Brexit and Americans’ distrust of free trade suggest the need for a modification of so-called Globalization 2.0
by Stephen S. Roach
NEW HAVEN, Conn. (Project Syndicate) —– While seemingly elegant in theory, globalization suffers in practice.
That is the lesson of Brexit and of the rise of Donald Trump in the United States. And it also underpins the increasingly virulent anti-China backlash now sweeping the world. Those who worship at the altar of free trade, including me, must come to grips with this glaring disconnect.
Truth be known, there is no rigorous theory of globalization. The best that economists can offer is David Ricardo’s early-19th century framework: If a country simply produces in accordance with its comparative advantage (in terms of resource endowments and workers’ skills), presto, it will gain through increased cross-border trade. Trade liberalization — the elixir of globalization — promises benefits for all.