Globalization and the US election: we need to take the voices of the discontented more seriously

Watch the Protectionism: Back to the Future? session from the World Economic Forum's Annual Meeting 2017 here.

If global integration had an alarm bell it would sound like the 2016 American presidential election. The USA – champion of free markets and home of the world’s largest and most integrated economy – selected a populist, nativist and protectionist leaning president.

Donald Trump pulled off an underdog upset peddling an anti-free trade message, which he amplified across America’s Rust Belt. The reality TV host and businessman mirrored his campaign after the UK’s Brexit, pairing anti-immigration sentiment to nationalist economic rhetoric.

Unpacking the US election 2016 (and its UK cousin) brings me back to Tom Friedman’s The Lexus and The Olive Tree. The 1999 book explains globalization as the post-cold war international system, symbolized by the Lexus automobile, an emblem of economic integration, technology and free trade. In Friedman’s model, however, the Lexus does not reign supreme. It shares a constant interplay – sometimes cooperative, sometimes confrontational – with the olive tree, an embodiment of age-old forces of human identity, nationalism and security. To succeed in the world economy, said Friedman, countries must strive to “build a better Lexus.” But if in the process of doing so “individuals feel their olive tree roots crushed…by this global system…” they may “rise up and strangle the process.”

So how do we recast Friedman’s thesis through the political events of 2016? I’d call it the year the olive tree crashed on top of the Lexus. Both the US election and Brexit represent the greatest political backlash to the forces of globalization since the 1999 Seattle World Trade Organization protests. In the world’s first and fifth largest economies nearly, 80 million people (62 million in the US and 17 million in the UK) chose a candidate and referendum rejecting free trade, liberal borders and regional economic integration.

Highlighting the facts of Trump’s win balances a tendency by many to over or understate his victory, which was a bit of an anomaly. On the inflated side, Trump did not win by the landslide supporters have claimed. In America’s electoral college system, he lost the popular vote by the largest margin of any presidential winner in US history. His electoral college win ranks 46th in 58 elections. In the states that put him over the top, Michigan, Wisconsin and Pennsylvania, Trump won by a combined 77,774 votes, or .06% of the electorate.

On the flipside, almost every professional poll predicted Trump’s loss, making his victory one of America’s great presidential upsets. He was outspent nearly 2-1 by opponent Hillary Clinton. And though he won by slim margins, he became the first Republican since Ronald Reagan to sweep Rust Belt states Michigan, Pennsylvania and Wisconsin.

Trump needed each to pull off his electoral college majority. He won them, in large part, by bucking longtime Republican support for free trade. Trump campaigned on pulling out of NAFTA, withdrawing from the Trans-Pacific Partnership (TPP), imposing import tariffs, and punishing US companies for moving jobs abroad.

In doing so he outflanked Hillary Clinton with working class voters. Though Bernie Sanders’ primary challenge pushed her to the left on TPP, ironically, Clinton was still vulnerable due to her husband’s 1990s shift of the Democratic party towards open trade policies.

Two decades later, disapproval of free trade created an unlikely point of unity between populist voters in both the parties. A 2016 Bloomberg poll, showed that large majorities of Americans across political lines share negative views on trade agreements and favour protectionist economic policies. Post-election analysis by several economists even suggests a direct correlation in counties in Michigan, Wisconsin and Pennsylvania between increased import competition from China and Mexico and support for Trump.

In a recent CNN interview, Chris Vitale – a union leader and Michigan auto worker who voted for Obama in ‘08 and ’12 – said he backed Trump because he was the first candidate “willing to speak to truth” on trade, referencing downsides of NAFTA and Chinese production to local jobs and manufacturing.

The economic insecurity Donald Trump channeled in 2016, when taken in context of the US economy’s performance overall, is a bit perplexing. Populist and protectionist agendas don’t usually take root in countries with low and declining unemployment and stock market indexes approaching record highs.

The 2016 US election speaks to a new chapter in the debate on the winners and losers of globalization. Greater income inequality and the tech business model have complicated things even further. In the US, even when leading indicators are positive, there remains a high degree of economic distress across certain demographics and geographic areas. And for those regions convinced they are losing jobs and earning power due to outsourcing or free trade, it’s become harder to pinpoint the actual reasons or identify solutions. For example, technological automation (often a job eliminator) is not always synonymous with globalization.

As for how Donald Trump’s administration may reshape the global economic order, it’s hard to predict. There are plenty of historical examples of populism and protectionism, but little precedent for them becoming hallmarks of an American president in the globalized age. Since winning, Trump’s transition has followed his campaign style of being long on rhetoric and short on specifics. The president-elect’s soon to be Senior Counselor, Steve Bannon, has spoken of an anti-globalist, economic nationalist agenda in favour of the middle class. We’re still learning exactly how this would become a policy doctrine.

For the time-being, the 2016 US elections (and Brexit) indicate the balance between Friedman’s symbolic forces of globalization, the Lexus and the olive tree, is out of whack. Most advocates of international economic cooperation were caught completely off guard by both events.

Mediums such as the World Economic Forum should pursue a greater range of perspectives, including from those who feel marginalized by free-trade and global integration. More discussions between blue chip CEOs and Michigan union leaders could lessen blind spots and prompt solutions to globalization’s downsides before they shape black swan political events.

At Davos 2016 jokes were made and doubts cast about Donald Trump’s populist agenda and chances of winning. On the last day of Davos 2017 he’ll be sworn in as President of the United States of America.