Who Benefits

Globalization increased total world output substantially -- the decades of rapid trade expansion following the GATT and WTO frameworks produced real increases in productive capacity, consumer access to goods, and economic development in parts of the world that had been largely excluded from industrial prosperity. The distributional question is who captured those gains. The answer is highly specific and has important implications for the political sustainability of continued trade openness.

At the global level, the primary beneficiaries of globalization have been workers in developing countries, particularly in China, who gained access to export markets for manufactured goods and experienced rapid wage growth. The fraction of the global population living in extreme poverty has declined substantially since 1990 -- from roughly 36% to under 10% by some measures -- partly as a result of export-led growth in developing economies. This is a genuine and significant achievement.

Within the United States, the benefits of globalization have been heavily concentrated. Consumers gained from lower prices on manufactured goods -- a real benefit, particularly for lower-income households that spend a larger share of income on goods. But the workers who lost manufacturing employment generally did not gain enough from lower consumer prices to offset their wage losses. The winners from globalization -- shareholders of multinational corporations, professional workers in globally competitive sectors, consumers of imported goods -- were not the same people as the losers from import competition, and the transfers that might have redistributed gains to losers were not made.

Globalization has been the greatest force for poverty reduction in history. It has also been among the greatest forces for increasing inequality within the countries that were already rich. Both things are true simultaneously.Branko Milanovic, Global Inequality (2016)

Branko Milanovic's "elephant curve" -- a visualization of global income growth by percentile from 1988 to 2008 -- illustrated this pattern sharply. The largest gains went to the middle of the global income distribution (the working and middle classes of developing countries, primarily China and India) and to the very top (the global elite of wealthy-country professionals and executives). The segment that gained least was the 75th to 90th global percentile -- which corresponds roughly to the working and lower-middle class of wealthy countries like the United States. Globalization, in this analysis, compressed inequality globally while increasing it within wealthy nations.

The political consequences have been predictable. Workers who bore the costs of trade adjustment while seeing the gains accrue to corporate shareholders and professional elites became skeptical of further liberalization and, eventually, of the economic institutions and experts who advocated for it. This skepticism has been caricatured as ignorant nationalism by commentators who did not bear the relevant costs. A more honest accounting would acknowledge that the promises made to justify trade liberalization -- adequate compensation, equivalent replacement employment, managed transition -- were not kept, and that the consequent loss of trust in mainstream economic institutions is a reasonable response to that failure.