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The Economics of Belonging — can globalisation work for the left behind?

Martin Sandbu has what the subtitle of The Economics of Belonging calls a “radical plan to win back the left behind”, those abandoned as economic jetsam by the rising tide of globalisation and technological change. His advocacy of more but better globalisation predates the pandemic. The coronavirus recession does not change the diagnosis of what has gone wrong with liberal democracies and market economies, but it certainly makes optimism for our future prospects all the braver.

First, the diagnosis. Belonging, here, is about not being left behind, rather than group identity. Those whose earnings have stagnated, who hold precarious jobs, live in towns scarred by austerity — they are the Unbelongers.

Much of the first half of the book explaining how this came about will be familiar to readers of Sandbu’s FT columns. Poor education is a major culprit given the skill-bias of technological change. While demand for highly educated workers has increased in western economies, supply has not kept pace. Not having a college degree is a passport to low-paid routine jobs and even — as Anne Case and Angus Deaton demonstrate in Deaths of Despair — ill health. Sandbu argues that technology is responsible for this inequality, and that globalisation has been unfairly scapegoated: trade and automation are in effect substitutes, and even if somehow manufacturing could be reshored to the US or western Europe, it would be done by machines, not people.

Linked to technological change, the economic magnetism of cities and the corresponding cost of staying in a left-behind town amplify this fundamental labour market inequality. Sandbu also blames the shift toward services, where traditionally female “soft” skills are more in demand, though jobs traditionally low paid.


The real argument of the book comes in the second half, namely that a set of radical but feasible policies holds the solution to inequality. And, if they were implemented, Sandbu eloquently argues, more globalisation would benefit all and defang populist polarisation.

What are these policies? Spend more on education, and combine it with active labour market policies, a high minimum wage, and limits on top pay. Skilling up the workforce and compressing the wage distribution, as in the Nordic economies, will remove the incentive to hire low-wage, low-skill workers. The nice contrast presented here is between poor immigrants who manually wash cars at stoplights in the US, and the Norwegian operators of automated car washes.

Other policies aim to empower workers: Universal Basic Income, ownership rights for personal data, employee representation. The first two of these seem to be the ultimate in neoliberalism: individualised solutions to collective problems, much loved by Silicon Valley bros. UBI will not buy me an adequate health or education or public transport system. “Owning” my personal health data is no use in a pandemic; the value in data almost always comes from aggregation or context.

The nice contrast presented here is between poor immigrants who manually wash cars at stoplights in the US, and the Norwegian operators of automated car washes.

Adequately expansive demand policies, reform of the financial system including ending the tax advantages of debt finance and tough competition policy are also part of the plan — these are not so much radical as motherhood and apple pie among economists.

Finally, there are the Unbelongers in the Left-Behind places. Reversing the geography of disadvantage is something even Donald Trump claims to want to do. Voting patterns in many western countries make it a political imperative. The book considers a sensible range of policies, such as business support schemes, or using higher education institutions and cultural amenities to make places attractive to knowledge workers.


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Sandbu rightly notes that many of these measures could be implemented if there is a will to do so. That, however, is a significant “if”. The response to the 2008 financial crisis was to implement none of the above policies. Is the current crisis going to be big enough to prod governments into enacting the kind of sensible reforms advocated by economists? I fear not.

The Economics of Belonging begins with two 1930s radicals, Roosevelt and Hitler, who took different paths out of depressed economic circumstances. The architects of our current situation in the west were Thatcher and Reagan, reacting to the 1970s economic crisis. The 2008 financial crisis paved the way for today’s obvious radical: President Trump. Radical plans need radicals to put them into practice. We are still waiting for our Roosevelt.

The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All, by Martin Sandbu, Princeton, RRP£20/$24.95, 296 pages

Diane Coyle is Bennett professor of public policy at the University of Cambridge

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source https://www.ft.com/content/50efbb96-a4e6-11ea-a27c-b8aa85e36b7e

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