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John Donvan:

Hi, everybody. I’m John Donvan. Welcome to Intelligence Squared and debate we are putting on in partnership with YPO EDGE in New York City, a gathering of CEOs and organization leaders who certainly understand well, this statement that I now put before you, sometimes an idea that is meant to make things better, actually works out really well. And sometimes, not so much. And there can even be unintended bad consequences. So, how has it gone with the idea known as globalization? The promise was that globalization by removing barriers to trade between nations and letting technology and people and ideas move freely across borders, was going to benefit everyone by producing greater efficiencies and more innovation. That was the promise. The reality after some 30 to 40 years of an ever-more-globalizing world is at least debatable.

So, that’s what we’re going to do. We’re going to debate it by having two debaters get up on this stage and each answer yes or no to this question, has globalization backfired? Let’s please meet our debaters. First, she is Global Business Columnist for The Financial Times and Author of “Homecoming: The Path To Prosperity In A Post-Global World.” Please welcome Rana Foroohar.

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And he is Founder and CEO of Climate Alpha and Founder and Managing Partner of FutureMap. Please welcome Parag Khanna.

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We want to find out first which side each of you is on the question. I’ll go to you first. Parag on the question, has globalization backfired, are you going to say yes, or no?

Parag Khanna:
I’m going to say no.

John Donvan:

All right, Rana, that tells us that you are the yes.

Rana Foroohar:

I am 100 percent yes.

John Donvan:

You all set to go?

Rana Foroohar:

I’m all ready.

John Donvan:

All right, take it.

Rana Foroohar:

Okay. Globalization, as we have known it for the last half century, has failed. Why has it failed? Neoliberal globalization, which was predicated on the Washington Consensus ideas, that capital goods and people could always travel seamlessly across borders, and crucially, would always land where it was most productive for them to do so and would lift all boats in the process is simply wrong. If we look at the last half century, in particular, the apex of what I would call this last round of globalization between 2003 and 2007, you had more wealth created at a global level than ever before. But in almost every country, you had a dramatic increase in inequality. Why is that? Because there was a flaw in this current system of neoliberal globalization, and that’s that capital can always travel faster than either goods or people.

And I’m going to argue, as I do in my new book, Homecoming, that that gulf has led not only to stagnating economies, but it has led to dramatic political polarization in much of the developed world, and parts of the developing world.

Let me tell you quickly, one story that I think encapsulates why globalization has backfired. In the course of my book research, I did an interview with the late labor leader, Richard Trumka, he used to be the head of the AFL-CIO. I went to him to talk about what the conversations were like in the ’90s and the noughties, when our current system of global trade and globalization was being developed. What were people telling him about the result for labor in the U.S. and Europe and other developed countries? And he said, at that time a policymaker from the Clinton administration had come to him and he’d said, you know, some of these deals are going to kill us. What are we going to do? We want to be part of global markets, but how is this going to affect labor working people at home?

And the policymaker said, we know it’s going to kill you, we know it’s going to be hard, but there’s going to be a leveling up. Remember that term leveling up? Wages are going to rise everywhere, and eventually, everything is going to be good, all boats are going to rise. Economies are going to grow. Politics will be stable. And Trumka said, okay, but how long is that going to take? And the policymaker said three to five generations. That’s 100 years in the communities in question and that is at the core of why globalization has backfired.

John Donvan:

Thank you, Rana.

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Okay, Parag Khanna you are arguing the opposite side, no, it has not backfired. You are here to defend globalization.

Parag Khanna:

I never refuse an Intelligence Squared debate. I’ve always enjoyed these. And I would certainly never pass up a chance to share the stage even if on the opposite sides from Rana. Now despite our perpetual youthfulness, the two of us here, three of us here on the stage are actually can probably well remember four instances in just the last 20 years when pundits have proclaimed the death of globalization.

