Short-duration assets and companies with low investment needs could therefore be relative benefactors of deglobalisation. But overall, the effect will be negative. “A retreat in globalisation probably won’t improve people’s lives,” says Williams. But protectionism would have an unintended consequence that could prove beneficial in the longer term: it would bring a recession closer, which is long overdue, he believes.
“I don’t want a recession, but it would invigorate the economy,” says Williams.
In his book, he claims that globalisation has distorted the financial ecosystem, in combination with the deregulation of financial markets which led to a credit boom. “Checks and balances in the economy have been muted because we have not had enough corporate decay. Many inefficient companies have been kept alive artificially. Because of cheap credit and low interest rates, even marginal operations generated a return,” he says.
The credit boom has, until 2008, masked the fact that investors and the super-rich took the lion’s share of the economic benefits of globalisation. Real wage growth for the working and middle class in many Western countries has been stagnant for decades, while real incomes of the world’s top-1% have risen by 60% since the mid-1970s.
“Globalisation has helped companies to grow profits a lot more than it has grown wages,” says Wade. No wonder 60% of British people believe ‘ordinary people do not get their fair share of the nation’s wealth’, according to a survey by consultancy PwC.
“Public dissatisfaction is all coming back to stagnation of real wages,” concludes the Schroders economist. As long as living standards were improving, as they did quite consistently across the Western world until 2008, workers could put up with rising inequality. But workers are facing a ‘lost decade’, with real wages now lower than they were 10 years ago, Bank of England Governor Mark Carney said in a recent speech. The last time something like that happened was in the 1860s, “when Karl Marx was scribbling in the British Library,” he added.
Unless we do something to address inequality, the populist revolt may put globalisation in reverse and will make all of us poorer, was his implicit message.