The rapid and disruptive nature of the ‘Great Convergence’ presents a significant challenge for policymakers. To effectively navigate the future of globalization, governments in developed nations can no longer rely on the old playbook. The new reality of global value chains and telemigration requires a shift in policy, moving from protecting firms to directly helping individual workers adjust to a more competitive and unpredictable global landscape.
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🛡️ Why Traditional Trade Policies Are No Longer Enough
In the old model of globalization, trade policies focused on protecting specific industries from foreign competition. Tariffs and other barriers were designed to help domestic firms compete against foreign firms. In the new globalization, this logic breaks down. The competition is no longer between, for example, a German car company and a Japanese car company. Instead, it is a German car company’s global supply chain competing against a Japanese car company’s global supply chain. Protecting one stage of production with a tariff can harm another stage of production within the same domestic firm.
🤝 A New Social Contract: Helping Workers Adjust
Since the new globalization affects individual workers and specific tasks rather than entire sectors, policy responses need to be more granular. Instead of trying to protect jobs that are likely to be offshored, governments should focus on helping workers adjust to the new reality. This means strengthening social safety nets and investing heavily in worker training and lifelong learning programs. The goal should be to increase workers’ resilience and ability to transition to new roles, rather than trying to halt the inevitable march of technological change.
🌐 The Need for 21st-Century Logic and Policies
The fundamental challenge is that our policies are still often based on 20th-century logic. We tend to think of trade in terms of goods crossing borders, but the future is about knowledge and labor services crossing borders virtually. Governments need to update their thinking to address this new reality. This includes reforming education systems to prepare citizens for a world of remote work and lifelong learning, as well as fostering policies that support domestic innovation to ensure their nations continue to produce the high-value ‘head’ work that drives the global economy.
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Baldwin, Richard. The Great Convergence: Information Technology and the New Globalization. Harvard University Press, 2016.
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