Insight
Crisis of capitalism? Perhaps, but don’t blame it on globalisation by Simon Tilford 10 February 2017
Globalisation did not force governments to adopt policies that divided their countries, exacerbated inequality and hit social mobility. Many of them did those things by choice. Donald Trump, Brexit, serious populist pressures in other EU countries: are we entering a full-blown crisis of international liberal capitalism? There is no doubt that globalisation poses policy challenges for governments. But globalisation by itself did not force governments to adopt policies that have divided their countries, exacerbated inequality and hit social mobility. Many of them did those things by choice. The problem is not that we have allowed an increased role for markets, as many on the left (and increasingly on the populist right) argue. Open markets remain the best way of generating wealth and opportunities, of challenging vested interests and of expanding people’s freedom. We are in this mess because we’ve forgotten the lessons of the post-war period. Basically, we have a crisis of distribution and opportunity. Globalisation is a net positive, and has played a huge role in reducing poverty globally over the last 30 years. But there are winners and losers from increased trade and movements of capital, as there are from rapid technological change, and many countries, notably the US and the UK, have failed to take the necessary corrective action. Contrary to the anti-globalisation proselytising of the political left, the American and British governments could have acted; they were not prevented from doing so by ‘international market forces’. And, globalisation does not, as the liberal economic right has tended to argue, require governments to reduce social spending, weaken unions and cut taxes on the wealthy. For example, successive American and British governments were not forced by ‘globalisation’ to allow executive pay to balloon. This reflects failures of corporate governance. While pretty much all developed countries have seen rapid pay growth at the top, nowhere has the explosion of boardroom pay been as big as in the Anglo-Saxon countries.
CER INSIGHT: Crisis of capitalism? Perhaps, but don’t blame it on globalisation 10 February 2017
info@cer.org.uk | WWW.CER.ORG.UK
1