So, let’s list all four really quickly. There was the 9/11 terrorist attacks. We were told trust across the globe has collapsed. It was a time of invasions and war. Foreign investment would be uninsurable. Remember that? Just 20 years ago. A few years later, global financial crisis, we were told interbank lending had frozen. We had a global demand shock, trade, finance and supply chains were disrupted forever we were told. A few years after that, the twin shocks of Trump and Brexit in 2016. That was meant to augur nationalism, protectionism and xenophobia as a wave sweeping the planet. And now, fourth instance. It’s actually many things at once. COVID, Ukraine, China, take your pick. We’re told nobody will ever travel again.

U.S.-China tensions and nearshoring will reverse trade and World War III looms. And just like 1914 that will definitively end globalization. Time and again, the globalization cynics say this time is different. And yet, here we are. The rate of trade to GDP is holding strong. Everyone talks about U.S.-China decoupling but guess what? U.S.-China trade is up this year 10 percent. And that’s just because two powers want to decouple from each other, what about the rest? Did you know that the largest trade agreement in history was signed this year, the Regional Comprehensive Economic Partnership? That actually went into effect among about 40 countries. Trillions of dollars of global assets, allocating pension savings and sovereign wealth all over the world evermore countries are having their stock exchanges connected to global markets and floating their local currency debt as well.

Digital connectivity is blanketing the world, petabytes of data are flowing through the internet, through cables every minute of every day, global digital commerce this year reaches $5.5 trillion, which is just shy of global goods trade. So, catching up. Now not — and let’s talk about the globalization of people; that matters too. Not 100 million, not 200 million, about 300 million people now live outside of their country of origin. So, more people, more cities, more countries, more societies, more of everything. It’s more connected more globally than ever, ever, ever before.

So, let me summarize this strident counter narrative, defending globalization with this utterly irrefutable fact of human history. Globalization always wins. Feel free to repeat. Thank you.

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John Donvan:

Thank you, Parag Khanna. All right, so now we’re going to move into a part of the debate where it’s more of a conversation that moves back and forth, robustly. But I just want to say what I think I’ve heard as two kinds of arguments being made here as the Parag has made the argument that globalization has not backfired from the point of view of the fact that, as he argues, or he is arguing that its infrastructure remains in place, that the connections that it set out to establish were established and continued to be made, that the relationships, the global relationships that it was meant to build, exist and are functioning and even thriving, where as I felt that Rana your argument is more that globalization came with a certain promise of benefits and that the promise has not been kept. So, talk a little bit about what the promise — a little bit more in detail about what you would say to Parag, what the promise was and why you feel it has failed to be followed through on.

Rana Foroohar:

For starters, I think it’s important to stay focused in these debates and Parag and I have both been in a number of them about the question at issue, has globalization backfired. We can talk till the cows come home about trade flows, we can splice and dice the numbers differently. I would actually if I was citing trade flows note that for the last several years, even leading up to COVID, and the war in Ukraine, trade in traditional goods and services had been flat or falling. Digital trade had in fact been rising. I think that that’s going to change and become much more regionalized for reasons that I’ll get into. Let’s talk about the different kinds of globalization that we’ve seen over the last several hundred years. Globalization ebbs and falls. It always has. For hundreds of years and thousands of years. And it comes in different forms.

The 18th century mercantilism worked until it didn’t. Then you saw a pivot to Laissez faire that worked until it didn’t. Then you saw the rise of Keynesianism. And then you saw the sort of transition starting in the ’30s but then really taking off with the Reagan-Thatcher revolution into this hardcore neoliberal idea that connecting global capital and global business across borders was going to be the way to tamp down the nation state, but more particularly nationalism. And I think that that’s really important historical context here. If you look at the word neoliberal, right, neoliberal globalization is what we’re really talking about here, the Washington Consensus, this last half century. That word was first used in the 1930s. And it was used in Europe, for understandable reasons. The continent was between two great wars, political philosophers and economists were coming together and trying to figure out how can we make sure that these countries don’t go to war with one another again?

