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(English) Globalization has left people behind. This is what we should do about it

عفوا، هذه المدخلة موجودة فقط في الإنجليزية الأمريكية. For the sake of viewer convenience, the content is shown below in the alternative language. You may click the link to switch the active language.

‘The most fundamental lesson is that to address a problem, you first need to notice it.’

It’s recently become fashionable to worry that the fabric of democracy is being undermined as people feel left behind by globalization and automation. I think these fears are to some extent well founded. But this isn’t a new problem: it goes back at least as far as the 1980s. Our failure to recognize it then, and act on it since, is why it has now reached crisis proportions.

Are there lessons we could learn from those decades-long failures of policy? Yes. Will we learn them? Perhaps not, although there are a few promising signs.

The most fundamental lesson is that to address a problem, you first need to notice it. One of the striking features of the Brexit vote, and the response in some other places to various manifestations of rising populism, has been the surprise of many voters in wealthy, cosmopolitan cities at discovering how differently some of their fellow citizens are thinking.

These tend to be people living in towns and smaller cities where traditional jobs began to disappear a generation ago and have never been adequately replaced. Whole communities have experienced their real incomes stagnating or falling since well before the financial crisis.

A decade ago, Benjamin Friedman made the case in The Moral Consequences of Economic Growth that democracy requires a growing economy to lubricate the necessary give and take. When people see their own lives improving, they tend to be sanguine about others’ lives improving more quickly. However, when their own living standards have declined, and they expect their children’s to be even worse, resentment against others who are doing better is inevitable.

For at least three decades, since automation and globalization started radically changing industry, whole swathes of geography have been struggling even as economies have grown overall. For the most part, this has barely registered on policy-makers’ radars.

Statistics existed that could have alerted us to the brewing crisis – but nobody was looking. It took Thomas Piketty, in his 2014 work Capital, to put in the huge amount of effort necessary to make the data clearly tell the story of how many workers were being left behind.

But all Piketty has done is start the conversation: we still need to develop a serious policy response. It’s not too late to start doing what we should have been doing since the 1980s – essentially, taking regional policy much more seriously. I see three main elements to this:

Infrastructure

Large cities will always be the best incubators of economic growth, because the more people you have in one place, the easier it is for their knowledge to spread to each other. But we can narrow the natural disadvantage of smaller cities and towns by improving the infrastructure that connects them to each other.

This recommendation implies making fast broadband universal, but it also points to the need for better transport, like high-speed rail, because virtual and physical communication are complements, not substitutes.

Education

I claim no expertise in how we should be educating our children for the technological state of the world they will face when they graduate, but I am fairly certain we’re currently getting it wrong. Most schools still resemble factories for turning children into expensive and not very good computers.

One obvious and much discussed improvement would be teaching more coding – something we struggle with, partly because we don’t have enough teachers with the necessary skills. Another improvement would be to help children develop the human skills that machines seem furthest away from mastering, such as creativity in problem solving.

Image: REUTERS/Neil Hall

Written by Diane Coyle (Professor of Economics, University of Manchester)
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