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North America is your future

Economic globalisation, as a process, ended around 2008. So what does the future global economic landscape look like?

Piers Purdy
26 July 2017
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Anti-TPP protests in Seattle, as then President Obama arrives for a fundraiser. Source: Backbone Campaign/Flickr. Some rights reserved.

This interview is part of the series 'Development in the Face of Global Inequalities'. You can find out more about the series, read its articles and explore the interactive roundtables by clicking here.

Before becoming the 31st President of the United States of America, Herbert Hoover, the son of a blacksmith and a self-made millionaire, concluded a successful election campaign with a speech on what he termed ‘rugged individualism’. It hailed entrepreneurship and the initiative of the individual, and warned of paternalism, state socialism and the domination of social groups. It was very much emblematic of the American way of thinking; a way of thinking that over the course of several centuries would position the US as the global focal point for those seeking their own maximum self-fulfilment in life.

Alongside several periods of intense twentieth-century globalisation, this way of thinking has become the engine behing a new transnational elite and the societies they govern, with North America at its centre. Yet quite paradoxically, this preference of the individual over the group has relegated the majority to a position far below the priviledged few. So, as we witness the world's 'left behind' react, visible in events such as the UK's Brexit and the Front national's electoral gains in France, should we expect the arrival of a new global political and economic landscape?

To explore this question, I meet with Salvatore Babones, an American sociologist at Sydney University, whose research tries to make sense of the global economy, with a long-term perspective. But he has also written several books on the need for progressive, well-established social policy in the US to tackle growing domestic inequalities, so he’s well positioned to guide me through the complex politics of globalisation. I start by asking him why understanding US politics is important for those working in international development. His answer is unequivocal:

“Because it’s your future.”

This is not a case of American exceptionalism, he assures me, but rather a consequence of what he sees as the new global economic geography. To explain it, he starts by differentiating the rise of a more political interpretation of globalisation – one used to explain Brexit and Trump’s election – from the story of economic globalisation:

 “Economic globalisation, as a process, probably ended around 2008. By which I mean that the world achieved its fullest level of economic integration at around this time, and since then the world has remained to be global… but it is no longer globalising.”

Why did economic globalisation end? Well, today, there are only minor trade barriers remaining, and the only thing holding economies back from integrating further is the lack of profitability. According to Salvatore, products that can be produced cheaper in another country already are, and the countries that are not deeply integrated into global trade - those victims of conflict, corruption or instability - simply aren't worth investing in.

The vast majority of trade within Europe is between European economies, likewise in North America and East Asia. The rest of the world’s economies simply feed into them.

But despite achieving this level of global economic integration, the promise that globalisation would bring benefits to the whole world has not been fulfilled. For the majority, globalisation has not delivered a level playing field in which increased mobility, economic opportunities and greater prosperity are accessible to all. Rather, Salvatore states, economic globalisation has created a steeply hierarchal system, dominated by three core trading regions. 

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The changing economic landscape revolves around 3 core trade regions: North America, Europe and East Asia. Source: Salvatore Babones.

Of the world’s $75 trillion in GDP, North America (29%), Europe (24%) and East Asia (23%) constitute the vast majority of the productivity and trade. This leaves the rest of the world – the Middle East, Latin America, Africa, and the rest of Asia – representing only 20-25% of this figure. What’s more, BRICS enthusiasts should know that without China the bloc’s contribution is just 7% of this figure.

This in itself isn’t particularly surprising, although it puts claims of an emerging BRIC-led, multipolar world into perspective.  But Salvatore goes on to explain an important characteristic that these three dominant regions share: they are all closely integrated within themselves. The vast majority of trade within Europe is between European economies, likewise in North America and East Asia. The rest of the world’s economies simply feed into them.

And it is the North American region – the most productive and the best connected to both Europe and East Asia – that sits at the top of this economic hierarchy. It is the epicentre of global trade, with Europe to its East, and East Asia in the West. And this is the reason why North America is your future…

 

The West of the West

…Or at least part of the reason. These trade flows reveal the US’ undwindling position at the top of the food chain. But how can Salvatore be sure the US will continue to be the home of the world’s leaders in the tech industry, finance and education? For this, he points to the country’s greatest export: individualism, the idea that the interests of the individual precede those of a social group, or the state, as articulated by Herbert Hoover in 1928.

