Already under attack after Brexit, globalisation and free trade have come under further pressure with the election of Donald Trump in the US.
Powered by the votes of disaffected US workers who propelled him to the White House, Asian currencies and emerging markets more broadly have been under pressure as investors bet the door is about to swing shut on unfettered access to the US economy and its consumers for foreign firms.
It’s already gone so far that there are reports Apple has asked its primary manufacturing partners, Foxconn and Pegatron, to abandon Asian manufacturing and explore making iPhones in the US.
Such a move would be the wrong rein to pull, Australian prime minister Malcolm Turnbull told an audience at the Business Council of Australia overnight.
Turnbull said open trade had help lift income, employment and living standards in nations which had “embraced open trade and investment policies”.
“In our own region, this have lifted billions out of poverty,” he said.
But in a nod to those disaffected Trump voters, and no doubt many around the developed world who sympathise with them, he also said change is happening at an unprecedented pace.
“Change is unsettling, and as people see things change around them, they are concerned they could be left behind,” Turnbull said.
Many workers in the developed world might see that fear as their reality.
Which is feeding the anti-trade sentiment which Turnbull said over the past year had “seen economies introduce new protectionist trade measures at the fastest pace since the global financial crisis — the equivalent of 5 per week”.
The wrong call
“Retreating from policies that have delivered us prosperity and opportunity is the wrong call. We ignore the gains from openness at our peril,” Turnbull said.
He also quoted Paul Samuelson, the winner of the 1970 Nobel Prize for Economics, who said:
“Economic history and best economic theory together persuade me that leaving or compromising free trade policies will most likely reduce future growth in well-being in both the advanced and less productive regions of the world. Protectionism breeds monopoly, crony capitalism and sloth. It does not achieve a happy and serene egalitarian society.”
True. But workers who have seen their jobs move to Asia might disagree.
And this, Turnbull said, is the lesson of Trump’s election victory.
The reality that the “the impacts of change can be borne unevenly across the community” must be faced and “policy changes must be seen to be fair and be seen to be fair in a very broad sense”.
But in a sign that he may not have fully grasped the lesson of Brexit or Trump, Turnbull is also asking those affected by change to do something remarkable. Remarkably difficult.
“Fairness does not mean examining each decision in isolation, looking at a narrow set of winners and losers,” Turnbull said.
“And this is a challenge for us, for our advocacy. It means making sure our overall system is fair, examining the transfers of goods and services over a person’s lifetime and asking ourselves, does this reflect the benchmarks we set ourselves of an open, fair and just society?”
How the prime minister can make this call to the poorer and disaffected in our society, when his government can’t even get changes to superannuation through because of the self-interest of wealthier Australians, is difficult to fathom.
Even the request is symptomatic of the disconnect that fueled Trump’s rise.
But Turnbull doubled down, saying: “Instead of retreating from the world, we need to strengthen our engagement internationally and with the fastest-growing nations in our region.”
And I’m guessing that when those affected by change in our economy hear Turnbull say “we have to make the case for trade” and to capture all its benefits “our economy must become even more flexible and even more competitive” and that’s why his government has a “vigorous structural reform agenda”, all they can think is: “What? I’m carrying the burden again?”
Turnbull is right. Free trade has been a boon for the Australian economy. But many workers both here and across the globe have been left behind by free trade and technological change.
Just telling them change is unsettling and they need to take a broader view is going to do little to assuage their fears.
Perhaps we could start with some reforms, some changes that even out generational and income inequality. Then maybe we could properly address the concerns that those unsettled workers feel.
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