How can we really tamp down, not just the power of the nation state, but the opportunities for nationalists and even fascists to rise? And they came up with the ideas of connecting global capital in business in the ways that eventually gave birth to organizations like the World Bank, the IMF, and the GAP that later became the WTO. And those ideas were great for a period of time, they worked until the pendulum, as it always does in economic paradigms, swung too far in the direction of capital. And I would argue that that started to happen in the 1990s, and in particular, in the noughties. That’s when you started to see real wages for all folks living in the developed world, for example, really stagnating, you started to see widespread inequality, and according to UN research, you started to see the benefits of all that global wealth being created, really going into two different pockets, multinational corporations, and China, the Chinese state.

I would say Chinese labor but as we all know Beijing has suppressed wages and basically funneled a lot of work or savings into state run institutions. So, I would say the state.

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John Donvan:

More from Intelligence Squared U.S. when we return.

Welcome back to Intelligence Squared U.S., let’s get back to our debate.

Rana Foroohar:

And that dichotomy that sense that wait a minute, we have a global market system that is working for basically, I could say the 1 percent, I could say the point .001 percent. But here’s what I’ll say; I’ll say the top 10 percent of the population that owns 85 percent of the stock in those multinational companies. And for the Chinese state, it was working mainly for those two groups, everybody else in between was getting less of their share of the pie.

John Donvan:

Rana, can I? You’ve seen so much. I want to let Parag respond to some of it. So, thank you for letting me interrupt. Parag, so, you can take your response wherever you would like. But I found compelling Rana’s argument that there was kind of a promise that globalization would lead to greater understanding, less tension, perhaps less negative competition, and that that has not been fulfilled, and that things like Brexit come about because of the breaking or the lack of fulfillment of that promise. So, can you take that on?

Parag Khanna:

Sure. I think there are a couple of things. John, in your introduction, you defined globalization correctly as the worldwide spread of an exchange, of people, of capital, technology, trade, goods, ideas, and so forth. You coupled it with saying it brought this promise of an ever expanding universe of prosperity.

Those two do not necessarily go hand in hand globalization is primarily the former part of what you said, it is a material, measurable fact, in terms of the extensity of connections and exchange among people, the velocity and so forth, that is globalization. It is in many ways neutral. You can choose to imbue it with certain hopes and expectations, and you may be disappointed depending on where in the world you are. Yeah.

John Donvan:

Well, can I break in then? What was the goal then? As you say, the functioning is neutral. But there must have been an objective for bringing it into —

Parag Khanna:

It’s so interesting, you’re both in a way ascribing an agency to globalization rather than to the agents who actually drive globalization because for one thing, it is driven by everyone. It is the sum total of all of these interactions. Globalization emerges from all of those voluntary, very often voluntary interactions.

Now we can go back to previous eras of globalization that were colonial and mercantile, in which of course, there was a lot of forced exploitation involved in creating the global world economy of the 17th, 18th, 19th centuries. But that’s not the globalization that we’re talking about right now. Nor does deglobalization objectively, neutrally in terms of measurement have to be synonymous with neoliberalism and integration. Globalization is a lot more than that one particular period of time that Rana is focusing on because it is the immediate contemporary or recent past. But that doesn’t mean that that is all globalization, because there’s a lot going on that drives the globalization of goods, services, exchange that has nothing to do necessarily with that paradigm ideologically. When China expands its capital outflow and investment, when it does the Belt and Road Initiative, when it pursues its dual circulation policy and signs lots of trade agreements, it is the largest trade partner of more than 120 countries. So, just FYI, nothing that we discuss here today is going to change that fact.

So, you can retrench as much as you want, and recalibrate your own position on globalization as America is welcome to do. It doesn’t mean that globalization has died.

John Donvan:

All right.

Parag Khanna:

Right?

Rana Foroohar:

Can I jump in? Parag is in some ways, making my argument for me, because he mentioned the word dual circulation. How many people actually, I’m curious in the audience know what dual circulation means, or have heard it used? It’s a pretty wonky term, but it’s an important term, because that’s essentially official state Chinese language for decoupling. Dual circulation means we are not going to have one single global economy anymore. The Chinese have said, and I think rightfully so that they want to have a much more regionalized economy, they see themselves again, I think, rightly, kind of like the World War — the U.S. in the World War II period where there’s a big single language market with room to grow and to loop nations around it into its orbit in a much more regionalized ecosystem.

