What Happens When Globalization Goes Bad?

Includes: DIA, QQQ, SPY
by: Michael Panzner

I (and others) have previously noted that as economic conditions worsen, so will the social mood. One unfortunate consequence of this shift will be heightened antagonism towards "outsiders," (e.g., immigrants) as well as widespread resentment towards those who seem to be "winning" at others' expense (e.g., China). The upshot? Increasing protectionism and a contagious tide of xenophobic nationalism.

As it happens, there is plenty of evidence to suggest that attitudes in this country are already moving in that direction - despite the fact that the U.S. economy has not (yet) fallen off a cliff. In "The Economic Isolationists Are Winning," the eponymous publisher of Greg Mankiw's Blog details a recent poll result that could be the precursor to a more direct and concrete collective response.

A new poll from NBC News/Wall Street Journal (conducted Dec. 14-17, 2007):

"Do you think the fact that the American economy has become increasingly global is good because it has opened up new markets for American products and resulted in more jobs, or bad because it has subjected American companies and employees to unfair competition and cheap labor?"

28 % of the American public said globalization is good, while 58 % said it is bad.

Note that even the pro-trade part of the question presumes a mercantilist approach to the issue. In actuality, trade is not primarily about more or fewer jobs but about allocating labor among industries toward those in which we have a comparative advantage. I doubt, however, that a more economically literate rewording of the question would have found the American public sympathetic to globalization.

While Professor Mankiw seems to blame the results on isolationist propagandizing or poor schooling, I believe they reflect a structural sea of change that will find popular appeal in nations around the world as the glory days of global growth come to an end.

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