New Book By FT Columnist Rana Foroohar Explains Why

On September 25, 2022, Giorgia Meloni, a former journalist in Italy turned politician, became the country’s first female Prime Minister. Under “normal” circumstances, she would be heralded as the first female leader of Italy, a country steeped in machismo, practically the original Latinos, where a woman’s place was in the convent or catering to bambinos. Of course, that was not the reaction to her win. Instead, tired tropes of her party’s historic affiliations brought up the usual buzzwords like “far-right” and “fascism”. On closer look, Meloni is indeed a nationalist. She’s “Italy First”, EU superstate second…a distant second. Most Italians agree. So because Meloni is against the baseline view of the power structure of the Western world – that super state globalism is good, nationalistic populism is bad, she will be smeared and brought to heel.

No country can have a person of influence who is against globalism. Elections like the one in Italy will happen again. No one wants globalism, let’s face it. Other than being able to try out different cultures, like mere consumers of new foods and fashions, the jet-setting tourist who did a semester abroad is likely as against one-world kumbaya corporate globalism and unchecked immigration as the guy in Middle America who lost his job making H-VAC equipment at $80,000 a year to a Mexican making $22,000 in Nuevo Leon.

Globalization and its advocates need to know this – let’s put it kindly, shall we: much of the world really does not like you all that much.

Even one-world free market aficionados like BlackRockBLK
CEO Larry Fink know how unpopular globalization has become.

In Fink’s 2022 letter to shareholders, he wrote that supply chain disruptions caused by the pandemic and the Russian-Ukraine war have “put an end to the globalization we have experienced over the last three decades.” It was as close to an admission that the Western world’s Asia-centric globalization model was on its last legs.

To be fair, globalization has been declared dead since early 2016. That’s when the World Economic Forum first said as much, ahead of its annual meeting in Davos, Switzerland. Worth noting, this was months before Donald “Tariff Man” Trump was even considered a contender for the White House. He would go on to a shocking victory in November 2016, shifting the conversation towards how trade deals have hurt “the forgotten men and women” of the U.S. Both U.S. Trade Representatives serving under Trump and now President Biden believe this fully.

Leading Wall Street billionaires have called for a “deglobalization” of the U.S. economy this year.

Howard Marks, co-founder and co-chairman of Oaktree Capital Management, wrote in a memo posted on Oaktree’s website in March that the “negative aspects of globalization have now caused the pendulum to swing back toward local sourcing.”

Marks recognizes that offshoring has “led to the elimination of millions of U.S. jobs and the hollowing out of the manufacturing regions and middle class of our country.” In his writing this spring, Marks said he thought reshoring will “increase the competitiveness of onshore producers and the number of domestic manufacturing jobs and create investment opportunities in the transition.”

What’s at stake, and what has happened to change people’s minds?

Financial Times columnist and Brooklyn-local, Rana Foroohar unleashes on the damages caused by hyper-globalism in her new book, “Homecoming: The Path to Prosperity in a Post Global World”, available at book sellers this week.

Homecoming gives readers a globalization history lesson. The neoliberals of the 1930s wanted to connect the world to buffer populism. At the time, populism was seen primarily as a communist revolt risk. To avoid such uprisings, they created multilateral institutions to govern global finance and trade, where everyone would be on the same page. Tears in the fabric of this system became apparent in 1999 during the World Trade Organization’s Ministerial Conference in Seattle. Protests were violent, something the U.S. had not seen since the race riots of the 1960s. Labor movements saw the WTO as gatekeepers to a corporatist trade system that was a detriment to their livelihood. NAFTA was already six years old. They had the receipts. Their concerns were ignored, however. China ascended to the WTO two years later. Ross Perot, who ran for President as an independent against George H.W. Bush and Bill Clinton, famously said such trade arrangements would result in a “giant sucking sound” of manufacturing jobs leaving the U.S. He got nearly 19% of the vote, unheard of for an independent candidate. It was a sign of things to come, both politically and economically.