They want to produce and consume more locally. Why do they want to do that? For all kinds of reasons, because of fuel, because of emission standards, because of the fact that they’re now richer and want to keep more of their own production at home. If globalization is about the free flow of capital, goods and people, and you have official Chinese policy that says we want to keep more of that regionalized, I think it’s really hard to argue that there hasn’t been a significant change in globalization, as we’ve known it, however you might define it.

Parag Khanna:

Let me come back on this. There’s a very crucial word that Rana used that I did not, and that word is free. And then you may have used it as well, John, but in fact, that’s not necessarily inherent in the definition of globalization, which as I said, is fundamentally something of a measurement exercise of the volume of exchange and the geographic extensity of that exchange, it can be morally much more neutral than both of you seem to want it to be, or certainly, Rana’s point about the word free.

Because globalization has been around literally for thousands of years, as she mentioned, and even just the last several hundred years, and the better part of that last several hundred years, globalization has been an imperial enterprise. We have more globalization today because we have more geopolitical and more geopolitically ambitious powers. Not just one or two, but three, or four. And they are all reaching outward to project their own model, to project their own exports and so forth. So, dual circulation is an interesting case, because it is actually an old wine in a new bottle as you might even say, because it’s fundamentally about import substitution. Well, how did the European mercantile powers become the global colonial masters that they became? Import substitution. How did the United States through the Hamiltonian doctrines of its founding years become one of the world’s leading economy? Import substitution.

And what China has been doing for 40 years and accelerating in many ways right now, as it climbs up the technology ladder, is this accelerated import substitution in every way it can. But does that mean that it’s deglobalized? Not at all, it’s pushing outward as much as possible. It wants to massively enhance its exports. Even as its labor force declines it’s using industrial robotics, which it has built and imports to expand its volume of exports. And so, the dual part of dual circulation, as the word dual suggests, is not either or, not either we are self-sufficient or we are interdependent with the rest of the world, it’s both and. It’s how can we continue to expand our presence and our global economic footprint, and that’s what they’re doing.

John Donvan:

All right, I feel we’re getting a little bit off the topic of whether globalization has backfired. So, I want you to come in and bring it back around to that.

Rana Foroohar:

Well, I’m glad that you said that because it’s actually a nice transition. The question is, has globalization backfired? And I’m defining this latest round of globalization as the last 50 years or so of the neoliberal Washington consensus.

To me, it’s important because you could argue very differently in the many eons of globalization what happened, but this is the period I’m looking at.

John Donvan:

I want to say I think that’s also our sense that we’re talking about the current phase of globalization. I think that’s the expectation. It’s his call.

Parag Khanna:

Even then you’d be incorrect but carry on.

John Donvan:

That’s okay. That’s totally okay.

Parag Khanna:

Please carry on [laughs].

John Donvan:

I just want to define terms.

Rana Foroohar:

Maybe we’ll do — we’ll come back, and we’ll do a three-hour debate. But just for now, let’s think about that last half century. It’s about values. And, you know, it’s interesting, and I wonder, Parag, if you would say the same. I’ve been going to China for many years. The first time I went there, I thought, wow, this is an amazing, rich, old, incredible country. Why does anyone think that they are going to seamlessly come into the structures that have been put into place by the U.S. and Europe? Like, what? Why are we pretending?

Why are we all sort of, you know, have the blinders on? Well, the reason we had the blinders on is that globalization and its structures had been largely driven forward by big American and to a certain extent, European multinational companies that wanted to try and make money in China. But China always had its own goals, its own political economy. And so, the idea of the One World Two Systems paradigm was always there, and it was always ready to explode. Now, I would argue that that process started to happen in 2015 when China put forward it’s Made in China 2025 strategy, when it said explicitly, we want to decouple from Western technology by 2025. You then get President Trump coming into office, he had no coherent strategy, I would argue, about pretty much anything, particularly globalization, but his U.S.TR, Robert Lighthizer did take the decision, I think, a courageous one in saying, you know what, the current paradigm is just pretend.

