In 2019, before the Covid-19 pandemic hit the world, the IMF's top economist broke down the pros and cons of globalisation at Davos.
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00:00So, what was the U.S. and U.K. back then
00:03is now the U.S. and China, with roles flipped.
00:10So, it's interesting to compare what happened
00:13during the Great Depression, this is 1920s, 1930s,
00:17to what's happening now.
00:19Just like now, even back then, there was rising inequality.
00:25There was a growth in what we call global imbalances,
00:28which we talk about now.
00:30So, the global imbalances now are about the U.S.
00:34on net, buying more from the rest of the world
00:37than the rest of the world buys from the U.S.
00:40Back in the 20s and 30s, it was reversed.
00:44It was the U.S. that was selling more
00:45to the rest of the world, and it was the U.K.
00:47that was buying more from the U.S.
00:50So, what was the U.S. and U.K. back then
00:53is now the U.S. and China, with roles flipped.
00:58So, this is a discontent that comes,
01:01that it's a common feature of it,
01:04but it's important to highlight.
01:05I mean, Mike raised many of the concerns
01:08with the system that need to be fixed,
01:09but it's also important to highlight
01:11the many benefits of the system.
01:13So, when you look at international trade,
01:15and if you look at what has happened post-1945,
01:19and particularly since 1980,
01:21is you've had the biggest decline in global poverty
01:24alongside this increase in integration
01:27in trade in the world.
01:29And that's something that has to be recognized.
01:33There's been an improvement in livelihoods
01:35for many, many people.
01:38There's been an increase in productivity,
01:39an increase in efficiency.
01:41So, there are many benefits to it.
01:43But yes, the system doesn't work perfectly.
01:45And so, what it will need is that
01:47it will have to be supplemented with domestic policies
01:52that address the fact that there are some people
01:56who lose in this process of globalization.
02:01Just to be clear, whenever a new order gets set up,
02:05it is always meant for the benefit of humanity
02:09and for a better world and a better society.
02:13So, in 1945, when you had the new,
02:16post-1945, when you had the new institution set up,
02:19of which the IMF is one of the Bretton Woods system,
02:22the purpose was to prevent countries going to war,
02:26to have economic cooperation,
02:28to make sure that people have better lives.
02:30Now, we can disagree about the path to it,
02:35but the goals were always the same.
02:37So, I don't think there's any disagreement there
02:40in terms of the ideology that this has to be
02:42for humanitarian benefit.
02:45What happens over time is that
02:50we revisit the different forms that globalization takes.
02:53We reexamine what works and what doesn't work.
02:57Now, to come back to the question on the trade side,
03:00but just to be very clear,
03:01I'm not saying that the international policy
03:04works very well and it's all about domestic policy.
03:07I think both need to be addressed.
03:09So, on the international policy side,
03:12I think what has worked quite well
03:15with the WTO, with the World Trade Organization,
03:18is the dispute settlement when it comes
03:21to very overt trade-related measures,
03:26like tariffs, like quotas.
03:29In those cases, there is a system in place to address it.
03:34I think what the WTO and these institutions do less well
03:38is for the policies that take place
03:41within the borders of a country, so inside a country,
03:45and the impact that has on protectionism.
03:48And so, it is a very good question to be asked
03:49and has to be explored more,
03:51is that when countries use subsidies
03:53to protect their industries,
03:55and this is not specific to any particular country.
03:59There are many countries in the world,
04:01in the developed world, in the developing world,
04:03that use industrial policy to favor their industries.
04:09How do we react?
04:10How does the international order react to that?
04:13And I think it's in that second space
04:14that we haven't done as well.
04:16We've done quite well in the kind of more
04:19in-your-face tariff situation.
04:22The other point is in terms of domestic policy.
04:25And in domestic policy, I think we have to acknowledge
04:29that we all came to this very late.
04:32We waited for a lot of discontent to build up
04:36before saying, okay, well, we needed to fix domestic policies
04:40and so what we need to do immediately
04:42is to make sure that we are there when the problem arises
04:47because we know that when we ignore it,
04:50it's no longer a problem of just a job and an income,
04:53but also it becomes a problem of health,
04:56the opioid epidemic in the U.S.
05:00So it morphs into a much bigger problem.
05:03And the solutions we have are a bit piecemeal
05:07in the sense that, yes, we have assistance programs
05:11to re-skill people, but that,
05:16we need a more holistic approach
05:18because usually when you want to fix problems
05:22of people losing jobs that are related to globalization,
05:26they might have to move, so the mobility is required.
05:30For that, you need to have policies for housing,
05:33for credit, besides policies for education and skilling.
05:37Is this all gloom and doom
05:38for the current globalization system?
05:40I just want to tell you that we have,
05:43not we, there's a Pew Research Center
05:45that has surveys every year
05:47asking people their views on globalization.
05:51And it's very interesting.
05:52It moves so closely with the economic cycle.
05:57So between 2014 and now,
06:00when we've been going around the world
06:02talking about the issues with globalization,
06:05there's actually been an improvement in sentiment
06:07towards globalization, and trade particularly.
06:10And why is that?
06:11It's because the world economy has done better
06:14in the last five years than in the past.
06:16So let's not throw out the baby with the bathwater
06:20is all I'm trying to say, but that said,
06:23we certainly need to have a vigorous debate
06:26on the next set of policy issues.