve some intellectual benchmark (conceptual framework) for evaluating alternatives. There may be some value in recounting alternative narratives about the effects of economic integration but this should not extend to an uncritical description of the suggested changes to trade agreements associated with the different narratives. Discussing whether these changes will make a difference, and, if they will, do so in more than a marginal fashion, and at what cost, seems to us (as economists) to be first-order questions that should not be ignored by analysts.

Given this brief and no doubt over-simplified characterization (hopefully, not too much of a caricature) of differences in the approaches taken by the two professions, we first describe in this comment how we perceive what Lamp does in his article and then discuss how the narratives of ‘winners and losers from globalization’ might have been analysed. The discussion proceeds in two parts: the first accepts the goal of identifying politically relevant narratives but disagrees with the presentation in Lamp’s article; the second argues that the first part of the programme (identifying narratives) is simply uninteresting without offering some kind of analysis. The first part of our critique is fully continuous with, and internal to, what we would characterize as an ‘international law’ approach. The second part is more of an ‘international economist’s’ critique and, thus, in fairness, external to Lamp’s analysis.

Virtually every branch of the humanities and social sciences contains an extensive literature, sometimes more than one, on the analysis of narrative. One minimal definition of narrative analysis involves two components: ‘(1) the events, the actions, the agents, and the objects that make up the stuff of a given narrative and (2) the shape that those events, actions, agents, and objects take when they are selected, arranged, and represented in one or another medium’. 2 For most such analysis, the second of these components has at least two elements: temporal order (stories have a beginning, a middle and an end, although this order need not be used in telling the story) and social context (to comprehend something as a narrative, we must understand the context in which it takes place). Beyond this, there are nearly as many specific developments of this approach as there are people deploying them. 3 In all of these cases, narrative analysis usually serves some analytical purpose. It is precisely to develop analyses of matters where temporal order and social context play a fundamental role that the language and tools of narrative analysis get used.

Unfortunately, Lamp uses narrative to avoid critical analysis rather than to confront it. Indeed, he explicitly eschews analysis. He identifies three narratives with a specific person (Donald Trump), an ill-defined establishment and a rhetorical position (critical). The last two labels lack clarity and may overlap. Those characterized as ‘establishment’, in fact, may be as critical of trade agreements as those mapped to the critical narrative. Trump himself is highly critical of trade agreements, but so are many mainstream trade economists. In what follows, as a first step towards greater analytical clarity, we identify each narrative with its core content or focal point: jobs, aggregate welfare and the global class struggle.

The ‘jobs narrative’ (Lamp’s ‘Trump’ narrative) emphasizes a claim about the relationship between globalization and jobs. 4 The building blocks of this narrative are: at time t 1 , specific people have specific jobs; at time t 2 , there is a globalization shock (trade or migration); and, at time t 3 , some of those specific people are no longer employed in their original jobs. None of these elements are controversial. By themselves, they do not constitute a story. We need two forms of context: positive and normative. The positive context is a causal claim that the globalization shock that precedes the job loss in fact causes the job loss. Clearly, some specific jobs are lost as a result of trade, given that resources will shift from sectors in which an economy does not have comparative advantage towards sectors in which it does. 5 What is controversial is that we can identify jobs lost as a result of globalization relative to those lost as a result of, say, technological change, demographic trends, changes in demand or shifts in production within countries as some regions or cities become more or less attractive for investors. A key device used by Lamp is to assert that such empirical identification and attribution challenges (the truth or falsity of each narrative) is simply irrelevant. What matters qua narrative then is whether or not this assertion is convincing. No evidence is offered to the effect that it is, in fact, convincing.

A trickier claim is the putatively normative one. As Lamp develops the jobs narrative, the normative claim is that workers have a right to a specific job (that is, the one they had at t 1 ). The proof of this is that people making this claim, including Donald Trump, deploy the language of theft: ‘[F]oreigners are stealing our jobs.’ However, this just seems like sloppy analysis. A ‘property right’ means something very specific, and virtually no one, at least in a market economy, believes that people have a right to a specific job. What many people do believe, though it is not clear to us that Donald Trump or any of his supporters believe this, is that working age people have a right to some job. It seems clear why Lamp likes the language of rights: it shields him from thinking about the adjustment to a shock and makes the claims of people that gain from trade strictly irrelevant. But arguing that these are not relevant considerations misconstrues the job narrative. A more plausible interpretation of the job theft talk is what economists call the ‘lump of labour fallacy’ – namely, that there is a fixed amount of work in the world. 6 If this were true, the competition over jobs would be zero-sum in nature. And, as Trump’s rhetoric often suggests, one measure of whether the economy is ‘winning or losing at trade’ is the total number of jobs. This says nothing about specific workers and specific jobs.

