The Corner


Globalization Is Making Everyone Richer

Employees work inside a factory manufacturing clothes for export, in Wuhu, Anhui province of China, November 5, 2013. (Reuters Stringer)

David Brooks has a pretty good column on the so-called Green New Deal (“How the Left Embraced Elitism”) based on an assumption that I think those of us in the camp of free markets should dispute more honestly than perhaps we have. Brooks writes:

Over the past generation, global capitalism has produced the greatest reduction in human poverty in history. Over the past 10 years, American capitalism has produced 20 million new jobs. The productive dynamism of capitalism is truly a wonder to behold. But economic growth alone is not enough. Growth alone does not translate into economic security for the middle class and the less skilled.

He goes on to insist that “we need to do something about” inequality.


Globalization has meant a radical improvement in the real material standard of living for something on the order of 1 billion (and rising) real people walking this Earth, actual human beings — not statistical abstractions — who are better fed, better housed, and better cared for than at any time in human history. If the tradeoff for this is that some subset of well-off people — some members of the middle class in the rich world — are obliged to compete more directly with less well-off people in other countries than they did a generation ago, then: Why should the economic “security” of the relatively rich trump the desire of the poor to eat and be housed? Especially when globalization has been raising the real living standards for both groups?

(I do not think we have thought nearly enough about what such “security” would actually look like.)

If that were the basic tradeoff, it would be a pretty good one. But the truth is more complicated. The workers in the rich countries are not only competing more directly with the poor but also more directly with each other.

The “race to the bottom” story of globalization is a lie. Global-investment capital is not disproportionately seeking out opportunities in poor countries but in rich ones: The United States was by far the largest recipient of foreign-direct investment in 2018, taking in twice as much as China. Most of the top ten FDI recipients are rich countries: the United States, the Netherlands, Ireland, France, Australia, Singapore, Hong Kong. The only poor countries on the top ten are China (which remains for this purpose statistically distinct from Hong Kong), Brazil, and, at the bottom of the list, India. Trade and investment have made important contributions to these countries, of course, but in terms of global capital flows, the rich countries dominate. Sure, wages are low in Haiti. Want to try building BMWs there?

Globalization is making people richer — and that absolutely includes the American middle class. The economic insecurities most relevant to the interests of middle-income Americans have to do with defective markets that are, not coincidentally, those most shielded from the effects of globalization: health care and health insurance, higher education, and housing. Most of those defective markets are dominated by state-created cartels and semi-cartels; the exception is housing, which federal, state, and local governments have intentionally made more expensive as a matter of public policy.

It isn’t Ahmedabad textile exports making software developers house-poor in the Bay Area or causing the schools to stink in Philadelphia.

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