Wednesday, 3 May 2017

Why the left should focus on countering inequality rather than banging on about globalisation


The 'debate' we are currently having about globalisation, is at best distracting, at worst highly toxic to the cause of spreading peace, equality and green politics in today's world. To put it simply, rather than banging on about globalisation the left and greens ought to be focussing on the issues that count.

I feel moved to say this now because of the terrible spectacle of left-wingers suggesting that it is best to be neutral between the xenophobic right wing (Trump, Le Pen) and the 'neoliberals' (Clinton, Macron). This has a few lurking  echoes with the position taken by communists in the early 1930s in Germany when they refused to back the social democrats and the centre against the Nazis. Now I am not suggesting that Le Pen and Trump are fascists. But there is no doubt that they have encouraged xenophobia, and I totally dismiss any argument that just because they profess antagonism to 'globalisation' they have anything in common with leftist objectives. This should be obvious; on economic grounds alone Trump's economic programme is oriented towards widening tax and state spending inequalities. The same, I am sure, would be the case for Le Pen if she was elected.

What we are left with is some xenophobic notion that the foreigners are taking stuff away from the workers, an impression which I was disturbed to see reproduced in a recent video produced by Momentum (Labour's pro-Corbyn group) supporting rail re-nationalisation. As if the job losses in countries around the world had much to do with foreigners or trade policies.

The point about 'globalisation' is that it actually has very little to do with the reasons we have had economic dislocation, job losses and rising inequality in recent decades. High up on the list of job losses is automation. The old industrial working class are a disappearing force. In addition to this as economies develop, so the employment patterns shift towards services and away from traditional industries. That's good news, by the way for ecology since it means lower energy outcomes. It is happening in China today something which I have noted in my new book 'China's Role in Reducing Carbon Emissions' , which, by the way you can buy as an e-book for £25 from Routledge now at  https://www.routledge.com/Chinas-Role-in-Reducing-Carbon-Emissions-The-Stabilisation-of-Energy/Toke/p/book/9781138244412

It's not that countries just buy their industrial products from somewhere else with lower labour costs - you can find some example of that - but that's not what is changing the patterns of work and economy. As in China, after a certain point the need to put in place the initial foundation of infrastructure, road, rail, bridges, water supplies, electricity wires etc declines. The surge in people buying many manufactured products such as fridges and TV sets declines to replacement rates once most families have got them. In other words demand for manufacturing declines relative to earlier industrial phases. Moreover, information technology and robots is dramatically reducing the number of workers needed to produce such products.That doesn't mean unemployment rises, but it does mean that people do different jobs.

This 'deindustrialisation' is not specific to particular places and the result of 'foreigners'. It is not connected in any particular way with what people call 'globalisation' either (see an LSE blog post below about this). You could actually have siege economies 'protected' by high tariffs and the same trends would be visible in almost exactly the same way. I don't recommend protectionism, I emphasise. Putting someone out of a job somewhere else will not even even do any good for your domestic economy, especially when the economic retaliation sets in and acts as a political bedfellow to rising xenophobia.  Going on about globalisation actually encourages such dead-end thinking.

What we need is not a self-defeating 'jobs for Brits' , Americans, French etc narrative but a drive to reverse the  devastating trends towards inequality throughout the world that have been going on since the 1980s (see some references below). This has a lot to do with changing marginal tax rates. The political right has had us locked in what is a distracting argument that somehow lowering higher income tax rates will not harm the total tax take. That's dubious, although it gets a lot of attention.

What is almost always avoided is the evidence that reducing taxes on higher income earners simply encourages them to go for higher and higher salaries. The most important point about the reduction in marginal tax rates for the better off that has occurred since the 1970s has nothing to do with the tax take. It is the fact that in any given company, the top bosses will be encouraged to take bigger and bigger salaries at the expense of the rest of the workforce. Yes, there is evidence for this generated by the famous Professor Picketty. The CEOs are simply taking the money off the rest of us, not increasing productivity. They would not do this if the tax system was a much more progressive one. The claim made for regressive tax systems is that they increase prosperity for everyone. Yet, even in the narrow term of economic growth figures this claim does not stack up since growth levels in the West have been lower since the 1980s than before.

Of course we can rightly criticise centrist politicians, including Macron, for implying that a political project called globalisation is somehow necessarily connected to the technological changes in information and robots and that this has a lot to do with trade liberalisation. Whatever the arguments about trade liberalisation, such trends are irrelevant to the issue about technological change and income inequality. And in any case the trends towards increased international trade are not as strong as is generally believed.

Our focus, however, should definitely not to point to some sort of equivalence between Macron and Le Pen and shy away from backing Macron as (I was devastated to see) was done by Melenchon. It should be to stop going on about globalisation and talk about the most important issues of encouraging international peace and cooperation, equality and ecological protection.


See http://piketty.pse.ens.fr/fichiers/public/PikettySaezStantcheva2013.pdf

http://blogs.lse.ac.uk/brexit/2017/04/28/de-industrialisation-rather-than-globalisation-is-the-key-part-of-the-brexit-story/

Piketty, T., Saez E., and Stantcheva, S.,  (2014) "Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities", American Economic Journal: Economic Policy, Vol 6(1), 230-71. 
http://piketty.pse.ens.fr/fichiers/public/PikettySaezStantcheva2013.pdf

References on income inequality since the 1970s:
http://www.latimes.com/business/hiltzik/la-fi-hiltzik-ft-graphic-20160320-snap-htmlstory.html

https://www.iser.essex.ac.uk/research/publications/working-papers/iser/2015-01.pdf

https://www.oecd.org/unitedkingdom/OECD-Income-Inequality-UK.pdf