Instead, it is more reflective of a mercantilist logic where the ‘theft’ is from the economy as a whole. Thus, there are not ‘property rights in jobs’. We are then back to a couple of highly debatable positive claims: the lump of labour argument and whether the total number of jobs in the economy has declined as a result of trade. Lamp recognizes in passing that the total number of jobs has not fallen, as the US economy has 4 per cent unemployment, but then adds a new normative claim: that some jobs (that is, manufacturing and mining) are ‘better’ than others (services). While it is not clear how ‘better than’ works here, Lamp simply notes that it is reflected in some of Trump’s statements. To this is added a final normative claim: that foreigners (firms and/or governments) gain jobs by ‘cheating’. While China engages in practices that would be illegal in the USA, it is an open question how much these acts determine Chinese export success or what role trade agreements have played in China’s success. Lamp is uninterested in such positive questions and evaluates the normative questions only in terms of its claimed rhetorical success, for which he offers no evidence.

The aggregate welfare narrative (the ‘establishment narrative’) emphasizes short-term adjustment costs associated with aggregate gains from trade. 7 The building blocks of this narrative contain all of the elements of the jobs narrative but are embedded in a different context. This context again has positive and normative elements. The positive claim is that the job loss is transitional: post-transition, national income will exceed pre-transition national income, evaluated at world prices. 8 The normative claim is a very loose utilitarian one; if total output (income) is higher post-adjustment (the positive claim we just noted), something called ‘aggregate welfare’ must be higher. 9 As a rule of thumb, this is one claim that many economists have little difficulty accepting, but we know that it is not a strong normative claim because of transitional (short-term) unemployment and long-run income losses for some workers.

In the short run, the aggregate welfare narrative recognizes that some workers become unemployed as a result of price changes in the world economy, just as they become unemployed as a result of technological changes or demand shifts. 10 It is the movement of workers and resources into alternative employment that produces the gains from trade: the people who are producing the gains for everyone else bear the costs of adjustment. There is no coherent normative system that rationalizes this situation. 11 It is precisely this problem that underlies arguments for adjustment assistance. 12 It is widely, and correctly, noted that, in the absence of support for such displaced workers, the case for trade liberalization is considerably weakened. Once the economy has adjusted, as the US economy has surely done to the China shock, efforts to reverse the effects of the shock will impose adjustment costs again, though presumably on a different group of people. How one is supposed to weigh those competing negative effects is not at all clear. 13

The long-run problem is different. Changes in relative prices produce permanent changes in the distribution of national income. Some (possibly many) households may experience a reduction in real income. 14 Thus, independently of any increase in aggregate national income, arguments for or against trade liberalization (or protection) must rest on a normative comparison of income distributions. However, unlike the jobs narrative, which has no room for winners, the aggregate welfare narrative says that both winners and losers should be considered when evaluating alternative states of the world.

The global class struggle narrative is fundamentally different in content from the other two narratives. 15 The building blocks shared by the first two narratives do not figure here but seem to be as follows: at t 1 , there is a pre-existing conflict between capital and labour in relatively closed national economies; at t 2 , globalization takes the form of increased mobility of capital; and, in t 3 , the relative gains from economic activity shift in favour of capital relative to labour in all national markets. These building blocks seem plausible as statements of fact, but, without context, they do not constitute a story. As with the other two narratives, there is a positive claim to the effect that globalization is in fact a causal determinant of the redistribution from labour to capital. Although this seems prima facie plausible, providing compelling empirical support for this proposition is difficult, but, as with the other two narratives, empirical content is simply ignored as irrelevant to the narrative. Moreover, the normative content is very unclear. There is much discussion of trade agreements, but little attempt to provide the positive and normative context that would make this an actual narrative, instead of just a set of selected talking points about views on international economic agreements held by some authors who either believe that such agreements are a source of ‘the globalization problem’ and that redesigning them can help attenuate (compensate) losers from globalization. 16

