One question that is frequently asked these days is what is the state of globalization currently,
and what is its prospects for the future?
The answer is globalization is collapsing right in front of our eyes, and thus its future is bleak. Not long ago there was a consensus that economic integration is inevitable, and such integration guaranteed global peace and prosperity.
However, that thought process has come under tremendous scrutiny in America and Europe. Free trade of goods and services, and free movement of people (immigration), which accounted for much of the post-World War 2 American prosperity, is now under severe assault. There is enormous support for this rising tide of anti-globalization and anti-immigration all over the Western World. The reason for this support is clear. Globalization produced clear winners and losers. Although free trade was beneficial in the aggregate, it dealt a severe blow to certain sectors of the economy.
Generally, the scare factors lost with international trade, while the abundant factor won with international trade. Free trade in the USA meant labor (which is scare factor, and hence commanded high wages before trade) lost from international trade, and experienced serious structural unemployment, and/or losses in wages and benefits. Capital (which is the abundant factor in the US and hence commanded low return before trade) benefited from free trade as capitalists found new markets to invest the capital for higher returns.
Let’s consider the US auto industry.
Free trade led to fierce competition from the Japanese imports, and the American consumers went for “cheap” Japanese cars. US domestic auto producers responded by either outsourcing their labor- intensive jobs, or simply automated the production process. Both the decisions led to decline in the demand for labor and hence widespread unemployment in the US and decline in wages and benefits.
Unrestricted immigration, with influx of foreign labor also end up depressing local employment and wages. So international trade and immigration is not without costs. It creates winners, but also creates serious losers. Governments of all western democracies are now responding to this call from electorate who have lost from international trade and immigration. Unless we can find a cure to this basic economic problem, globalization would remain in the chucking block, and its future will remain bleak.