We need to rescue globalization not just from populists, but also from its cheerleaders. Simply put, we have pushed economic globalization too far, toward an impractical version that we might call “hyperglobalization”. Some simple principles would reorient us in the right direction.
1. There is no single way to prosperity. Countries make their own choices about the institutions that suit them best.
2. Countries have the right to protect their institutional arrangements and safeguard the integrity of their regulations. Financial regulations or labor protections can be circumvented and undermined by moving operations to foreign countries. Countries should be able to prevent such “regulatory arbitrage” by placing restrictions on cross-border transactions. For example, imports from countries that are gross violators of labor rights may face restrictions when those imports demonstrably threaten to damage labor standards at home.
3. The purpose of international economic negotiations should be to increase domestic policy autonomy, while being mindful of the possible harm to trade partners. Poor and rich countries alike need greater space for pursuing their objectives. The former need to restructure their economies and promote new industries, and the latter must address domestic concerns over inequality and distributive justice. Both objectives require placing some sand in the cogs of globalization.
4. Global governance should focus on enhancing democracy, not globalization.
5. Nondemocratic countries like Russia, China and Saudi Arabia, where the rule of law is routinely flouted and civil liberties are not protected, should not be able to count on the same rights and privileges in the international system as democracies can.
When I present these ideas to globalization advocates, they say the consequence would be a dangerous slide toward protectionism. But today the risks on the other side are greater, namely that the social strains of hyperglobalization will drive a populist backlash that undermines both globalization and democracy. Basing globalization on defensible democratic principles is its best defense.