The WTO is not working, we all know that. China is not playing by the rules of the WTO, understandably, because it has its own political economy that is essentially state run and always will be. And U.S. multinationals are complaining behind the scene, but not having the courage to stand up and actually, you know, name names when it comes to what’s going on. So, trade tariffs come into place, you then get Biden coming in post COVID, post Ukraine war, when it is very clear that the three things on which globalization has been predicated — cheap capital, cheap labor, and cheap energy — are all falling apart. Cheap capital’s ending because 40 years of low rates are being rolled back. And we’re now seeing what’s happening with that. Cheap labor is shifting because China wants to be more regional. And by the way, labor rates in Asia had risen to an extent that companies were already deglobalizing, then COVID hits, you see problems with supply chains, and you begin to understand that maybe it’s not a great idea to get your gas from an autocrat.

So, you start to see a tri polar world, the U.S., China and Asia and Europe going in somewhat different directions. There will be overlap in certain times and places but in a fundamentally different way than what you’ve seen in the last 40 years.

John Donvan:

And so, are you arguing that that represents a failure of globalization?

Rana Foroohar:

It’s a backfiring, because there are politics that were being ignored, be it the fact that China has a different political economy, be it the fact that we didn’t look after labor in the rich world. There were value systems that were being ignored here. And they have backfired politically.

Parag Khanna:

You know, at the outset, I said, there were these four instances where we’ve declared the death of globalization and we’ve been wrong every time. Part of it, if you remember, the anti-globalization movement had its heyday about 20 years ago as well, Rana and I would well remember everything from the Battle of Seattle, the World Trade Organization ministerial in 1989, the protests swarm — the protesters swarming the IMF and World Bank meetings in Washington or elsewhere and water cannons at Davos, and so forth.

And what happened to all of that? It fizzled. Right? It died. Globalization is still alive and well, but that movement more or less fell apart, and the parochial narrow interests that it claimed that it represented even as it claimed to be representative of a global underclass, really weren’t that representative. And this is the reason this is important is to remember that even if we agree that there is supposed to be some common set of norms and rules driving globalization from a legal standpoint or an institutional standpoint, you have to bear in mind that the vast majority of the human population is still more or less globalizing in rough accordance to those rules. Look at the Transpacific Partnership Trade Agreement, something that the United States Government designed and incubated, but ultimately it didn’t sign and actually expected that the other countries would pull out of it when the U.S. did.

Lo and behold, every other country did join the Transpacific Partnership Trade Agreement. That does not to me signal the end of globalization or a backfire and globalization. Canada, Mexico, Colombia, Chile, Australia, New Zealand, Japan, modern societies, Western hemispheric and writ wealthy Asian societies decide to continue with the globalization. And one other thing. Ultimately, whether or not the rules were born here in the United States with the Bretton Woods system post 1945 or not, the United States is the least trade dependent. If we were to reduce globalization to just trade which we should never do, but for the purposes of massive oversimplification we’re doing, that’s fine. Even if just, we were only talking about trade, United States only has 14 percent, represents only 14 percent of global trade. This is the most self-sufficient already, even as it tries to do more, continent in the world.

But Europe and Asia continue to expand trade with each other, and they each represent close to 40 percent each of global trade. So, that globalization, according to rules that we more or less know and recognize very well, continues to expand among just about every other region of the world, and every other human in the world.

John Donvan:

And would you — in just a moment by the way I would like to go to the audience, to you and the audience for questions. So, please get ready to formulate your question and I’ll call on you. Are — is your point then Parag not only this, you said at the outset that the plumbing of globalization continues to function, but that the clogs that might be represented by some of the negative consequences like inequality and the impact on labor, are not sufficiently serious and/or onerous to have caused a rollback of globalization. A meaningful reaction against globalization.

