Gita Gopinath On How To Survive Globalisation

Brut India

In 2019, before the Covid-19 pandemic hit the world, the IMF's top economist broke down the pros and cons of globalisation at Davos.

Transcript

00:00So, what was the U.S. and U.K. back then

00:03is now the U.S. and China, with roles flipped.

00:10So, it's interesting to compare what happened

00:13during the Great Depression, this is 1920s, 1930s,

00:17to what's happening now.

00:19Just like now, even back then, there was rising inequality.

00:25There was a growth in what we call global imbalances,

00:28which we talk about now.

00:30So, the global imbalances now are about the U.S.

00:34on net, buying more from the rest of the world

00:37than the rest of the world buys from the U.S.

00:40Back in the 20s and 30s, it was reversed.

00:44It was the U.S. that was selling more

00:45to the rest of the world, and it was the U.K.

00:47that was buying more from the U.S.

00:50So, what was the U.S. and U.K. back then

00:53is now the U.S. and China, with roles flipped.

00:58So, this is a discontent that comes,

01:01that it's a common feature of it,

01:04but it's important to highlight.

01:05I mean, Mike raised many of the concerns

01:08with the system that need to be fixed,

01:09but it's also important to highlight

01:11the many benefits of the system.

01:13So, when you look at international trade,

01:15and if you look at what has happened post-1945,

01:19and particularly since 1980,

01:21is you've had the biggest decline in global poverty

01:24alongside this increase in integration

01:27in trade in the world.

01:29And that's something that has to be recognized.

01:33There's been an improvement in livelihoods

01:35for many, many people.

01:38There's been an increase in productivity,

01:39an increase in efficiency.

01:41So, there are many benefits to it.

01:43But yes, the system doesn't work perfectly.

01:45And so, what it will need is that

01:47it will have to be supplemented with domestic policies

01:52that address the fact that there are some people

01:56who lose in this process of globalization.

02:01Just to be clear, whenever a new order gets set up,

02:05it is always meant for the benefit of humanity

02:09and for a better world and a better society.

02:13So, in 1945, when you had the new,

02:16post-1945, when you had the new institution set up,

02:19of which the IMF is one of the Bretton Woods system,

02:22the purpose was to prevent countries going to war,

02:26to have economic cooperation,

02:28to make sure that people have better lives.

02:30Now, we can disagree about the path to it,

02:35but the goals were always the same.

02:37So, I don't think there's any disagreement there

02:40in terms of the ideology that this has to be

02:42for humanitarian benefit.

02:45What happens over time is that

02:50we revisit the different forms that globalization takes.

02:53We reexamine what works and what doesn't work.

02:57Now, to come back to the question on the trade side,

03:00but just to be very clear,

03:01I'm not saying that the international policy

03:04works very well and it's all about domestic policy.

03:07I think both need to be addressed.

03:09So, on the international policy side,

03:12I think what has worked quite well

03:15with the WTO, with the World Trade Organization,

03:18is the dispute settlement when it comes

03:21to very overt trade-related measures,

03:26like tariffs, like quotas.

03:29In those cases, there is a system in place to address it.

03:34I think what the WTO and these institutions do less well

03:38is for the policies that take place

03:41within the borders of a country, so inside a country,

03:45and the impact that has on protectionism.

03:48And so, it is a very good question to be asked

03:49and has to be explored more,

03:51is that when countries use subsidies

03:53to protect their industries,

03:55and this is not specific to any particular country.

03:59There are many countries in the world,

04:01in the developed world, in the developing world,

04:03that use industrial policy to favor their industries.

04:09How do we react?

04:10How does the international order react to that?

04:13And I think it's in that second space

04:14that we haven't done as well.

04:16We've done quite well in the kind of more

04:19in-your-face tariff situation.

04:22The other point is in terms of domestic policy.

04:25And in domestic policy, I think we have to acknowledge

04:29that we all came to this very late.

04:32We waited for a lot of discontent to build up

04:36before saying, okay, well, we needed to fix domestic policies

04:40and so what we need to do immediately

04:42is to make sure that we are there when the problem arises

04:47because we know that when we ignore it,

04:50it's no longer a problem of just a job and an income,

04:53but also it becomes a problem of health,

04:56the opioid epidemic in the U.S.

05:00So it morphs into a much bigger problem.

05:03And the solutions we have are a bit piecemeal

05:07in the sense that, yes, we have assistance programs

05:11to re-skill people, but that,

05:16we need a more holistic approach

05:18because usually when you want to fix problems

05:22of people losing jobs that are related to globalization,

05:26they might have to move, so the mobility is required.

05:30For that, you need to have policies for housing,

05:33for credit, besides policies for education and skilling.

05:37Is this all gloom and doom

05:38for the current globalization system?

05:40I just want to tell you that we have,

05:43not we, there's a Pew Research Center

05:45that has surveys every year

05:47asking people their views on globalization.

05:51And it's very interesting.

05:52It moves so closely with the economic cycle.

05:57So between 2014 and now,

06:00when we've been going around the world

06:02talking about the issues with globalization,

06:05there's actually been an improvement in sentiment

06:07towards globalization, and trade particularly.

06:10And why is that?

06:11It's because the world economy has done better

06:14in the last five years than in the past.

06:16So let's not throw out the baby with the bathwater

06:20is all I'm trying to say, but that said,

06:23we certainly need to have a vigorous debate

06:26on the next set of policy issues.

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