April 20, 2018 / 3:29 PM / 10 months ago

Breakingviews - Review: How to deprogram economic xenophobia

Fifth graders from Weizmann elementary, a multi-cultural school, dance the tango during rehearsals as part of a social development programme at their school in Jaffa near Tel Aviv December 8, 2011. REUTERS/Ronen Zvulun

HONG KONG (Reuters Breakingviews) - Renowned social scientist Robert Putnam was so horrified by his research results that he almost binned them. His vast, meticulous survey, which ended in 2000, found that Americans living in ethnically diverse communities became less trustful than their peers in homogenous neighbourhoods. They not only became sceptical of people from other races, but of their own ethnic group too. Placed in proximity with those from different backgrounds, humans did not become more tolerant, but voted less, volunteered less, distrusted their neighbours and suspected their leaders. The survey contradicted a core assumption of multiculturalism: that integration delivers social cohesion.

These days Putnam’s conclusion would shock no one. As trade barriers rise and demagogues gain political appeal, the world seems to be reprising the mistakes that ended in World War II. “Countries are no longer nations but markets,” French nationalist leader Marine Le Pen griped in 2017. “This dilutes our cultural identity.” The quotation opens the first chapter of Ian Bremmer’s “Us vs. Them: The Failure of Globalism”. His survey of the forces trying to re-erect walls between people, nations and markets makes for a sad read. If globalisation once seemed the “generous choice” that let everybody win, as Bremmer puts it, a far more cynical ideology is spreading. Through its dark lens international trade appears as a mercantilist competition for surpluses. Pluralist Western societies, battered by crime and terrorist attacks, look naïve; Asian countries like Japan, which puts little value in diversity, look like models.

Bremmer, a social media savant and famed inventor of buzzy concepts like the “J curve” - a descriptor of the relationship between political openness and stability - rails at length against these developments. But he is also careful to empathize. Supporters of U.S. President Donald Trump or Venezuelan leader Nicolas Maduro may not be so welcome at the cocktail tables of Davos, but they aren’t all irrational or evil. Bremmer admits that many regional industries have been wiped out by shifts in global supply chains, and free trade won’t bring them back. He predicts many professionals will get similar treatment at the hands of robots. It is understandable that many are unwilling to wait for the winds of comparative advantage to blow in their direction. Those dragged along by globalisation’s tail have felt nothing but its sting.

Rising inequality has played a big role in manufacturing discontent, especially in developing economies. Bremmer offers the example of Nigeria, where the number of millionaires rose by 44 percent between 2004 and 2010, but the population of impoverished people expanded by 70 percent to 112 million.

It is not surprising that elites and corporations have been quicker to adapt than stodgier peers in governments, schools, churches, and unions. It is equally unsurprising that countries where such public institutions are weak, or weakening particularly fast, are more vulnerable. The solution lies in institutional change, but large chunks of Bremmer’s concluding chapters read more like scribbles on a Davos cocktail napkin than serious programmes. “There is another way,” he writes, but his way rambles.

He calls for a rewritten social contract, for more educational investment and for a different approach to taxes. He’s on the fence about taxing robots to compensate workers replaced by machines; and is lukewarm to the “universal basic income” that would give everyone a base living stipend. He’s excited by the role that tech companies like Facebook and Google could play in defending democracy, intrigued by India’s biometric Aadhaar programme, and charmed by non-governmental organisations handing out learning tablets in refugee camps. Even so, “Us vs. Them” spends more time name-dropping ideas than assembling an agenda.

There is one class of public institution that has more power than any other to alleviate, or aggravate, all of the issues above: the school. Educational systems have repeatedly failed to cushion societies against the impact of free trade and migration. In the United States, politicians have been dealing with layoffs provoked by economic dislocation for decades, yet the situation persists. Universities are churning out vast numbers of graduates capable of engineering molecules or designing exotic derivatives, yet they have still proven susceptible to infantile political ideas. Everyone should know better, but they don’t.

Average world government expenditure on education as a share of GDP actually declined during the depths of the financial crisis, UNESCO data shows. That highlights a market problem: investment in schools tends to fall just when societies most need it to rise. At the same time, primary and secondary school teachers earn far less than college professors in most countries. Underinvestment in early education effectively widens the capability gap between those able to afford college and the rest. Such imbalances are major contributors to economic and political inequality, and leave workers vulnerable to technological changes. Band-aids like universal basic income don’t solve such problems.

There are reasons humans talk loudly about how important education is, then vote to cut funding for pre-schools. There are reasons autocrats prefer narrowly educated specialists to creative thinkers. Those who would break down walls might start by looking squarely at this one, and then pick up a hammer.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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