Parag Khanna:

These are very, very serious concerns and consequences, and therefore we should place the blame where they lie, which is with our own political class and leaders who have failed to moderate globalization, manage globalization.

You cannot simultaneously argue that globalization has backfired without specifying the geography in which it has backfired. Because A —

John Donvan:

Can’t that case be made that it has backfired in some places?

Parag Khanna:

You can say that in some electorates, at some moments in time, in some elections, but not in others, there may be a backlash. But I wouldn’t even say that the bogeyman is globalization, you’d be buying into Trumpian mythology of blame the globalists, blame the globalists. Because the fact is that if you take heavily dependent trading nations, like Germany, or South Korea and others, again, around the world, they don’t have the same kind of backlash in their political systems the way we have. Well, what’s the difference between them? Those countries will 3 percent to 4 percent of their discretionary budget on worker retraining and upskilling and retooling their workers to continue to engage in convenient globalization and the United States did not.

John Donvan:

Okay, so let me take that to you, Rana, then. So, Parag is saying that policy choices made regionally and within national borders are the reason that globalization is backfiring as opposed to the —

Rana Foroohar:

Wait. Are you now arguing that it has backfired [laughs]?

Parag Khanna:

No, I’m arguing that the blame for — those who blame globalization are actually blaming the wrong culprit. And actually, I got that from your book, because in your new book you blamed everyone from the Democratic Party to Republicans to protectionists, for not investing sufficiently in education, in worker re-training, in building American industry, the industrial base. That doesn’t sound like the fault of China that American politicians didn’t invest in education and worker —

John Donvan:

Could we persuade you in any way to retell us again, the name of your book?

Rana Foroohar:

“Homecoming: The Path To Prosperity In A Post-Global World.” Thank you, John, for that subsidized promotional moment [laughs].

Parag Khanna:

It’s an excellent book.

Rana Foroohar:

Listen, you know, we need to focus again on the question at hand — has globalization backfired? I 100 percent don’t blame China for that. I think China, and I’ve written this in a number of columns, has a system that works well for China. I have my issues with the hardening of the Xi Jinping regime. But in my book, I say quite clearly that globalization has backfired. And I would look at the rise of populist in the U.S., the rise of populist on both sides of the aisle in Europe, I would look at the rise of nationalists in many developing markets, and say — and also look at, frankly, the collapse of the Bretton Woods institutions, you know, which are operating in many cases in name only not as problem solvers at this stage, and say, yes, globalization has backfired.

Because we had a system that prioritized global markets well beyond the ability of nation states everywhere to cope. And you know, this is true not just for rich countries, but in many developing countries as well. One of my intellectual rabbis, Joseph Stiglitz, the Nobel laureate economist, professor at Columbia, has said for years and wrote in his book “Globalization and its Discontents,” that the Washington consensus, and frankly, Western elites, by and large that developed that, neoliberal elites had a one size fits all prescription for how development was supposed to occur. But we have an opportunity right now and I’m actually really optimistic. My book is an optimistic one. We know the world isn’t flat. And it’s particularly bumpy right now. But for all kinds of reasons, I think we’re going to get to a better place where the balances of the global markets and the nation states are going to be able to be conjoined not only because more regionalized economic bloc’s will make that division between interests less stark, but because there are all kinds of new technologies that are pushing production local.

You’ve got, you know, paradigm shifts going on in everything from work from home, to, you know, I could go on and on, about what’s happening in business that are changing this and making local and global possible together.

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John Donvan:

I’m John Donvan. This is Intelligence Squared U.S.. We’ll hear more from our debaters right after this.

Welcome back to Intelligence Squared U.S.. I’m John Donvan. Let’s get back to our debate. Is that a globalization that works or is that a deglobalization?

