The two sides of globalization


Shifting gears back to politics and the parallels between the US elections and Brexit, one thought on my head lately is the discussion on jobs and the sentiment against globalization. There are a 100 reasons to hate the result of the election but we also need to take away that there is a sentiment that is building which hasn’t been talked about enough. 

As a student of economics, we have always been thought that globalization is a wonderful thing- free movement of people and products across countries without barriers resulting in economies of scale and lower prices. That premise has brought the world closer- we drink Kenyan coffee brewed in a German coffee machine in a cup made in China.

People who opposed globalization were labeled protectionist and countries pursuing such policies were pressured into joining the global free market for trade.

But there is a price to pay: developed countries like US and UK have seen jobs move to China and Mexico. The people working in these factories in the small industrial towns presumably don’t have degrees that offer them new jobs and don’t have the luxury to re-skill with mouths to feed and mortgages to pay. The result is they take lower paying jobs to pay the bills but might end up in a lower income segment. This group doesn’t reflect in any unemployment number but they feel forgotten by their governments. This article Article: Revenge of Forgotten Class has examples from the swing states. There were similar anecdotes from UK, where a builder interviewed said he worked for 20£ an hour but was outbid by Polish migrants who work for half that. His choices are to work at half pay or risk going hungry, even if he went the half pay route, he feels significantly poorer.

The lack of focus by the Democrats on this issue cost them a lot of votes- Michael Moore called the result in July and cited this particular reason for the Rust belt- Ohio, Pennsylvania, Michigan, and Wisconsin- traditionally Democrat states to switch to Republican. 

There needs to be more thought on how this situation needs to addressed otherwise those negatively affected by globalization with hold the politicians responsible for negotiating trade deals that resulted in cheaper items for them to buy but not enough money to afford them. 

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The world today 

I don’t usually post on politics but I had to comment on the headlines from this year that will be in history books for years to come- Brexit and Trump presidency. Both have some parallels:

  • a vote that seems anti establishment 
  • Shows a strong city versus the rest divide
  • Can also be perceived as blue collar versus white collar divide
  • Age demographics show young old divide
  •  All odds, opinion polls, and pundit predictions are wrong 
  • A departure from globalization to a more inward looking view
  • Immigration backlash

The point I want to bring out is this is a shock because we live in a bubble and tend to surround ourselves with people who share our views- this include the media. As an immigrant who has always lived in big cities, my views have been liberal- I want to see a female president and I would have voted remain. So do most people I know and work with. I read New York Times, follow MSNBC and CNN- both liberal mouthpieces. What we miss is every poll has sampling bias and most channels were looking at self -fulfilling prophecies- people who support their theories. 

In the case of Trump, they spent a lot of time ridiculing his over the top comments, which he gave us a lot of. But they should have spent some time understanding who were the people voting for him. The media lumped and labeled all of them as stupid, less educated racists and sexists. I am not debating if they are or not, the point is without listening to why they support Trump and taking an elitist view of them being less intelligent was a huge blunder. 

I think Hillary made that mistake too- she called Bernie supporters the losers living in parent’s basements and Trump supporters deplorable. Clearly they tapped into some real discontentment with the economy and they voted to the person who heard them. 

This is the exact parallel to Brexit, with London voting remain and rest of the country voting exit. No one saw it coming, every poll expected a large win for remain. Even the exit lobbyists were not expecting to win!

It is easy to label those who don’t share our views as stupid, but trying to understand why they voted is crucial to uniting a divided country. And a big role for the liberal media is to spend some time with both sides of the divide, otherwise they will risk never getting it right!