Globalization: What next?

A Harvard Kennedy School (HKS) “policycast” in June 2022 noted the prescience of economist Dani Rodrik for having predicted much earlier the failure of globalization. The titles of his books clearly demonstrate where he stands vis-à-vis globalization and economic orthodoxy. Examples: Has Globalization Gone Too Far? (1997), One Economics, Many Recipes (2009), The Globalization Paradox: Democracy and the Future of the World Economy (2011), Towards a Better Global Economy (2016).

As far back as the late 1990s, Rodrik has been saying that global economic integration, democracy, and national sovereignty cannot co-exist simultaneously.

He argued, based on his studies and his experience, that slowing down global integration was necessary for national sovereignty and democracy to flourish. Speeding up and wholly embracing globalization would translate into sacrificing democracy or national sovereignty.

Democracy without national sovereignty can be compatible with globalization at the abstract level. But the reality is that global institutions are immature, and dense global rules are practically non-enforceable. To quote Rodrik, “the world has no central government.” Hence, “hyper-globalization” cannot substitute for nation-states or national sovereignties.

For Rodrik, “hyper-globalization” or “neo-liberalism” is synonymous with market fundamentalism. That is, having excessive faith in the role of markets but at the same time having a frame of mind that has excessive deficit with respect to collective action.

Fully exposing the failure of “hyper-globalization” or “neo-liberalism” is a string of recent tragedies — the successive economic and financial shocks in both developing and developed countries; the widespread demonstrations against unemployment, high prices, discrimination, and inequality; the climate crisis; the COVID-19 pandemic; the Russian invasion of Ukraine; and the intensifying geopolitical rivalry.

Regardless of ideology, the elite like the policymakers and politicians as well as the masses in rich and poor countries alike have retreated from “hyper-globalization.” In the US, Donald Trump and Joe Biden or Republicans and Democrats — despite being mortal enemies — have found common ground in rolling back hyper-globalization. Despite their hard ideological differences, now they both invoke national security or national interest to justify restrictions on freer movement of goods and capital. In Europe, the forces of populism, mercantilism, and anti-immigration are shaping the policies. The wave of populism and economic nationalism has likewise swept emerging economies or developing countries.

Rodrik said that the failure of hyper-globalization could be ultimately attributed to its “inherent contradictions.” The governments gave corporations and the markets the power to dictate the thick rules of globalization, but those in power abandoned the necessary national reforms for decent jobs and fair wages, social and environmental protection, and equity and inclusion.

Rodrik could have his “I-told-you-so” moment, opined the HKS “policycast.” Once a lonely voice, the heterodox Rodrik now has gained the attention of the mainstream. His vindication, nonetheless, is not his concern. Rather, his preoccupation is how the world can move forward to attain prosperity, security, and inclusiveness.

Thus, in a recent essay for Project Syndicate (March 9, 2023), he asks: “What’s next for globalization?” Rodrik coins an alternative economic-policy framework: “productivism.” Here, he “emphasizes the role of governments in addressing inequality, public health, and the clean energy transition.”

Productivism is a new paradigm that “reasserts domestic political priorities without being inimical to an open world economy.” The way that productivism is defined — giving premium to domestic jobs and production, instead of the free flow of global finance — makes it attractive across the social and political spectrum.

“What’s next for globalization” is germane to Philippine policy-making. The Philippine policy elite must give serious thought to this emerging paradigm. We must focus on creating jobs that provide decent pay, income growth, and legislated health and social security benefits. Jobs that continually improve workers’ skills and techniques. Jobs that yield higher productivity. Jobs that link manufacturing and agriculture. Jobs that create green output. Jobs that guarantee workers’ voice and collective action.

The creation of such kind of jobs should be the priority of industrial policy. It means that industrial policy can no longer be limited to those firms or sectors that have the greatest impact on export growth or GDP (Gross Domestic Product) growth. Industrial policy must encompass the small and medium enterprises where the majority of jobs are found.

But while industrial policy will do heavy lifting, productivism must be a whole-of-government, whole-of-society strategy. This paradigm requires new resources for skills’ training, continuing education, implementation of the universal health care law, investments in green technology and infrastructure. Pension or social security reforms cry out to be done. Energy policy must specify the priorities to assure renewable energy investors of predictability. Food policy must be directed towards securing affordable and adequate food for the workforce and the general population.

All these are gargantuan tasks. To focus on these tasks likewise means that the current administration abandon some of the things that have eaten up its political capital and dissipated its energy. To go straight to the point, being obsessed with the Maharlika Wealth Fund and the change of the Constitution deviates from the productivism paradigm.

Filomeno S. Sta. Ana III coordinates the Action for Economic Reforms.

www.aer.ph