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Maxed Out: Globalization has not been our friend

CArgo ship Maxed Out May 11
Globalization has not been our friend—a fact further driven home by recent global events—but lingering belief in it is hard to shake.

An inexorable side effect of Covid has been a turning inwards. Almost everyone had more than enough time to examine their lives, hopes, dreams, opportunities, self-made prisons. Many veered off their career paths, some by choice, others by necessity. Many abandoned urban areas for less crowded places. Quite a few just went mad.

Countries looked both inward and outward. The stark reality of broken supply chains, the inability to source vaccines, the desperate need to support populations suddenly unemployed, the limitations of both fiscal and monetary policy and the rage of large swaths of their populations left countries scrambling for answers to questions they didn’t know existed until the fragile world order fell apart.

Globalization—the poster child for a better world for all—revealed its ugly side like never before. 

The first tenets of globalization to fall were the myopic beliefs that the fine meshing of commerce and culture would bring countries and peoples together and strengthen the bonds, political, economic and cultural around the world. The internet, easy communication, cheap global transportation and, yes, even social media were going to bring the world’s countries and cultures together, hand in hand, happily singing Kumbaya.

But suddenly much of the world looked askance at China, from where the consensus determined Covid emerged. Anti-Asian feelings caught fire around the globe. 

Suddenly many developed countries and virtually all lesser developed countries realized they were at the mercy of some place else to provide the vaccines being manufactured. Suddenly supply chains broke like they were made of floss and manufacturing companies around the world wondered why they’d developed and finely tuned their just-in-time factories. Suddenly the world’s economy awoke to the reality they couldn’t buffer the economic effects of Covid’s devastation without fuelling inflation, a beast most thought slayed in the 1980s, ironically about the time this current culture of globalization began to take root. 

In addition to fuelling inflation, the disruption visited by globalization fuelled nationalist political movements. Immigration slowed, borders closed, trade protectionism increased, countries turned to strongman dictators.

And then Russia went crazy. Most of the EU countries whistled past the graveyard because they were dependent on Russian energy to fuel their homes, businesses and economies. Governments and farmers and everyone up the food chain are setting their hair on fire because Russia is the world’s leading producer of agricultural fertilizer. 

And other global manufacturers shuddered to discover how dependent they were on manufactured parts from Ukraine.

Globalization, while spurred on by a revolution in communication, was built on a foundation of cheap labour and cheap transportation. 

Business leaders in the developed world quickly grasped the effect on their bottom lines of moving manufacturing to countries with cheap labour, lax or no unions, environmental and occupational safety standards and friendly, complicit governments. The world lionized CEOs who laid waste to work forces, factories and whole towns by downsizing and moving production offshore, often to countries that, in addition to the factors above, provided jurisdictions in which to shelter profits from taxes they’d have had to pay in their home countries.

Who benefited? Not workers—blue or white collar—who saw hard-won wages, working conditions and job security disappear. Not towns who saw their economic foundation crumble. Not countries who no longer created strategic goods, swapping that security for cheaper goods made elsewhere. Not the world that saw factories in countries with higher environmental standards shuttered, replaced by operations in countries that couldn’t spell environment.

Who benefited? CEOs, shareholders, the one per cent. But hey, as a welfare recipient you could at least buy cheap crap from Walmart. Oh yeah, as a welfare recipient you worked at Walmart because you lost your job when your factory that made the stuff you’re buying closed down.

Virtually all the productivity gains made as a result of globalization inured to the one per cent. The rich got richer, the rest, if they were lucky, treaded water. 

Cheap transportation fuelled globalization. Container ships grew to the size of floating towns. They were fuelled by bunker oil, the dirtiest, most polluting, cheapest source of fuel. They were crewed by developing-world sailors who were repeatedly living a life of virtual slavery.

How pervasive and important was this cheap transportation? Factoid: Fish being caught off Norway were being shipped to China for processing and being shipped back to Norway for consumption. Just one example. Norway is a small, fairly socialist country with a high standard of living. Undoubtedly processing fish would be much more expensive in Norway than China. But the global cost—deemed externalities by economists—of this crazy supply chain were huge. 

And it’s just one tiny example.

The need to purchase a new faucet recently was a frustrating exercise. After several stops, I finally found one, and only one, not manufactured in China. It was a few bucks more expensive. 

Important?

We’re witnessing Russia weaponize energy against countries. How surprised will we be when China weaponizes, well, just about everything we buy? Inconceivable? Hardly.

The effects of globalization—political, economic, environmental, cultural—have been a mixed bag. Far from the rising tide that lifts all boats, it has been closer to a zero-sum game with few winners and many losers. 

It hasn’t produced the touted free trade in goods; tariffs, trade barriers and nationalistic purchase laws have abounded. While it may have marginally increased living standards in places multinational companies sited new factories, it decreased living standards in developed countries and fuelled a culture of fear, leaving workers reluctant to demand better wages and working conditions. It has globalized disease, led to the exploitation of workers, rewarded prisoner and child labour, shredded social safety nets and greatly increased the inequality of wealth worldwide.

Which in no small way encouraged those nationalistic movements and, just this week, saw the Philippines elect yet another president named Marcos to replace the brutal regime of Rodrigo Duterte.

Globalization has not been our friend. But lingering belief in it is hard to shake. On Monday, an editorial in the Globe and Mail touted Canada as an oil superpower ready, if not quite able, to step up and fill some of the void left by Putin’s self-immolating decision to play brinksmanship with the EU. Their analysis—strong global demand for oil, pariah status for various suppliers—boiled down to the schoolyard taunt, “Somebody’s going to do it; might as well be us.”

The convoluted logic—especially in the face of our federal energy policy—is Canada should profit by the global demand and use the profits to turn the Canadian oil and gas industry into the world’s lowest-emitting producer. 

Dante nailed it: “Abandon hope all ye who enter here.”