Within days of the Brexit vote, Prime Minister Justin Trudeau and U.S. President Barack Obama were in Parliament joking about their bromance and the fact that American teams have won the most Stanley Cup championships.
Nice try, guys. There were no jokes funny enough to interrupt the fear and loathing that followed Britain’s referendum decision to quit the world’s greatest unification project. You will have heard that globalization is dead and that a dark age of Trumpian isolationism is upon us.
Introspection is needed. It should be obvious to everyone by now that something is wrong with the world we’ve built over the past few decades. The world’s biggest market has entered a long period of political uncertainty that can only impede economic growth. Meanwhile, in the United States, a man who would close borders to Muslims and scrap trade agreements is about to run for president. These are dangerous times. But let’s keep clear heads: Don’t let Donald Trump and the 17 million Brits who voted to leave the EU scare you into thinking that the world’s borders are about to clamp shut. Globalization works; it just needs some fine tuning.
Every time you read something about the Republican nominee for the White House, remember: He is losing, and badly. Trump trails an unpopular Democratic candidate by significant margins in almost every poll. He has raised very little money. Moderate Republicans are lining up behind his opponent, Hillary Clinton, who should have little trouble rallying her side. We are witnessing “peak Trump,” not “peak globalization.”
India just loosened a number of foreign-ownership restrictions and now boasts of being the country most open to international investment in the world. In the U.K., the “Leave” campaign promised more free trade deals, not a moratorium. Brexiters voted for more globalization, not less.
What then? The Brexit vote was the clearest manifestation to date of a deep frustration in the rich world with the political class, which has proven incapable of dealing with elevated youth unemployment, stagnant wage growth and the threat of long-term joblessness. In her book on the global plutocracy, Chrystia Freeland, Canada’s minister of international trade, writes about “active inertia,” academic Donald Sull’s term for the tendency of companies to respond to revolutionary change by ramping up what they are already doing. Freeland, a former journalist, observes that many of the modern billionaires—George Soros, Mark Zuckerberg, Russian oligarchs—became super rich because they were nimble and brave enough to take advantage of fundamental change.
Sadly, the political class to which Freeland now belongs behaves more like quivering chief executives than world-beating entrepreneurs. We’ve known for a decade at least that the benefits of globalization in countries such as the U.S. and the U.K. were being trapped at the top of the income pyramid. The only way to change that was some form of redistribution. What did politicians do? They recommitted themselves to austerity, a policy suited for a time of plenty, not a moment when households are hamstrung by debt and corporations are bent on hoarding profits and buying back shares. They tied up their legislatures in partisan conflicts that appealed only to their most zealous supporters. They ran away from sensitive, important issues such as immigration and income inequality.
After almost a decade of crisis and disappointment, hundreds of millions of people have lost faith in their leaders. Lies about immigration played an important role in the Brexit vote, but former Prime Minister David Cameron was powerless to combat them because too many Britons had given up on him. Something similar happened in Canada. Trudeau won because he promised to end the “active inertia” that gripped Ottawa. He has adapted his economic policies to the time in which we live, whether it is risking deficits, raising taxes on the wealthiest or raising Canada Pension Plan benefits. We can debate the specifics, and we will. But he has the right idea. Let’s hope others are watching.
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