Rana Foroohar:

What I would say is it’s more of an international system. I think when you use the word International, you by proxy, acknowledge the fact that decisions about economic policy, I believe, should still be taken by voters at the level of the nation state. In this country I believe the reason that you got extreme politics on both sides of the aisle be it Trump, be it Bernie Sanders, is that you had an electorate that felt that, listen, I’m voting, I’m paying taxes, and yet the policies that are affecting my life are floating way above the nation state.

You have to have a little bit more local to save the good parts of global.

Parag Khanna:

I think that the definition that we’ve now converged upon, at least from your perspective, is far too narrow. Because if we’re looking at globalization, according to that conventional, very bricks and mortar kind of way, it’s almost pre technological. It’s almost pre financial. And yet, as Rana is saying, well, part of what went wrong, according to her, is this hyper financialization. So, how can suddenly when we talk about globalization, we ignore finance, we ignore money, which is as hyper global in many ways as ever. So, we can’t say that globalization has backfired when you have more capital flowing around borders and being invested all over the world.

Where I live in Asia, every week, a new Western European or Canadian sovereign wealth fund or pension fund expands their offices to invest more billions of dollars on the other side of the planet. To say nothing of digitization, which as I cited is almost equal in value to goods trade, and that there the word internationalization would not even begin to capture it. Because when you think about the wearer of a global digital supply chain, it is quite literally everywhere. Think about the sort of game the gaming industry has, right? Where is a computer game made? Well, the value of computer games, which has a larger GDP as an economic sector than all of Hollywood and music combined, is coded by people in the cloud who have never met. No Adam has crossed a border. And yet, that’s very much globalization all the time. We can’t say that globalization has backfired when — if you only reduce it to internationalization and ignore the things that are truly global that are actually expanding.

Rana Foroohar:

We’re — I actually completely disagree with that and let me explain why. We’re talking about nothing if not capital, that’s the whole point. Globalization backfired, because capital was able to travel so much more freely than either goods or people and that created inequality which had a backlash. Now, interestingly, capital is vulcanizing. Capital has been vulcanizing regionally for some time. Actually, that started after the financial crisis. But think about the digital RMB, Digital Yuan. China is doing far more trade now, increasing amounts of trade in its own digital currency. It wants to have a system that is totally separate from the dollar. The sanctions, the dollar base sanctions that were placed on Russia, while I completely agree with them also pushed a number of emerging markets to start scratching their head and thinking, gosh, maybe we need a more multipolar currency system because the dollar can be weaponized. This is catching fire because of the digital aspects that Parag is talking about.

Almost every country in the world is looking at having its own digital sovereign currency which you can use in much more localized ways, that’s going to be a good thing, because you know what that goes back to what Keynes always wanted, which was a much more multipolar currency system.

John Donvan:

And I’d like to go to audience questions. So, but if you want to respond to that point —

Parag Khanna:

Again, we’ve got a multipolar world is fundamentally a world that is going to be more global, not less, it’s not going to be driven by — there’s not going to be just one driver, but multiple drivers. And that’s the way globalization has always been, it is not uncommon for people to argue that a more regional world is a deglobalized and fragmented world, or that a new Cold War or a rift between regional systems means a deglobalized world. And yet, how is it that the very globalization system that we are talking about and have as our main subject today emerged during the Cold War? Right? And it is a fact that as regional systems integrate, they actually push outward to expand their production chains and expand their exports globally.

And one last point is just the idea of nearshoring. Right? You know, bringing back industries is very often including the President a lot more hype than reality. Every time we read about an American automobile company that’s decided that it’s going to make an additional investment in Michigan or something like that, that will be page A1 news. On page A26, you will actually also read that that same company has decided to quintuple its investments in Asia and produce more automobiles there. And that’s also of course, globalization thriving. So, you can’t have both at the same time. And part of the reason why trade continues to grow across the Pacific, including between the United States and China is that even as you near shore in order to make more iPhones, for example, the United States, guess what? Where did the screens, the cameras, the chips, and a whole bunch of other things actually come from? They came from Asia. So, you actually increase your trade deficit in order to nearshore.

