The 2016 political and electoral shocks in the UK and US, and the rise of ‘populism’ in western civilisation have raised the question of whether current models of societal structure remain valid. Elections in the Netherlands, France and Germany in 2017 will all play significant roles in shaping not only the future of the EU, but also in determining if globalization as we know it will continue.
A quarter of a century ago the “Silent Revolution” of Globalisation was in full swing. The collapse of the Soviet Union and increased co-operation between the IMF and many developing countries led to a change in the way the world was doing business. Economic relations were strengthened, international alliances were formed and the path to success seemed certain. So, how have things gone so badly wrong so quickly?
Successful economic globalisation requires reasonably successful growth patterns in individual countries. The routes of modern globalisation were formed in the 30 years or so after World War II, when growth rates across a multitude of countries were extremely high. Benefits of this growth were being broadly shared within countries, and the rise of developing economies helped reduce global inequality enormously.
Globalisation continued beyond the 1970s, but slowly the underlying growth patterns changed. Labor arbitrage embedded in economic globalisation and increased use of digital technologies meant advanced economies’ middle-class manufacturing jobs disappeared. Median incomes stagnated, and job and income polarisation grew, even though many country GDP’s growth remained strong. This new pattern – persisting through the ’90s, accelerating post 2000 – caused inequality to rise sharply. Ultimately, this is what weakened the foundations of globalisation and has led to the problems we are seeing today.
Countries’ responses to this changing dynamic have varied widely. Some have taken steps to reduce inequality via...