The big shock driving the resurgence of protectionist pressure in the USA today is the growth of China. This has very little to do with international economic agreements and very much to do with changes in domestic Chinese policies – notwithstanding other narratives in which China’s accession to the World Trade Organization is held to be the reason for the relative decline in the share of manufacturing in total employment in the USA. An implication is that redesigning agreements cannot do much to address the concerns embodied in the jobs narrative. Indeed, given that trade treaties do not address major dimensions of this narrative – notably, immigration, corporate tax regimes and exchange rates (foreign macro-economic policies) – the salience of the ‘critical’ narrative for the jobs narrative is very limited. 17 Lamp makes clear that the different narratives have different policy implications, but this does not help us address the question of how we should think about losers of globalization. What can be said – but was not – is that no matter what one thinks about what is wrong with trade agreements, they are not central to the concerns underlying the two other narratives. Perhaps most important from an American perspective is that the USA does not have trade agreements with many countries and has none with Brazil, the Russian Federation, India, China or South Africa – the BRICS economies. Given that the gains from trade are mostly the result of autonomous policy decisions by foreign governments, the various proposals mentioned to incorporate redistribution of intra-national gains from trade into trade agreements are neither here nor there from the perspective of the losers of globalization.

Given the weakness of the third narrative, in particular, we might ask why choose these three? Why not, say, an environmental narrative, a community narrative or a national strength and security narrative? Perhaps, more importantly, why focus on narratives that presume some kind of globalization as a problem? Where is the consideration of an economic transition narrative (that is, from an industrial to a post-industrial economy)? Where is the narrative of the benefits of globalization that have accrued to many developing countries and the short-term losses that were incurred by some groups in these countries as they became more integrated into the world economy?

Narrative analysis is generally deployed to reveal gaps in previously mainstream analysis. Consider two more-or-less randomly selected examples. The Cambridge school of historiography develops a critique of traditional history of political thought, arguing that this misattributes positions to such scholars as Thomas Hobbes and John Locke based on a reading of those texts in terms of the interests of modern scholars rather than in the context of their own time. 18 This is presented explicitly as a narrative analysis. Andrew Abbott develops an argument that, because they cannot treat the sequential element of social action in time, traditional methods of quantitative sociology are unable to deal with time in a serious way. 19 He then goes on to develop methods, rooted in the theory of narrative, that do just that. Such examples could be multiplied many times over. The point here is that, in the place of narrative analysis, Lamp presents an ad hoc discussion of what he regards to be the policy implications of these narratives. Many of these are ad hoc in turn as they are not informed by positive analysis, so we have no idea whether they are likely to be effective in helping the losers from globalization even if we accept the argument that the focus should be limited to the context of each narrative. The upshot is essentially nihilistic, given the stated presumption that engaging in an effort to assess the empirical foundations of the stories is not of any use. Thus, the reader has no guidance whether the suggested narrative-specific policy implications will help losers from globalization.

Leaving this aside, it is striking that narrativity as a method – one that is employed in many research areas – plays no role in Lamp’s discussion. Effectively used, narrative analysis can extend our knowledge of the politics of trade policy as well as policy towards globalization more generally. Given that the three narratives are positions in a public political discourse, we might be interested in what draws particular participants in this discourse to one or another of the narratives. This would involve a systematic discussion of the objectives of the agents actively deploying a given narrative and an analysis of the elements of the narrative in terms of those objectives. Why, for example, is the lump of labour argument narratively effective independent of its factual content? For whom is it compelling? Why and how was the aggregate welfare narrative effective among decision-making elites (at the national level as opposed to international organizations, which Lamp strangely characterizes as representing the establishment), and why and how did that effectiveness collapse?

An interesting fact is that globalization, and trade, in particular, was simply not part of the public political discourse in the USA from the end of World War II until the 2016 election, despite (unsuccessful) efforts on a number of occasions (John Danforth, Ross Perot and so on). This would produce an analysis directly related to the study of heresthetics by Elmer Schattschneider and developed by William Riker. 20 The details of the narratives in play, successful and unsuccessful, would be an essential part of such an analysis. This would be an interesting use of narrative analysis. Unfortunately, no such effort was made. As a result, Lamp does not help us think about the winners and losers of globalization or whether, within the context of any given narrative – whatever one thinks of it – the policy responses implied by the narrative will address the core issue that is of concern to those who employ it.

