A number of mainstream economists argue that the rising trend of de-globalisation led by advanced economies (AEs) like the US makes for bad economics. Trade protection and immigration control is just as damaging to their economies as the strident brand of nativism is to their societies. However, a hard look at the data on the gains from globalisation over the last few decades tells us a somewhat different story. The expansion of North-South economic relations that underpins much of globalisation has been biased against the North.
Some of the solid empirical work on globalisation has come from private research agencies and thinktanks like Capital Economics that provides some interesting evidence in a series of research notes on the death of globalisation. CE economists estimate that roughly a third of global per capita income growth since 1990 has been due to productivity enhancements riding on globalisation. However, the bulk of these benefits have accrued to the emerging markets and not to the AEs.
Trade and investment flows with the external world have certainly helped AEs reconfigure their entire structure of production, choosing to retain higher value generating operations and offshoring the lower ends of the supply chain. However, this restructuring has provided a one-off benefit. It has had a minor impact on subsequent productivity gains. Instead, secular gains in per capita income in AEs have depended largely on technological change.
As its pace of change has faltered over the last decade or so, so has per capita income growth. The deceleration in technological change could partly be the effect of low investment and innovation and partly the fading additional gains from the internet-computer revolution that is yet to be replaced by a decisive upturn in the new cycle driven by machine learning or AI.
The obvious place to look for losses in advanced economies due to globalisation is their labour market, in the death of relatively low skilled but employment rich sectors like textile and the support economies that grew around it. There are varying estimates of the job loss caused by cheaper imports from China. Economists Autor, Dorn and Hanson in their classic paper 'The China shock Learning from labour market adjustment to large changes in trade', estimate that competition from China caused direct manufacturing job losses of 1.5 million between 1999 and 2007.
Including the support economies, the losses would be much higher. They also point out that the re-absorption of this displaced labour has been slow and incomplete. This is reflected in the share of wages to GDP that dropped by a good 5% from 2000 to 2017.
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