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The Failure of Globalization in Developed Economies

The election of Donald Trump as the United States’ President, and the United Kingdom’s public decision to leave the European Union (E.U.) has been presented by economist as a rejection of globalization by the western world. Trump consistently used the adverse effects of globalization as a foundation of his campaigns across America. There has also been a continued disgruntlement within the E.U. about the hardships that have been introduced by freer global markets (Flanagan 1). The previously held belief among developed economies that freer trade is the way to go has been rocked to its core. Notably, the developed economies are leading the protests against free global markets by seeking to renounce their stances (Worth 3). This work assesses the current view of the failure of globalization in the developed economies, and especially the basis of these assumptions.

Globalization in the Developed Economies

From the onset of globalization, the rich were expected to benefit the most. The fall of the Berlin Wall in 1989 has been seen by many as the beginning on the free movement of capital, goods, and labor. Unleashing market forces on the global market was expected to diminish the role of nation states by triggering trickle-down economics. In fact, most developed economies were in favor of this move. But as Jeffrey Sachs puts it, the United States and European leaders were in denial relating to the realities of global capital markets and competition from Asia. As globalization has become more rapid and caused considerable economic decline in the developed world, expectations have not been met (Worth 3). Globalization was intended to create more wealth for the wealthy, and more job opportunities for the developed economies. These views, explains Jeffery Sachs, were based on dated understanding of globalization that was greatly restricted by the lack of concreate experience.

Rapid globalization has resulted in unforeseen consequences within the developed world. although globalization has benefited the wealthy as predicted, it has also disproportionately hurt the unskilled and middle class in the developed economies (Ogawa 90). Competition from Asia and other global market such as Brazil has presented much cheaper labor, and taken away many of the positions that were previously held by developed countries. With the realization that globalization can continually offer cheap labor, major developed economies have made strides towards cessation. President Trump came to office on the promise of Americanism, and not Globalism. Brexit was largely a vote against globalization.

The largely unskilled and middle class in developed countries have played a crucial role in the revenge on globalization, and rightly so. In Europe and the United States, there has been a gradual decline in the middle class has been evident as more people fall into the bottom of the income distribution. Tao Zhang of the International Monetary Fund (IMF) notes that more than one half of American households have lower incomes today than they did in 2000 (Carluccio 113). The middle class has undergone a persistent and evident decline.

Figure 1: The declining share of households in the U.S. and increase in low income households

As the share of American middle class households has continually declined, the share of low income households has increased considerably. Rapid globalization has resulted in a profound income polarization in the developed economies to an extent where it has gained political influence. Trends of income polarization are especially evident in the United States, Europe, and Japan; mostly developed economies.

Alternative View

The view that globalization has caused a disproportionate harm to the unskilled and middle class in the developed economies has been refuted. The marginalization of the middle class in the U.S. and Europe has been well documented, the reason for this trend has largely been given as a result of rapid globalization. Wolfgang Münchau presents the view that the failure of globalization in the west is largely caused by the failure of the western economies to effectively cope with economic shocks that inevitably result from globalization. For instance, the stagnation of real average incomes for two decades was badly dealt with by western economies. The view that globalization has inevitably been harsh on the developed economies is in denial over realities of globalization (Flanagan 1). The financial crisis of 2007-8 was also as a result of rapid globalization, but its impacts could have been better dealt with.

The move by electorate to side with advocates of economic reform in the United States and the United Kingdom is not a decisive one as the economic impact of reform is usually subtler. There is no factual evidence to support the view that countries that adopt economic reforms perform any better. This leave the view that rapid globalization has overwhelmed the developed economies both politically and technically. A compared to some of the developing economies, developed economies have not managed change well enough.

Conclusion

Developed economies need a close continuous analysis of the global market. This will allow for better and elaborate scheme to retain a beneficial position. The view that globalization has failed the developed economies is false. Rather, globalization has overwhelmed developed economies both politically and technically (Flanagan 2).

Works Cited

Carluccio, Juan. "Fragmentation and Wage Inequality: Insights from a Simple Model." Annals of

Economics and Statistics 125/126 (2017): 113-134.

Flanagan, Charles. "Retreat from Globalisation? Brexit, Trump and the New Populism." Irish

Studies in International Affairs (2017): 1-4.

Ogawa, Hikaru. "Impact of Capital Market Integration on Skilled-Unskilled Labor Choice."

Journal of Economic Integration 32.1 (2017): 90-111.

Worth, Owen. "Globalisation and the ‘Far-right’ Turn in International Affairs." Irish Studies in

International Affairs (2017): 1-10.