51: Why Everyone Is Freaking Out About Globalization

SPEAKER_1 (0:00)

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Tracy Alloway (0:24)

Welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway, executive editor of Bloomberg Markets. And unfortunately, my normal co-host, Joe Weisenthal, is away this week.

He is off globe trotting to some very exotic locations on a business trip for Bloomberg. So I thought as a sort of protest episode that Joe gets to go on an amazing trip to some very nice places with very good food and very luxurious scenery, we are going to talk about globalization. And specifically, we are going to talk about the negative aspects of globalization.

And here with me today as a replacement co-host is Sid Verma. He is one of the newest members of the Bloomberg Markets team. Say hello, Sid.

Sid Verma (1:15)

Hi there.

Tracy Alloway (1:16)

So, Sid, you are actually the perfect person to talk about this, because you have done an enormous amount of work on globalization and cross-border capital flows and development over the course of your career, right?

Sid Verma (1:28)

Yes. For the last couple of years, I have written quite a lot about the opportunities and challenges brought by unfettered capital flows and the backlash against some trade policies that have been implemented at the behest of Western-backed institutions. So, yeah, I'm really excited to have this conversation. It seems like it really is the sexy topic of the moment.

We've obviously got the Brexit vote, the rise of Donald Trump this year, declining trade flows, rising income inequality, political populism. It all seems to nurture a growing view that globalization isn't just out of fashion. It's on life support.

Tracy Alloway (2:11)

And our guest today, I actually really like the way you described him earlier.

It's Danny Roderick. He's an economist. He's also a professor of international political economy at Harvard. And you kind of said he was the original guy who started writing about all the negative aspects of globalization before it was cool, right?

Sid Verma (2:33)

Yeah, he refused to join in the congratulatory party two decades ago. And he argued that economists probably overstated the benefits of globalization and that policymakers probably risk a backlash if they push ahead with unfettered free trade and capital policies.

So he's exactly the right economist to talk to on this topic.

Tracy Alloway (2:57)

Right. And in retrospect, it seems like the notion that a backlash was coming was very, very prescient because here we are in 2016 and everyone's talking about the downsides of globalization, unfettered trade deals, rightly or wrongly, I should say.

Well, without further ado, Danny Rodrik, thank you so much for joining us today.

Dani Rodrik (3:28)

Nice to be with you, thank you.

Tracy Alloway (3:29)

Should we maybe start with this idea of a backlash? You know, to what extent was the criticism that we are seeing now of globalization, to what extent was that inevitable based on what's happened over the past two decades and beyond?

Dani Rodrik (3:47)

I think it was pretty inevitable. I mean, it seemed clear to me that the opposition was going to be building up. I guess I wrote a little monograph a couple of decades ago called Has Globalization Gone Too Far? And then, you know, it was different kinds of characters that were sort of, it was Pat Buchanan, and, you know, in Europe, it was the truckers protesting and the agriculturalists, and sort of where, you know, sort of other kinds of people on the scene. But the general trends were pretty easy to see, and they arose from some basic fundamentals that the kind of overall economic benefits of globalization began to be swamped by a lot of concerns about redistribution, about what was happening to specific communities, about the elites getting sort of uprooted from sort of their national setting, and then the larger gap opening up between the people who control the politics and what was happening and the ordinary people. And sort of, you know, decision making, moving away from national capitals to weird places like Brussels or Geneva, or sort of multinationals and banks, you know, in closed doors.

And so historically, of course, this was also not the first time we were seeing this, that we've had an era of high globalization during the gold standard. And it came to a rather abrupt end for many of the same reasons.

I don't think we are up quite the same kind of crisis at this point. I think the kind of globalization we have has much firmer foundations than was the case under the gold standard. But I do think we have pushed it further than it can go either economically, actually, or politically.