Individualism is a way of thinking that has been embraced by the US political elite, manifesting itself in years of destructive social policy. 

He explains how the US has always been at the forefront of global trends, earning itself the title ‘the West of the West’. Individualism has been the driving force behind this brave pioneering, as the country’s first European settlers left their homelands with the hope of building alternative societies in New World. Since then, this idea that ‘the community being nothing more than a group of individuals’ has been the foundation of US social policy and technological advancement.

It is a way of thinking that has been embraced by the US political elite, manifesting itself in years of destructive social policy. Wealthy individuals have been responsible for crafting these policies, guided by self-interest, yet their belief that what is good for the individual is good for society simply isn’t true. And while President Trump has certainly already made some bad policy choices – his assault on Obamacare being one – he is quite simply a blip in a succession of Presidents who have taken the same ideological approach. For example, it was President Clinton, Salvatore remembers, who took away the child benefits that his own mother had benefited from when he was young.

These bad social policies led to a particularly sharp rise in domestic inequality from 1991 onwards, a trend replicated to a similar extent in other Anglo-Saxon countries. Coupled with the most intense period of economic globalisation and productivity that came with it, this inequality is an important dynamic within the labour market. Salvatore explains that in a system where two countries share similar levels of productivity, high levels of domestic inequality in one will produce much higher salaries than in the other – and the poor will become the losers. This suggests that high levels of domestic inequality are desirable, to some extent, if you want to keep on attracting the world’s best.

This is exactly what happened in the US, where he compares the average CEO annual salary of $12.259 million in the US, to $5.912 million in Germany or $2.354 million in Japan. Financial rewards in the US are simply much higher, and this produces certain powerful global economic forces. The US, offering the highest salaries, the best resources and newest technologies, becomes the place to invest, which puts pressure on elites from the BRICS, the Global South and Europe to invest their money in the US. This doesn’t only apply to developing countries, but also developed economies such as Japan, Germany and China. And while China may have been a net recipient of US investment for much of the globalisation period, this trend has completely reversed since 2008. North America and, he stresses, the US ways of thinking are at the top of the pyramid, but everyone else is happy so long as they can have a slice of the American pie.

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On May 1st, 2012, as every year, Front National activists march in Paris, here led by Marine Le Pen. Photo: Blandine le Cain / Wikimedia Commons

The left behind, remember them?

Well not everyone. While the US has become the Promised Land for the young, talented and wealthy people seeking individual self-fulfilment, for the majority of the world, such  global mobility, access to top education, or access to graduate training programmes is simply not a reality. Today’s globalisation is not flat, it is steeply hierarchical with a transnational global elite at the top. You don’t need to live in the US to be part of this elite, you simply need to be part of the trade that flows in and out of the North American region.

And so, what do France’s Marine Le Pen, Russia’s Vladimir Putin and Venezuela’s Nicolás Maduro have in common? They represent the frustrations of those who feel betrayed by this global elite that is benefitting disproportionately from the current system. These leaders have promised to protect their countries from the wrath of globalisation, employing communal, nationalist ways of thinking, in stark contrast to the American individualism that guides the global elite. And Donald Trump is no different: this multi-billionaire’s own constituents are America’s ‘left behind’, and he has adopted similar rhetorical and policy positions that play on these fears.

Salvatore remarks that when you've got the world's wealthiest people meeting in Davos to solve the world's inequalities, you're unlikely to find the best solutions. Nevertheless, while challenging this new global economic order may not fit within the remit of the international development community, channelling local frustrations into coming up with constructive and innovative ways of organising society certainly is. And by doing so, perhaps we can develop more attractive alternatives to the current status quo than the enticing brand of divisive, nationalistic politics that is currently being offered.

* * *

Read Salvatore's answers for the Politics of Inequality interactive roundtables here, and his new book 'American Tianxia' is available to buy on Amazon.

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