Homecoming – Recipes for a post-globalization economy

President Joe Biden speaks from his lectern flanked by the slogan
As President, Joe Biden is trying to build a worker-centric consensus © New York Times/Redux/Eyevine

Globalization and automation have not been good for the US middle class in recent decades. Economists like Thomas Piketty, Daron Acemoglu, Gordon Hanson, and Anne Case have documented the blows the average American has suffered in terms of inequality, wage stagnation, job destruction, and deaths of desperation.

But despite 30 years of middle-class malaise, Democratic and Republican governments alike have been pushing laissez faire Policies without creating social safety nets that the “righteous” would have put in laissez faire – as did the safety nets in all other advanced economies in the world. That is changing now.

Republican Donald Trump has brought down the free trade consensus; Democrat Joe Biden is building a new worker-centric, place-centric alternative. a new book, homecoming by FT columnist Rana Foroohar, documents how and why America entered this “post-global” paradigm, and explains how the US political establishment is now pushing a new political agenda with new priorities and why this is creating a rare harmony among Americans left and right.

The book is a compelling read that will provide thought-provoking thought for many days. It is not a book in which the causes, consequences and remedies are neatly fitted into a crystal of logic. Its strength lies in its rich array of examples – many of which are based on the author’s interviews with economic actors and policy makers.

When big corporations are blamed for part of the malaise, the blame is laid in three chapters on “BigAg” and the US food industry. When the erosion of the US industrial base is lamented, it is in the context of chapters on the semiconductor and textile industries.

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Though the book is filled with heartache, strife, and guilt, it is ultimately hopeful. Rather than leaving the reader to imagine solutions that could create the new post-globalist paradigm, a variety of specific examples are discussed. Vertical farming and cooperatives could fix BigAg’s ills. Digital currencies could fix the bugs of the dollar-based international financial system. Job creation in healthcare, childcare and education could create the jobs that a more local, community-based economy will need.

US Vice President Kamala Harris speaks to a man (both wearing anti-Covid face masks) next to a sign that reads

US Vice President Kamala Harris talks to a small business owner in Louisiana © AFP / Getty Images

homecoming is a book about America, but it would have been stronger if it had two additional chapters. One should have considered how other rich nations avoided the dire consequences of the United States. Northern Europe dealt with competition from robots at home and China abroad by “protecting workers, not jobs”; Southern Europe did it by “protecting both”. Only in America did a consensus emerge on the “do not protect either” option. The second missing chapter would have shown how globalization lifted hundreds of millions out of extreme poverty and pushed billions into the global middle class.

Elsewhere, descriptions of economic mechanisms shake. To cite an example, “Because the dollar is the world’s reserve, the United States is being inundated with dollars that need to be converted into financial assets, which means the financial system is having to work overtime to achieve this, which is what debt and… Promotes bubbles.” Many international economists would disagree with this logic. But this is a distraction, but not a serious mistake, since the book’s true merit is in explaining the thinking behind the reasoning that led the US policy establishment to turn against beliefs it had unquestionably held for decades would have.

Ultimately, this is a must for those in the Davos world. Many FT readers may disagree with statements like this: “Far from making us all ‘free’, the free market has turned us from citizens into consumers increasingly beholden to the ever-larger corporations that outsource our jobs and our personal ones mined data even as they sold us (often on credit) the ever brighter and shinier objects of late capitalism.”

Many more will be uncomfortable with the list of culprits that includes trade deals, Wall Street, shareholder value, economists and the international financial system. But you should read the book anyway.

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It will likely become a playbook for the post-global era, in which free trade will be pushed aside by labor-centric trade policies, localization, and strong industrial policies. Where Davos man or woman is pushed aside by policies that use international economic interdependencies to advance geostrategic goals, so-called “armed interdependence”. Where the interests of Wall Street and multinational corporations are less heard and the interests of “people and places” in Washington’s halls of power are more heard.

This book will help mainstream thinkers understand the reasoning of those who, like Foroohar, are dead certain that “globalization as we have known it for the last half century is over”. And especially what comes after that.

homecoming: The road to prosperity in a post-global worldby Rana Foroohar, Krone $30, 400 pages

Richard Baldwin is Professor of International Economics and Editor-in-Chief of the CEPR’s policy portal VoxEU.org

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