Nicolas Lamp continues the debate with a Rejoinder on our EJIL: Talk! Blog.

See Lamp, ‘How Should We Think about the Winners and Losers from Globalization? Three Narratives and Their Implications for the Redesign of International Economic Agreements’, 30 EJIL (2019) 1359.

K. Puckett, Narrative Theory: A Critical Introduction (2016), at 2.

There are substantial literatures applying tools of narrative analysis in law, political science and economics. For law, see, e.g., P. Brooks and P. Gewirtz, Law’s Stories: Narrative and Rhetoric in the Law (1996); R. Cover et al. , Narrative, Violence, and the Law: The Essays of Robert Cover (1993); R. Posner, Law and Literature (2009). For narrative analysis in political science, see Patterson and Renwick Monroe, ‘Narrative in Political Science’, 1(1) Annual Review of Political Science (1998) 315; Suganami, ‘Narrative Explanation and International Relations: Back to Basics’, 37(2) Millennium (2008) 327; A. Miskimmon, B. O’Loughlin and L. Roselle, Forging the World: Strategic Narratives and International Relations (2017). Narrative analysis is also used in economics; see, e.g., Akerlof and Snower, ‘Bread and Bullets’, 126 Journal of Economic Behavior and Organization (2016) 58; R. Bates, Analytic Narratives (1998); D. McCloskey, The Rhetoric of Economics (1998); Shiller, ‘Narrative Economics’, 107(4) American Economic Review (2017) 967.

While it is true that Trump often talks about jobs, as Lamp notes in passing, his globalization discourse focuses on many other elements: bad deals (the inability of other leaders to do what he can); the role of the USA as a singular power (and the benefits that should flow from that); the current account (as a measure of ‘winning’) and so on. In his discourse these, and many other elements, are not obviously separable from jobs. Thus, while Lamp’s analysis mostly focuses on jobs, it is not clear to us that this is an accurate characterization of a ‘Trump narrative’. At the same time, many other public figures deploy a narrative about globalization and jobs, providing a justification for the clearer label ‘jobs narrative’.

What Lamp means by the statement that ‘[w]hether one accepts the movement of jobs on the basis of comparative advantage as legitimate is a purely normative judgement’ is completely obscure to us. It clearly flows from the notion of property rights in jobs, but such a claim is not part of any narrative that we actually observe.

That this is a fallacy is widely accepted in economics. It is often applied to the case of technological change, but, as David Autor has noted, ‘[w]hat is fallacious in the “lump of labor fallacy” is the supposition that there are a limited number of jobs. … It is not fallacious, however, to posit that as workers are displaced from older to newer activities technological advances create winners and losers’. D. Autor, U.S. Labor Market Challenges over the Longer Run (2010), at 1. The same observation is true of trade.

The ‘establishment’ is held to be epitomized by institutions engaged in the ‘governance of global trade’. Here, Lamp implicitly channels the populist trope that nation-states have lost sovereignty to faceless, unelected and unaccountable bureaucrats (indeed, this is an alternative narrative that could have been considered as it is salient to the political backlash to openness). We think ‘aggregate welfare narrative’ is a more accurate and informative label for this narrative as that is its core feature. It could also be called the ‘mainstream economics’ narrative. Recognizing that the core feature of this narrative is aggregate welfare would avoid making it a strawman in the ‘critical narrative’. Staff of international organizations and many mainstream economists have been critical of discriminatory trade agreements on welfare (efficiency) grounds and have pointed out the income redistributive dimensions of intellectual property protection. Indeed, the General Agreement on Tariffs and Trade’s secretariat staff did so during the Uruguay Round, as have World Bank staff. See, e.g., Subramanian, ‘TRIPs and the Paradigm of the GATT: A Tropical, Temperate View’, 13(4) World Economy ( WE ) (1990) 509; W. Martin and L.A. Winters (eds), The Uruguay Round and Developing Economies (1996); J.M. Finger and P. Schuler, ‘Implementation of Uruguay Round Commitments: The Development Challenge’, 23 WE (2000) 511.

