Globalization undoubtedly fosters more peace and prosperity through cooperation than the fragmenting forces of nationalism do. An excerpt from a paper about globalization published by the International Monetary Fund (IMF) says it best: “Periods of increased globalization have tended to be associated with . . . rising standards of living. Moreover, countries that have embraced openness to the rest of the world have done better than those that have not.” (Masson 1). The paper goes on to say that all nations that have embraced globalization have had lower rates of infant mortality, longer life expectancy, and high literacy rates (Masson 8). Overall, globalization helps countries become wealthier, raises their quality of life, and promotes peaceful international relations through cooperation.
This does not mean, however, that nation states are obsolete as the 21st century unfolds. The very same paper by the IMF, an organization that “helps to ensure economic gains from globalization by encouraging trade liberalization”, also stated that “globalization may also be associated with increased inequality and volatility, which may justify strengthening domestic safety nets and financial supervision and regulation” (Mason 1). Nation states uphold the needs and values of individuals in the anarchic nature of world politics and economics. Globalization’s priorities are not always in line with domestic needs, therefore the nation state is still required to ensure local priorities are met.
The economic impacts of globalization have been many. Globalization has allowed for amazing efficiencies within the global economy. Free trade policies that have facilitated globalization have dominated politics, and been particularly pronounced since the end of the Cold War (Harper 50). Economically, globalization has been an extension of laissez faire capitalism, where supporting more liberalization of markets has allowed for more efficient resource allocation, division of labour, etc. This has created greater productivity overall across the globe. It has had the amazing consequence of raising billions of people around the world out of extreme poverty. “As recently as 1990, nearly two billion people, one-third of the world’s population lived in extreme poverty. Today, that is true of only about one in ten.” former Canadian prime minister Stephen Harper writes in his 2018 book Right Here, Right Now (42). Globalization has been an incredible force of productivity that has resulted in great prosperity worldwide, but it has drawbacks.
Although globalizing forces have afforded advanced nations cheap consumption of goods and services, it has contributed to wealth inequality within those nations. According to an article published in the European Journal of Political Economy by Andreas Bergh and Therese Nisson, reforms that favour globalization have increased inequality in advanced nations (488). They concluded that higher rates of freedom to trade internationally increases the inequality within rich nations, with a stable correlation of 0.7 (Bergh and Nisson 500). As far as correlations within the social sciences are concerned, globalization's relationship with inequality is very strong.
Wealth inequality has risen as a result of productivity gains having been decoupled from real income growth since 1979, according to a study published by the Economic Policy Institute (Bivens et al.). The study stated that:
"Between 1979 and 2013, productivity grew 64.9 percent, while hourly compensation of production and nonsupervisory workers, who comprise 80 percent of the private-sector workforce, grew just 8.2 percent. Productivity thus grew eight times faster than typical worker compensation. (Bivens et al.)."
Other studies indicate similar trends, with wages of non-college-educated workers in the United States having been depressed by nearly $1,800 per year since the 1980s (Harper 17). This rising inequality can be attributed to efficiencies afforded to transnational corporations that are able to take advantage of cost effective methods of production, facilitated by globalization and liberal trade policies.
Large numbers of low-skilled jobs have been moved from advanced nations to developing ones where wages are much lower. “The most dramatic effects have been in manufacturing, where total employment has fallen by one-third” (Harper 17). This increases the net productivity for transnational corporations, but does not channel returns back down to local levels in the nation of origin. This is partly due to the fact that most individuals in developed countries where these companies are based out of are not adequately exposed to markets as shareholders.
In a working paper for the National Bureau of Economic Research, Edward N. Wolff analyzed the Survey of Consumer Finances from the Federal Reserve Board of Washington. He found that among the “richest 19 percent of U.S. households . . . 25 percent [of their total assets] was in the form of stocks directly or indirectly owned.” (Wolff 9). This is in contrast to the middle class whose “Stocks directly or indirectly owned amounted to only 9.7 percent of their total assets.” (Wolff 9). That means that the top 19 percent of U.S. households have 2.5 times more exposure to stock market gains than the middle class, which further exacerbates the wealth gap. Note that the middle class includes anyone with a net worth below $471, 600 in this study. Ownership of stocks is most likely a lot lower among poorer segments of the population living paycheque to paycheque.
Both the loss of low-skilled jobs in developed nations paired with inadequate exposure to productive gains in the stock market have resulted in stagnation for large portions of the population in advanced nations since the 1980s. Globalization has resulted in short term advantages for developed nations in the form of cheaper consumer goods and services, but have come at the cost of higher levels of wealth inequality which is causing political and social issues within developed nations.
