Populist and nationalist policies on trade and migration, two of the main indicators of a globalized world, are clearly on the rise.
But economists at the CFA Society’s annual investment forum in October came to different conclusions about whether the tariffs announced by U.S. President Donald Trump against China and more protectionist measures in general would bring an end to the era of globalization.
Bloomberg economist Carl J. Riccadonna said the current “trade war” was more a “trade skirmish” and that globalization was just slowing. Michael Pettis, professor of finance at Peking University’s Guanghua School of Management, in contrast, believes that we have entered a phase of deglobalization.
Riccadonna noted that while globalization is beneficial for an economy as a whole, it has produced both winners and losers. The failure to account for the negative externalities of a globalized economy had led to a public revolt. Most economists, he argued, tended to overestimate the ability of workers to adapt to competitive pressures caused by a globalized economy.
This has resulted in a shift in the labor market. Although unemployment in the U.S. is at a record low, at levels last seen in the days of the draft during the Vietnam War in 1969, the lack of pressure to increase wages suggests a high level of underemployment. This means that the unemployment rate has become an unreliable indicator of slack in the labor market, the Bloomberg economist said.