There is nothing normative about this claim, it is strictly empirical. It may be true or false.

This is very far from being a formally well-grounded utilitarian claim. Lamp’s assertion that the ‘establishment narrative’s case for trade is hence a utilitarian one’ is technically false. Under a variety of rather special assumptions, this theory can deliver such a utilitarian claim, but it is far from general. As has been clear since the foundational work in this area by Bergson and Samuelson, our normative judgments must be explicit in such cases. See Bergson, ‘A Reformulation of Certain Aspects of Welfare Economics’, 52(2) Quarterly Journal of Economics (1938) 310; P. Samuelson, Foundations of Economic Analysis (1947); Chipman and Moore, ‘The New Welfare Economics 1939–1974’, 19(3) International Economic Review (1978) 547.

In various places, it is noted that the establishment ‘admits’, ‘acknowledges’ and ‘recognizes’ that losses occur, suggesting a view that this is something its proponents would rather not do. This is misleading. That there are losers is a basic feature of trade theory and explained in any economics textbook.

Hoekman and Nelson, ‘Reflections on Populism and the Economics of Globalization’, 1(1) Journal of International Business Policy (2018) 34.

Given the difficulty of identifying trade displaced workers with any precision and that the same problem exists for adjustment to technological change and other shocks, there is no reason to condition this on trade.

Since the new equilibrium will involve lower national income, either more people will lose or the losers will lose more than what was lost in the shift to the open equilibrium.

Lamp’s notion of a ‘fungibility assumption’ is not a useful device as there is nothing ‘normative’ about recognizing that consumption is paid for out of wages and, thus, consumption is affected both through the effects of prices on the cost of the consumption bundle and the effect on household income. It is quite appropriate to recognize that unemployment has an additional effect on welfare that works through the sense of identity associated with employment. But this latter effect is no more absolute than the effects that work through prices. These are various sources of well-being, but the existence of one does not exclude the other. The extent to which specific people trade off one for the other, or, alternatively, the economic cost of the psychic loss from unemployment, is an essentially positive issue that has been extensively studied in the literature on psychic states. See, e.g., Clark, Georgellis and Sanfey, ‘Scarring: The Psychological Impact of Past Unemployment’, 68(270) Economica (2001) 221; B. Frey and A. Stutzer, Happiness and Economics: How the Economy and Institutions Affect Well-Being (2002); R. Layard, Happiness: Lessons from a New Science (2005). Such considerations have been incorporated in the literature on the evaluation of trade policies as well. See, e.g., Davidson, Matusz and Nelson, ‘Fairness and the Political Economy of Trade’, 29(8) WE (2006) 989; Kreickemeier and Nelson, ‘Fair Wages, Unemployment and Technological Change in a Global Economy’, 70(2) Journal of International Economics (2006) 451.

The label ‘critical narrative’ leaves unclear what this narrative is critical about. We prefer the label ‘global class struggle’ as it is clearer as to the content of the narrative as described by Lamp.

Claims that trade agreements are about the protection of assets and efforts to eliminate regulatory differences are often made by opponents of globalization. Here again, some critical discussion would be in order. Trade agreements rarely entail the harmonization of regulatory standards – not least because the USA would not stand for it. Protection of intellectual property rights is the exception, not the rule. The moves by many governments and the European Union to constrain rent seeking in the area of investment protection and to control investor-state arbitration (for example, the ongoing discussion in the United Nations Commission on International Trade Law (UNCITRAL) on investor-state dispute settlement reform) are examples of states addressing what has come to be perceived as a mistake by many. The issue here is not the compensation of losers of globalization but, rather, learning from experience and a desire to clarify the rules of the road. For UNCITRAL discussions, see https://uncitral.un.org/en/working_groups/3/investor-state .

Hoekman and Nelson, supra note 11.

See, e.g., J. Dunn, The Political Thought of John Locke: An Historical Account of the Argument of the ‘Two Treatises of Government’ (1969); J.G. Pocock, Politics, Language and Time: Essays on Political Thought and History (1972); Q. Skinner, Reason and Rhetoric in the Philosophy of Hobbes (1996).

A. Abbott, Time Matters: On Theory and Method (2001).

W. Riker, The Art of Political Manipulation (1986); E. Schattschneider, The Semisovereign People: A Realist’s View of Democracy in America (1960).

