The Moral Case for Globalization

March 18, 2016

The presidential election campaign seems to be finding bipartisan consensus in all the wrong places. An antitrade message has powered the campaigns of the leading Republican and Democratic candidates—a message that, if implemented, threatens to set back the US and global economies. But what the candidates are overlooking the most is the moral case for globalization.

The object of most critical debate is the Trans-Pacific Partnership (TPP) agreement signed earlier this year, despite what many economists estimate will be widespread benefits for the United States and the 11 other member states. But they all seem to agree, wrongly, that trade deals that have won across-the-board support in the last 25 years have been bad for America.

The rhetoric is loudest on the Republican side, where beyond his personal insults, Donald Trump claims the United States has gotten a raw deal out of the global economy, even though he does extensive business overseas, including owning golf courses, hotels, and other properties in Scotland, the Philippines, India, Brazil, and elsewhere. Trump wants to retaliate against imports and companies that set up factories overseas. Senator Ted Cruz, his main rival, takes the same position. Such steps would only cause trading partner companies to retaliate, producing more harm than good to the US economy.

On the Democratic side, Senator Bernie Sanders' attacks on former Secretary of State Hillary Clinton, who has supported free trade deals in the past, have won him some support in the industrial Midwest. Her efforts to outdo him enabled her to roar back in more recent primaries.

The consensus is misplaced, dangerous—and ethically obtuse. Even as the world economy struggles to recover from its worst downturn in 75 years, the case for the global marketplace is strong, although global cooperation is needed to continue setting strong ground rules. That case is based not simply on economic growth pursued by political leaders and the "efficiency" championed by economists. It is a moral case as well, laid out in my new book, The Great Tradeoff: Confronting Moral Conflicts in the Era of Globalization.

Morals have always been part of the discussion of markets, which is one reason economic arguments become so passionate. Adam Smith, whose Wealth of Nations was published in 1776, was professor not of economics but of moral philosophy at the University of Glasgow.

The moral case for globalization rests on the proposition that the system has raised the living standards of billions of people, including some of the world's poorest citizens. With due respect to Thomas Piketty for highlighting the issue of inequality, the evidence suggests that on a global basis, economic inequality is declining, even as it increases within rich nations. Those in the bottom third of the world's population, except for the very poor who earn as little as $1.25 a day, have become significantly better off, as demonstrated by Branko Milanovic, the former lead economist at the World Bank's Development Group.

"For the first time in almost 200 years—after a long period during which global inequality rose and then reached a very high plateau—it may be setting onto a downward path," he has written.

True, the group that has not benefited from globalization are the working-class families in the advanced countries of the West. But the proper response to that challenge is not to beat back globalization or to slow the pace of technological change—as if either were feasible—but to spur job creation, reform the tax and immigration systems, and prepare workers for the changes that always transform economies and civilizations. Just a century ago, it is easy to forget, most Americans earned their living in agriculture.

Today we have to meet changes head on as we have before.

There is an essential moral value undergirding the global economy, after all: economic liberty, the right of consumers to buy and the right of investors to produce goods where they want. This principle is ancient. The Greeks said that oceans exist so that trade could flourish. But from Adam Smith to Ronald Reagan, markets have also been associated with political as well as economic freedom, which is why it is odd that the presidential front-runners Trump and Cruz, in opposing trade agreements, have turned that Republican catechism on its head. Milton Friedman, worshipped by conservatives because he understood that political and economic liberty were interdependent, would be appalled.

As for what President Barack Obama calls "the defining challenge of our time"—inequality in the United States—it would be a mistake to dwell singularly on inequality while ignoring the policies that lift people out of poverty.

Many economies today, most obviously China, have mobilized global markets to elevate the living standards of those least well off. At the same time, inequality has widened in China, because of even greater benefits accruing to the very rich.

That inequality is increasing in the United States is beyond doubt. But the Congressional Budget Office estimates that government programs and transfer payments have elevated the incomes of the bottom fifth of the population by almost 50 percent in recent decades. These programs are not included in Piketty's calculations of inequality. They should be, because they point to how we can achieve a sense of justice in the United States.

How to reconcile justice at home versus justice on a global scale is a great challenge of the worldwide market economy. Certainly, a moral society must look after those left behind through no fault of their own, such as citizens suffering from lost jobs and stagnating wages.

Still, US political noise notwithstanding, countries can embrace communitarian imperatives by ensuring adequate norms are established in trade and investment agreements, such as the labor and safety provisions in the recently-negotiated Trans-Pacific Partnership. They need to train their workforces to adapt not only to the global economy but to the technological changes that have eliminated low-skilled jobs.

Moral absolutes are hazardous. But yes, there is a strong moral case for globalization. The global system needs to be complemented by steps at home to deliver economic gains by those left behind and respect for the preservation of communities. But under the right rules, globalization can be nurtured to deliver liberty and justice, along with higher standards of living and opportunities around the world.