The Davos Lie

Kevin O’Rourke:

The Davos lie: … If there’s one thing that people agree about in Davos, it’s that globalisation is a Good Thing. …

As is well known, many Western societies have become more unequal over the past two decades… During the 1980s and 1990s, the consensus was that this growing inequality was due not to international trade, but to technological change that was systematically favouring skilled over unskilled workers. …

More recently, however, the debate has swung back towards the view that trade is important in explaining rising inequality…

Unfortunately for Davos, globalisation’s losers are becoming increasingly hostile to trade (and immigration)…, ordinary people’s attitudes towards globalisation are exactly what Heckscher-Ohlin economics would predict. …

Economists can tut-tut all they want about working-class people refusing to buy into the benefits of globalisation, but as social scientists we surely need to think about the predictable political consequences of economic policies. Too much globalisation, without domestic safety nets and other policies that can adequately protect globalisation’s losers, will inevitably invite a political backlash. Indeed, it is already upon us.