For Foroohar, the ability of global corporations and finance to control more businesses, more wealth and political power than any time in history, “has led us to a place in which neoliberal visions of globalization are collapsing. Individuals everywhere are left stranded in the middle.” Alternatives to laissez-faire globalism are gaining influential followers. Foroohar would not have written this book otherwise.

China plays a key role in the book. It was the biggest disruptor of the Western-led trade system. The main architects and advocates for China’s new role as America’s manufacturing center claimed to believe China would become one giant Japan, despite being a top-down, command and control system run by the very same political party the U.S. fought a Cold War with for forty years. To many of us, it is hard to believe they were convinced of this outcome, or even sincerely hoped for it.

The fact that China was not becoming freer as it got richer was “papered over for decades,” Foroohar writes.

Looking at the manufacturing sector between 2000 and 2014, the domestic share of total value added and the domestic share of labor income within that declined in the U.S. and all of the West.

China was the exception. There was an increase in domestic manufacturing as a percentage of national GDP. Much of the Western world’s foreign direct investment was going there instead of at home, that’s one reason why. The multinationals from G7 countries turned China from a Happy Meal toy making economy, to the guys behind TikTok, and the lab partners to BioNTech and Pfizer’sPFE
Covid vaccine.

“The rise of trade-related political risk…may be creating a consensus around the idea that we really do need a revamp not only of the global trading system, but of globalization itself,” Foroohar said, considering all of the supply chain snafus caused by China’s lockdowns. “Today, we are still largely in the hyperfinancialized laissez-faire system that characterized the period from the eighties onward. What we need is a paradigm shift more suitable to the reality of a post-Trump, post-Brexit, post-China world,” she said.

On the dollar front, Foroohar said that the “overvaluation of the dollar and the underinvestment in the industrial base meant that American consumers increasingly had no choice but to buy cheap stuff from China sold at WalmartWMT
– because they didn’t make enough to do anything differently.” Once, when interviewing an economic advisor to an unnamed senior Democratic senator from the South, Foroohar inquired about the economic deserts dried out by manufacturing high-tailing it to Mexico and Asia. This was in 2016. The aide told Foroohar that the White House, led by the Obama Administration at the time, said it was cheaper to pay people to move to urban areas and subsidize them than it was to hope for manufacturing to return.

Where do we go from here?

Forohoor recognizes the problem, and the trend. The question is whether she sees the opposition, which has spent much of the last six years bemoaning an end to traditional globalization and backing any politician, lobby shop, or person of influence who could promote the cause. There has been massive pushback against tariffs, and other trade remedies, as recently evidenced by reductions in solar tariffs imposed by the Trump administration. New incentives in the Inflation Reduction Act might help, but the U.S. will never outspend and out-subsidize China.

There are new concerns.

With globalization on the wane, many of the same characters who have chartered the course of our global economy recognize that their unipolar project of a one-size fits all economic model is in trouble. China is decoupling. The U.S. political scene is not constructive to a return to the “good ole days”, nor is Europe’s. Voters are divided on everything, with the one exception of should we have more globalization or less.

Those individuals and institutions who have set the course for, and benefit from, globalization are now leading the West into a forced industrial revolution to monopolize and capture markets at home. This coincides with their inability to do so in Asia as it is becoming more difficult to subdue China.

We have what looks like a forced destruction in the West – led by Europe – of key sectors of the domestic economy, all to be made anew. This includes new foods, new energy, new transportation, new drugs (primarily for the healthy and not the sick), and new money, with talks of central bank digital currencies.

This is the new battle. If globalization and its institutions were designed, as Foroohar notes, to fight populism, so is this new turn inward designed to do the same. Populist leaders and advocates are vilified, as we have seen now in Italy. The battle of our times in the Western world is between the forces of globalism versus the interests of the populace: globalism vs populism.

Corporate-led globalization may be dying. But what replaces it might not be any better.

“There will be new frictions and unexpected challenges as we move from a highly globalized economy to one in which production and consumption are more tightly geographically connected,” Foroohar said in her final chapter. “There will be huge opportunities. Around the country…you’ll see a far greater number and variety of communities becoming economic hubs as both policy and business models push back against the trend of centralization and globalization.”