Dear Friends & Colleagues,

Donald Trump’s trade wars have placed trade on the front page, above the fold.

I have posted two papers on the economics and political economy of globalization (abstracts below). Please consider sharing them.

The economics paper offers a new theoretical reinterpretation of trade & globalization.

The political economy paper places Trump’s trade wars in a broader political economy perspective. If you only have time to read one, I urge you to read it. I think it can help understand our dangerous political condition. There are no “good” guys, only “bad” and “worse” guys.

Best,

Tom Palley

Globalization Checkmated? Political and Geopolitical Contradictions Coming Home to Roost

The deepening of economic globalization appears to have ground to a halt and the process may even unravel a little. The sudden stop has surprised economists, whose belief in globalization has strong parallels with Fukuyama’s (1989) flawed end of history hypothesis. The paper presents a simple analytic model that shows how economic globalization has triggered political and geopolitical contradictions. For the system to work, politics within countries and geopolitics across blocs must be supportive of the system. That is missing. The model is applied to a global economic core consisting of the US, China, and the European Union. It is revealing of multiple tensions, fracture lines, and contradictions. Within the US, globalization has delivered economic outcomes that have estranged the electoral bases of both major political parties. It has also delivered outcomes that are inconsistent with the US neocon geopolitical inclination. President Trump is a product of those forces, and he will likely prove to be a historically significant figure. That is because he has surfaced geopolitical contradictions that cannot be swept back under the rug. Ironically, his biggest impact may be on the European Union, particularly Germany, which is being compelled to recognize the neocon nature of the US and the vulnerabilities of dependence on US exports and technology. China was already aware of its vulnerabilities in those regards.

Three Globalizations, Not Two: Rethinking the History and Economics of Trade and Globalization

The conventional wisdom is there have been two globalizations in the modern era. The first began around 1870 and ended in 1914. The second began in 1945 and is still underway. This paper challenges that view and argues there have been three globalizations, not two. The first half of the paper provides empirical evidence for the three globalizations hypothesis. The second half discusses its analytical implications. The Victorian first globalization and Keynesian era second globalization were driven by gains from trade, and those gains increased industrialized country real wages. The neoliberal third globalization has been driven by industrial reorganization motivated by distributional conflict. Trade theory does not explain the third globalization; capital’s share has increased at the expense of labor’s; and there can be no presumption of mutually beneficial country gains from the third globalization.

Thomas Palley

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Tel: 202-667-5518

www.thomaspalley.com