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Winners And Losers Of Q2: Paramount (NASDAQ:PARA) Vs The Rest Of The Broadcasting Stocks

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As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q2. Today, we are looking at broadcasting stocks, starting with Paramount (NASDAQ:PARA).

Broadcasting companies have been facing secular headwinds in the form of consumers abandoning traditional television and radio in favor of streaming services. As a result, many broadcasting companies have evolved by forming distribution agreements with major streaming platforms so they can get in on part of the action, but will these subscription revenues be as high quality and high margin as their legacy revenues? Only time will tell which of these broadcasters will survive the sea changes of technological advancement and fragmenting consumer attention.

The 9 broadcasting stocks we track reported a mixed Q2. As a group, revenues missed analysts’ consensus estimates by 0.8% while next quarter’s revenue guidance was in line.

Stocks, especially growth stocks with cash flows further into the future, had a good end of 2023. On the other hand, this year has seen more volatile stock market swings due to mixed inflation data, and while some broadcasting stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 3% since the latest earnings results.

Paramount (NASDAQ:PARA)

Owner of Spongebob Squarepants and formerly known as ViacomCBS, Paramount Global (NASDAQ:PARA) is a major media conglomerate offering television, film production, and digital content across various global platforms.

Paramount reported revenues of $6.81 billion, down 10.5% year on year. This print fell short of analysts’ expectations by 5.9%, but it was still a satisfactory quarter for the company with an impressive beat of analysts’ earnings estimates but a miss of analysts’ Direct-to-Consumer revenue estimates.

Paramount delivered the weakest performance against analyst estimates and slowest revenue growth of the whole group. Interestingly, the stock is up 2.1% since reporting and currently trades at $10.42.

Is now the time to buy Paramount? Access our full analysis of the earnings results here, it’s free .

Best Q2: FOX (NASDAQ:FOXA)

Founded in 1915, Fox (NASDAQ:FOXA) is a diversified media company, operating prominent cable news, television broadcasting, and digital media platforms.

FOX reported revenues of $3.09 billion, up 2% year on year, in line with analysts’ expectations. The business had a strong quarter with a solid beat of analysts’ operating margin estimates and a decent beat of analysts’ earnings estimates.

The market seems happy with the results as the stock is up 9.2% since reporting. It currently trades at $39.71.

Is now the time to buy FOX? Access our full analysis of the earnings results here, it’s free .

Weakest Q2: E.W. Scripps (NASDAQ:SSP)

Founded as a chain of daily newspapers, E.W. Scripps (NASDAQ:SSP) is a diversified media enterprise operating a range of local television stations, national networks, and digital media platforms.

E.W. Scripps reported revenues of $573.6 million, down 1.6% year on year, falling short of analysts’ expectations by 2%. It was a softer quarter as it posted a miss of analysts’ earnings estimates.

As expected, the stock is down 39.1% since the results and currently trades at $1.81.

Read our full analysis of E.W. Scripps’s results here.

Gray Television (NYSE:GTN)

Specializing in local media coverage, Gray Television (NYSE:GTN) is a broadcast company supplying digital media to various markets in the United States.

Gray Television reported revenues of $826 million, up 1.6% year on year. This number missed analysts’ expectations by 1.7%. Taking a step back, it was a mixed quarter as it recorded an impressive beat of analysts’ earnings estimates. On the other hand, revenue guidance for the next quarter fell below analysts' expectations.

The stock is down 5.3% since reporting and currently trades at $4.99.

Read our full, actionable report on Gray Television here, it’s free.

Sinclair (NASDAQ:SBGI)

Founded in 1971, Sinclair (NASDAQ:SBGI) is an American media company operating numerous television stations and providing multi-platform broadcasting services.

Sinclair reported revenues of $829 million, up 7.9% year on year. This print missed analysts’ expectations by 1.1%. Taking a step back, it was a satisfactory quarter as it also produced an impressive beat of analysts’ earnings estimates but a miss of analysts’ Distribution revenue estimates.

Sinclair achieved the fastest revenue growth among its peers. The stock is up 7.4% since reporting and currently trades at $14.

Read our full, actionable report on Sinclair here, it’s free.

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