Don't leave labour behind if globalization is to succeed

The merits of integration are clear but it needs to be managed better for equitable outcomes

- PRACHI MISHRA

The conventional economic case for globalization and free trade has emphasized the aggregate gains that they bring, including enhanced productivity, faster technological change and wider consumer choice. However, a critical aspect often overlooked is that globalization inevitably creates both winners and losers in the short term, even though its long-term effects are broadly positive for society as a whole.

The theoretical underpinning for these overall benefits is the assumption that losers can be compensated and moved over time to alternative productive sectors.

Yet, in practice, the benefits and costs of globalization have been unevenly distributed across worker demographics, industries and regions. This may point to inadequate implementation of supportive policies such as trade adjustment programmes, social protection measures, regional development initiatives and industrial schemes.

Given these realities, the current social and political backlash against globalization—in the US and globally—should come as no surprise. This sentiment has become a decisive factor in one election after another.

In response, policymakers increasingly adopt trade restrictions, even as concerns about 'fragmentation', 'de-globalization', 'slowbalization' and offshoring/friend-shoring strategies reach unprecedented levels.

Notably, the seeds were germinating well before the 2024 US election; its new administration just appears to be amplifying the existing patterns rather than creating them.