Wealth inequality, which has risen in part due to neoliberal globalization policies, decreases economic mobility within developed nations. Economic mobility is heavily influenced by income growth and overall wealth, since an individual's productivity is largely determined by what developmental opportunities they can afford (Dalio). Lower income individuals often have poorer access to education, which results in lower economic mobility. It becomes a self reinforcing spiral downwards, further heightening levels of inequality within developed nations. Ray Dalio, founder of the world's largest Hedge Fund, Bridgewater Associates, reports that:
[T]he percentage of children who grow up to earn more than their parents has fallen from 90% in 1970 to 50% today. That’s for the population as a whole. For most of those in the lower 60%, the prospects are worse.
This situation was created largely because globalizing policies that afforded more productivity came at the expense of middle class incomes. These issues can only be properly tackled by nation states for their citizens. Unfortunately, the interests of the wealthy bureaucratic class that dominates political discourse are tied to continuing globalizing economic policies.
The main benefactors of globalization’s efficiency have been “those whose economic interests are global” (Harper 3). This is not limited to executives and shareholders of transnational corporations. It includes “Segments of urban and university-educated professionals [that] have become genuinely globally oriented in their careers and personal lives.” (Harper 53). This is causing a rift in domestic politics, where elites have promoted globalization policies that are disconnected from a vast portion of the population. Regardless of political party orientation, over the past three decades, “both [Democrats and Republicans] have embraced trade deals, deficit financing, high levels of low-skilled immigration (legal and illegal), weak financial regulation, and corporate bailouts.” (Harper 11). These liberalizing policies overwhelmingly support individuals whose economic interests are global. Bergh and Nilsson’s study on the relationship of globalization and inequality found policies that allow for more freedom to trade internationally and less regulation favours elites while “the risks are shared by a larger group.” (495). The middle and lower classes’ concerns are not being met because of the conflicts of interest between political and business elites, and the masses.
While it’s true that allowing for more globalization to allocate resources efficiently ultimately leads to greater productivity for a country, “it does not follow that everyone in the country is better off.” (Harper 35). David Rothkopf adds to this insight in Superclass by stating “Market-marketism does not deal sufficiently with the inefficiencies, weakness, and failings of markets at producing the kind of just society that is at least as important a goal as fostering prosperity.” (60). He goes on to say “To me, [market-marketism] sounds a little bit too much like the promise of heavenly rewards that enable clerical elites to collaborate with political elites throughout history as a way of promoting stability in the face of widespread suffering among the poor.” (Rothkopf 61). Yet, this is exactly what has happened over the last few decades. Governments under neoliberal ideology, promoted heavily by global elites, have continued globalization without recognition for the disenfranchised many. It has become a plutocracy: “Government by the wealthy'' (“plutocracy”).
Dani Rodrik, Professor of International Political Economy at Harvard's John F. Kennedy School of Government, wrote an article for the Financial Times in 2007 warning of the potential drawbacks from unfettered globalization.
"Globalisation’s soft underbelly is the imbalance between the national scope of governments and the global nature of markets. A healthy economic system necessitates a delicate compromise between these two. Go too much in one direction and you have protectionism and autarky. Go too much in the other and you have an unstable world economy with little social and political support for those it is supposed to help." (Rodrick)
As plutocratic influences have continued pushing neoliberal policies that have had “little social or political support for those it is supposed to help” (Rodrik), populism has risen as a direct response to the ignorance of global elites.
If under globalization there has been a rise in plutocracy that favours the upper class, the opposite trend is also rising. Populism, under the fragmentary forces of nationalism, has risen as a response to local priorities not being met under globalizing forces since the end of the Cold War. This movement toward populism was most clearly seen in the 2016 election of Donald Trump, and the Brexit referendum of the same year. There is a strong correlation in the US and Britain that in areas where jobs have been moved to lower wage countries, populist sentiments have risen (Harper 44). “In short, the world of globalization is not working for the many of our own people” Stephen Harper has remarked in response to populism's rise ( 2). Nationalism and populism are becoming more widespread ideologies as a direct response to the previous decades of unchecked globalization.
Populism and nationalism’s rise since 2016 has alarmed many. Criticism of these nationalist movements have been that they are caused by “fools and bigots” (Harper 2). To take this position would be ignoring the grievances of millions of people that have voted for populism. Something worth mentioning as well is that populism is not exclusively a right wing issue. The phenomenon has also affected the left wing with the likes of Bernie Sanders and Jeremy Corben (Harper 4).
Concerns over nationalism and populism are warranted of course. “Excessive nationalism can be unproductive, even dangerous” (Harper 48). Or as Dani Rodrik put it, lean too much toward nationalism and “you have protectionism and autarky” (Rodrik). The twenty-first century is full of examples of how nationalism can tilt too far and create major conflict within and between nations — facism on the right and communism on the left. If the drawbacks from globalization are ignored, however, further extremism and internal disruption from populism and nationalism will continue, and only get worse. This could jeopardize the peace and prosperity that globalization created in the first place.
