Until recently, globalisation and free trade seemed like no-brainers. But now it’s clear that there were always winners and losers, and the public has made its feelings known at recent elections: something has to change. But is a return to strident nationalism the answer? Here, Kevin Albertson, Professor of Economics at Manchester Metropolitan University, makes the case for a gentler and wiser alternative that’s starting to make a difference: localism.
It hardly needs saying, but there are changes afoot in the political economy of the world. Where there is globalisation, there are globalisation protestors. This is nothing new, but it is becoming mainstream.
The antithesis of globalisation, nationalism, and the pursuit of your own country’s interests over those of everyone else, has bubbled back up in Europe. And it’s not just Europe, of course. In the US, president Donald Trump is (among other initiatives) rethinking the American commitment to free trade.
In the rest of the world, the experience of globalisation shows it creates some winners and some losers. This varies geographically and in different economic fields, and is shown in different aspects of our lives.
And so, someone in London might find their house is worth more. As foreign capital flows in to buy up large swaths of the capital, it increases their wealth, while others might be priced out of the market. In some sectors of the market, wages might be declining as a result of global competition, migration, casualisation or automation. In the final analysis, however, it is not a matter of whether globalisation causes these changes – it is rather more that people feel that it does.
Walls and wails
Globalisation is not, however, merely a matter of trade, migration and foreign outsourcing. To many, it seems Britain itself is for sale as an increasing proportion of UK businesses and assets answer to foreign owners.
Economic theory suggests, therefore, the nation will increasingly be run for the benefit of foreign capital, rather than the citizens. On top of this, there is the danger that inflows of foreign capital will cause the exchange rate to appreciate, making it more difficult to export, reducing manufacturing output and reducing employment in those sectors affected.
To protect them from forces beyond their control, citizens across the world are increasingly looking to the nation-state for protection, hence the rise of what is often called nationalism. As Abraham Lincoln noted:
The legitimate object of government is to do for a community of people whatever they need to have done, but can not do at all, or can not so well do, for themselves – in their separate, and individual capacities.
It is clear that no individual or community can stand against the forces of global capital, and Western governments appear averse to giving the workforce the means to protect itself, through, for example, increasing employment rights and unionisation. However, in their search for a strong government to protect them, citizens are in danger of giving the state too much power over their lives.
It is by no means assured that the policies which suit a strong domestic government will be better than those which suit foreign owned multi-national corporations. Also, history indicates the fear of global capital may be co-opted by unscrupulous politicians into a fear of other nations or fear of other peoples.
Rather than nationalism, therefore, we might turn to localism. In the UK context, this might be devolution with real (financial) localised power, and that power realised through local government and local business.
An economy of big businesses (operated for the benefit of global owners) is less than ideal for the individual and society. In contrast, a society of many small local businesses is more resilient, more empowering and more in keeping with the spirit of capitalism and of the market. We must also bear in mind that increasing business concentration (fewer, but larger firms) is a driver of increasing inequality. If a business is too big to (be allowed to) fail, then the government has failed in its duty to keep business small.
Economic theory indicates that those with no stake in a community other than profit extraction avoid suffering from localised ill effects such as unemployment, poverty, want and homelessness. It follows those who live and work in a community have a greater stake in its prosperity.
The government might likewise consider how we might prevent those who do not even live in the country from driving up house prices.
Local protection from exploitation by global interests requires the right mix of global and local policies. And local government policies require adequate financing. By local financial power, I don’t mean local taxes. That has the potential to fragment the nation, as it has, to some extent, in the EU (whether perceived rightly or wrongly).
If we fund education or social care out of local taxes, for example, there will tend to be a race to the bottom as local authorities will be motivated to underperform to encourage vulnerable families to go and live elsewhere. It follows taxes should be collected nationally, and shared proportionally (on the basis of demographic profile) to the devolved authorities.
There is no space here to discuss in detail other possible localism policies here, but there are many ways to promote local ownership and local empowerment. That could include local currencies, boosts to council housing, local authority ownership of utilities or support for locally-owned high street shops. However, it is not a policy mix I suggest, rather it is an emphasis.
Ultimately, the only viable alternative to the choice currently on offer, the choice of Big State or Big Business, is Small State and Small Business, or more appropriately Local Government and Local Business. To pursue localism will require a systemic shift in how the national government goes about shaping society, but I suggest it is possible to promote social justice in a capitalist context in no other way.
(Picture credit: Flickr/ThorstenSchröder)
Read our article on the rise of localism in Manchester, UK.