A Tale of Two Middle Classes

Worry and anger permeate the middle classes of Asia and the Americas, and in a world that is tightly interconnected, individuals perceive cross-border competition. During the US presidential campaign, President-elect Trump suggested that “unfair trade deals” had hurt US workers and communities, and he promised to tighten immigration rules and curb abuses associated with the H1-B and other visas. Chanda points to findings by economist Branko Milanovic, author of Global Inequality: A New Approach for the Age of Globalization: “…at the same time as a large middle income group in the developed world has seen wages stagnate thanks to global economic integration, Asia has been resurgent. Although one cannot convincingly establish causality between the two developments, he says, the coincidence of the two will lead many to conclude that globalisation has created a more unequal world.” Chanda notes that technology and automation – not trade – have reduced manufacturing jobs. And ongoing development of robots and artificial intelligence ensures that middle classes everywhere have reason to be anxious. – YaleGlobal

A Tale of Two Middle Classes

Jobless Americans wait for Trump to crack down against offshoring and immigration, and middle class Asians anxiously await the fallout
Nayan Chanda
Tuesday, December 20, 2016




If ever there was any doubt, the surprising election of Donald Trump has proved once again that hell hath no fury like a middle class scorned. The repressed anger that led voters to ignore all the President-elect’s glaring flaws has implications for the middle class in emerging economies. The same phenomenon of globalisation that had left a large swathe of the American middle class behind has also created a prosperous new middle class from China to India to Southeast Asia. As jobless Americans anticipate delivery on Trump’s campaign promises, middle class Asians are merely waiting anxiously.


Exit polls have clearly shown that a large section of white Americans, mostly without college education and some with, voted as a bloc for Trump tilting traditionally Democratic states toward the Republican candidate. He roused passion among those who felt like the losers of globalisation by pledging to support, as he declared in July at the Republican National Convention, “the laid-off factory workers and the communities crushed by our horrible and unfair trade deals.” Trump has repeatedly promised to tighten immigration rules to prevent jobs from being shipped to countries like China and India.


Recently outlining his plan of action for his first 100 days in office, Trump said his administration would “investigate all abuses of visa programmes that undercut the American worker”. Offshoring jobs is, in his view, part of the disastrous “globalism” that he wants to wean the US away from.


Those among Trump’s supporters who cheered his pledge to crack down on the issuance of H1-B work visas now eagerly await the Justice Department’s actions. The fact that Trump Ihas delivered on his promise to stop the Carrier plant from shifting 1,000 jobs from the US to Mexico will only fuel hopes for a similar clampdown on immigration. Not only would thousands of Indians and other H1-B visa holders spend anxious nights wondering if they can stay in the US, but their families back home whose livelihoods improved thanks to remittances will face grave uncertainties.


Ironically, the flip side of job loss in the US has been the creation of millions of jobs that have dramatically altered the face of Asia. World Bank economist Branko Milanovic, who recently published a book entitled Global Inequality: A New Approach for the Age of Globalization, notes that at the same time as a large middle income group in the developed world has seen wages stagnate thanks to global economic integration, Asia has been resurgent. Although one cannot convincingly establish causality between the two developments, he says, the coincidence of the two will lead many to conclude that globalisation has created a more unequal world. Such a conclusion risks discouraging free trade and slowing down immigration, which, in turn, will drag down economic growth and potentially reverse the trend that has helped to reduce poverty worldwide.


The fact remains though that while jobs have been lost in the rising years of globalisation — following the launching of the WTO — trade has not been the principal reason for unemployment. Increasing automation and the increasingly widespread use of industrial robots has steadily reduced manufacturing jobs while boosting productivity. Inadequate macro-economic policy, onerous taxation and the state’s inability to adapt to such technological challenges has added to the misfortune of workers in developed countries.


The middle class anger that won Trump his stunning victory will not however, be assuaged in the long term by sops like a deal to keep one plant — like Carrier — open. At some point after the dust settles from his first 100 days in office, Trump will realise that he cannot win the future by swimming against the tide of the 21st century.

Nayan Chanda is the author of Bound Together: How Traders, Preachers, Adventurers and Warriors Shaped Globalization and is consulting editor of YaleGlobal Online, published by the MacMillan Center, Yale University.

 

© Copyright BW BUSINESSWORLD 2016. All Rights Reserved.

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