Globalization operates in the anarchic conditions of world politics, with no real authority to put checks and balances on its development. There are no instruments other than the nation state to ensure individuals and their communities are prospering under its influence. “Left to its own devices, globalization would be an economic world of massive and persistent instability . . . In other words, the nation-state, with all its flaws, is a concrete reality.” (Harper 55). It is the role of federal governments to regulate the anarchic conditions of the global economy on behalf of the interests of their citizens.
The particular solutions to the grievances from globalization are not clear, however. For example, bringing back manufacturing jobs from overseas markets will likely not resolve the issues considering the jobs would become highly automated in developed nations (Cellan-Jones). What is clear is that nation states are the only suitable instrument in facing these challenges. Whether it be the tax reforms by Teddy Roosevelt to check the disruptive factors from rising monopolies in the 1900s, or FDR’s new deal in the 1930s that helped set up the social infrastructure that would be the foundation for the 1950s paradise for the middle class (Freeland 13-14). Populism and the state can be forces for needed change, and champions of local priorities. As Stephen Harper has said, “It’s up to government to establish an institutional framework that harnesses capitalism’s [and globalization’s] productive capacity and constrains its destabilizing impulses” (32).
Strong nation states form the foundation from which globalization can flourish. It is in proponents of globalization’s best interest to acknowledge the drawbacks from it, and to support a strong, stable nation state. “It is, after all, the major nation-states that have made globalization possible. To the extent that there are global markets with rules and stability, it is agreements among nation-states that created them.” (Harper 54). Globalization has undoubtedly created massive prosperity, but it’s drawbacks must be dealt with in order to avoid further domestic extremism, autarky, and illiberal political developments.
Both globalization and nation-states are required to successfully navigate the challenges of the twenty-first century. Yuval Noah Harari outlined three major issues facing humanity in 21 Lessons for the 21st Century. There is the potential for nuclear war, the unfolding ecological collapse from global warming, and finally massive technological disruption that will automate many jobs (Harari 123). All of these are as Harari puts it “global problems [that] need global answers” (110). Globalization is required to appropriately deal with all of these massive issues. It is required to continue fostering the conditions for peace, cooperation, and prosperity across the globe. There is no doubt that it has allowed for miraculous advances since World War II and the Cold War, but ignoring the strain that it has put on local priorities cannot continue. The destabilizing forces globalization has inflicted upon developed nations could compromise stability and progress as the twenty-first century unfolds. The nation state is needed to ensure local priorities are attended to on the world stage. Healthy nation states are the essential foundation from which globalization can continue to promote progress, and confront the global challenges facing the world this century.
Works Cited
Bergh, Andreas, and Therese Nilsson. “Do Liberalization and Globalization Increase Income Inequality?” European Journal of Political Economy, vol. 26, no. 4, Dec. 2010, pp. 488–505., doi:10.1016/j.ejpoleco.2010.03.002.
Bivens, Josh, et al. “Raising America's Pay: Why It's Our Central Economic Policy Challenge.” Economic Policy Institute, 4 June 2014, www.epi.org/publication/raising-americas-pay/.
Cellan-Jones, Rory. “Robots 'to Replace up to 20 Million Factory Jobs' by 2030.” BBC News, BBC, 26 June 2019, www.bbc.com/news/business-48760799.
Dalio, Ray. “Why and How Capitalism Needs to Be Reformed (Parts 1 & 2).” LinkedIn, 5 Apr. 2019, www.linkedin.com/pulse/why-how-capitalism-needs-reformed-parts-1-2-ray-dalio?trk=portfolio_article-card_title.
Freeland, Chrystia. Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else. Anchor Canada, 2014.
Harari, Yuval N. 21 Lessons for the 21st Century. Signal, 2018.
Harper, Stephen J. Right Here Right Now: Politics and Leadership in the Age of Disruption. Penguin Random House Canada, 2018.
Masson, Paul R. “Globalization Facts and Figures.” International Monetary Fund, 1 Nov. 2001, www.imf.org/en/Publications/IMF-Policy-Discussion-Papers/Issues/2016/12/30/Globalization-Facts-and-Figures-15469.
"plutocracy, n." OED Online, Oxford University Press, September 2020, www.oed.com/view/Entry/146244. Accessed 26 October 2020.
Rodrik, Dani. “Cheerleaders Threat to World Trade.” Financial Times, FT Group, 26 Mar. 2007, www.ft.com/content/1b13320e-dbb5-11db-9233-000b5df10621.
Rothkopf, David Jochanan. Superclass: The Global Power Elite and the World They Are Making. Farrar, Straus and Giroux, 2009.
Wolff, Edward. “Household Wealth Trends in the United States, 1962 to 2016: Has Middle Class Wealth Recovered?” National Bureau of Economic Research, 2017, doi:10.3386/w24085.
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