When Dealing with Globalization Fallout, Domestic Policy Choices Matter
- Brexit, Trump and the surge in eurozone populism have been lumped together as expressions of a shared anti-globalization sentiment, with the downsides of trade reduced to three key features: widening inequality, stagnating wages and the hollowing out of the manufacturing base.
- But when we drill down into how the US, the UK and Germany have experienced globalization, we see that those three aspects differ significantly across the three countries and that policy choices matter in driving different social and economic outcomes.
- In our view, these distinctions illustrate that globalization has not been a unitary force with consistent consequences and that distinguishing among the different forces driving anti-establishment sentiment is important.
With regard to greater inequality, the US gap has widened steadily since 1967, while German inequality peaked in 2008 and has been narrowing ever since, and the UK has witnessed a consistent decline since the 1990s that became even more pronounced after 2008 (see Figure 1).