How is it that economic and neo-liberal globalization is being interrogated from inside even in developed countries? What are the economic consequences of such globalization? (2015, 15 Marks)
Neo-liberal globalisation, launched by Margaret Thatcher’s and Ronald Reagan’s market turn and codified in the Washington Consensus, meant free trade, free capital movement, privatisation and deregulation. Its paradox is that the sharpest challenge now comes from the societies that designed it.
Why it is interrogated from inside
- A broken bargain. John Ruggie’s embedded liberalism paired post-1945 openness with welfare states and capital controls at home. From the 1980s the domestic half was withdrawn and the international half deepened. Karl Polanyi’s double movement (The Great Transformation, 1944) predicts the protective reaction.
- Concentrated losers. David Autor, David Dorn and Gordon Hanson’s China shock research shows import competition devastating specific manufacturing towns. Workers neither moved nor found comparable jobs, and demand for unskilled labour fell across Europe and the United States. Branko Milanovic’s elephant curve shows the Western lower-middle class gaining least between 1988 and 2008, and Raghuram G. Rajan (The Third Pillar, 2019) adds that the local community was left to decay.
- Compensation never came. US trade adjustment assistance stayed under half a billion dollars a year and stopped certifying new petitions in 2022.
- Representation closed. When centre-left parties (Bill Clinton’s Democrats, Tony Blair’s New Labour) converged on the market consensus, opposition to openness had no mainstream channel. It returned as insurgent populism, often turned against immigrants.
- Crisis at the core. The 2008 crash began in Western finance; banks were rescued while households were foreclosed, and eurozone austerity deepened the distrust. Seattle (1999), Occupy Wall Street’s “99 per cent” (2011) and Thomas Piketty’s work on inequality made the critique mainstream, and Brexit and the 2016 US election carried it into government.
Economic consequences
Gains
- Higher aggregate growth, cheaper consumer goods, record corporate profits and rapid convergence for East Asian and Indian economies.
Costs
- Deindustrialisation and regional decline in Western industrial belts.
- A falling labour share: the ILO (September 2024) puts the global labour income share 1.6 points below its 2004 level, mainly through technology, while the threat of relocation weakened wage bargaining.
- Rising inequality: Oxfam (January 2026) finds the top 1% holding 43.8% of global wealth.
- Financial instability, from the 1997 Asian crisis to 2008, with losses socialised.
- Tax competition and fiscal strain: the OECD’s global minimum tax was diluted in January 2026, when US-parented groups were allowed to opt out of its main enforcement rules.
Policy reversal. The interrogation has itself become an economic consequence: industrial policy (the CHIPS and Inflation Reduction Acts, 2022) and the 2025 tariff wave. For India it arrived through the $100,000 H-1B fee (struck down in June 2026 and left uncollected after an appeals court refused to restore it in July) and the EU’s carbon border levy.
Conclusion
Joseph E. Stiglitz (Globalization and Its Discontents, 2002) locates the failure in management, not openness. The Nordic states, which paired openness with strong social protection, faced a weaker backlash. Dani Rodrik’s thinner globalisation, leaving room for national social contracts, is the sustainable path between hyperglobalisation and closure.