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A robot sweeping food towards two dairy cows at an ‘automated farm’ exhibit at the International Green Week food and agriculture fair in Berlin on Thursday. The key driver that is depressing wages and eliminating jobs in the industrialised world is technology. AFP PIC

The World Economic Forum this year feels like an exercise in ritual self-flagellation, which — as with the old Christian practice of fasting and whipping one’s own body — is supposed to purify the sinful nature of man. The sin, of course, is globalisation, which everyone now seems to agree has been lopsided, inequitable and dangerous. In fact, most of the flaws attributed to globalisation are actually mistakes in national policy that can be corrected.

It took a Chinese billionaire to speak frankly on this topic. Jack Ma, the founder of the e-commerce giant Alibaba, estimated that over the last three decades, the United States government spent US$14.2 trillion (RM63 trillion) fighting 13 wars. That money could easily have been invested in America, building infrastructure and creating jobs.

“You’re supposed to spend money on your own people,” he said. “It’s not (that) the other countries steal jobs from you guys — it is your strategy.” He pointed out that globalisation produced massive profits for the American economy, but much of that money ended up on Wall Street. “And what happened? Year 2008. The financial crisis wiped out US$19.2 trillion (in the) USA alone. What if the money [was] spent on the Midwest of the US developing the industry there?”

You don’t have to accept Ma’s specifics and statistics to recognise the validity of his general point. Globalisation created huge opportunities for growth, many of which were taken by US companies. The global economy today is still pervasively dominated by large American firms; 134 of Fortune Global 500 are American. And, if you look at cutting-edge industries, the vast majority are American. These companies have benefited enormously by having global supply chains that can source goods and services around the world, either to lower labour costs or to be close to the markets in which they sell. Since 95 per cent of the world’s potential consumers live outside the US, finding ways to sell to them will have to be a core strategy for growth, even for a country with a large domestic economy like America.

Obviously, globalisation has large effects on national economies and societies, and it produces some significant problems. What complex phenomenon does not? But, it also generates opportunities, innovation and wealth for nations that they can then use to address these problems through good national strategies. The solutions are easy to state in theory — education, skills-based training and retraining, infrastructure. But, they are extremely expensive and hard to execute well.

It is much easier to rail against foreigners and promise to fight them with tariffs and fines. But, the cost of addressing these problems at the global level is massive. The Economist reports, in a survey on globalisation, that in 2009 the Obama administration punished China with a tariff on their tyres. Two years later, the cost to American consumers was US$1.1 billion, or US$900,000 for every job “saved”.

The impact of such tariffs is usually felt disproportionately by the poor and middle class because they spend a larger share of their income on imported goods like food and clothing. That same Economist survey points to a study that calculated that, across 40 countries, if transnational trade ended, the wealthiest consumers would lose 28 per cent of their purchasing power, but the poorest one-tenth would lose a staggering 63 per cent.

Perhaps most important, the key driver that is depressing wages and eliminating jobs in the industrialised world is technology, not globalisation. For example, between 1990 and 2014, US automotive production increased by 19 per cent, but with 240,000 fewer workers.

Even when manufacturing comes back to the US, it is high-end manufacturing. It’s not just new Intel plants that have few workers anymore. Adidas has set up a new shoe factory in Germany that is run almost entirely by robots. It will open a similar one in Atlanta later this year. And, the few workers in these factories tend to be highly skilled technicians and software engineers. You can’t turn off technological revolutions. Nor can you stop China from growing. Tariffs on China will simply mean that production will come from some Third World country.

The best approach to the world we are living in is not denial but empowerment. Countries should recognise that the global economy and the technological revolution require large, sustained national efforts to equip workers with the skills, capital and infrastructure they need to succeed. Nations should embrace an open world, but only as long as they are properly armed to compete in it. And that requires smart, effective — and very expensive — national policies, not some grand reversal of globalisation.

Fareed Zakaria is an American journalist and author. He is the host of CNN’s ‘Fareed Zakaria GPS’ and writes a weekly column for ‘The Washington Post’

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