So, I don’t deny that we should have more localization, I would wholeheartedly endorse the proposition that we should not un-strategically and unsustainably be dependent on international or global supply chains when we can more sustainably and more strategically fulfill those functions here at home. And that’s a very logical proposition, but it doesn’t — it works much more easily in theory than it does in practice.

John Donvan:

I’d like to go to audience questions. And I have a little difficulty because the room is so dark.

Rana Foroohar:

Oh, there’s a phone over there being put up.

Male Speaker:

Hi. I’m Ben, I’m from Australia. And my question is really how do we — you know, the discussion has globalization backfired, is about poverty. From the 1950s until now, global poverty has been reduced substantially and has increased — well, it’s slowing down more recently. Is that because of globalization or some other factor?

Rana Foroohar:

Yeah. Listen, that’s a great question.

And yeah, I would have to say yes, because it goes back most of the poverty that you’re talking about was alleviated in emerging markets but particularly in Asia, and particularly in China. So, it goes back to this point, UNCTAD research showing that the biggest single beneficiaries were the multinational corporations and the Chinese state. So, yes, you now have a number of people that are not living at the poverty line. But the question of the debate is has globalization backfired? And I would argue that the outsized increase in in-country inequality has created so much economic trouble in various nation states that yes, the decoupling and the political fractiousness that we’re seeing now is evidence that it’s backfired.

Parag Khanna:

It’s certainly true what Rana pointed out. Factually, yes, of course, globalization has a very, very strong role in poverty reduction around the world, particularly in Asia. And now though, domestic economic growth, the consumer economy, digitization, financialization, urbanization in those countries has also picked up the torch.

Now, again, those countries are so connected to international supply chains. Look at India, look at Indonesia, Vietnam, these places from which American companies are now relocating supply chains. Remember that just because they decided to no longer and if they don’t invest in China anymore, they’re just relocating that supply chain activity to Vietnam or other Asian countries, that’s very much still globalization. So, there is still cheap labor out there. And even if the labor were not cheap, you still want to sell into those fast-growing consumer markets. The majority of the world population, the majority of the world’s middle class, is shifting towards Asia on the other side of the world from us. If those multinational corporations have any hope of maintaining their market cap, they’re going to want to continue to export.

Now again, the backlash against the mismanagement of globalization by our politicians is very welcomed. But once that process is complete of voting out governments that have failed and passing new regulations that are more equitable and pushing for inclusive capitalism, once that process is complete, guess what?

We will be back to where we’ve been all along, which is embracing globalization and comparative advantage.

Rana Foroohar:

One quick stat — 92 percent of multinational companies, according to McKinsey Global Institute are regionalizing and localizing production for all kinds of reasons.

John Donvan:

Here’s another question. Can you tell us your name, please?

Charlie Rose:

Hi there, Charlie Rose from YPO Pasadena. Many would argue that the defining challenge of this era is climate change, which is a uniquely global issue. I have a two-part question for you. How has globalization —

John Donvan:

Can I ask you just in the interest of everyone else to choose one?

Charlie Rose:

Yes. So, my question is, how has globalization impacted the trajectory of climate change? And the question I choose is, how will the fight to —

John Donvan:

You’re slipping in a second one.

[laughter]

So, I’m going to take the first one.

Rana Foroohar:

I’m sorry, could you —

John Donvan:

So, the question is, how has globalization impacted the issue of climate change?

Rana Foroohar:

I love that question. And I would take it in two pieces. A lot of times people ask this question, and they say, well, how can we possibly get a solution to climate change unless the conversation is happening at a global level? And of course, it has to happen at a global level. But the solutions will be highly localized and let me give you a couple of reasons for that. The U.S., Europe and China, Asia, all are approaching this issue in different ways and by different means. Ultimately, fixing climate change is going to mean hyper localized supply chains. Does anybody know what the single most polluting thing in really any large country is in terms of an industry? It’s not the fossil fuel industry itself, it’s supply chains going into complex industries, like housing, for example, there are seven separate supply chains that go into building a house.

Materials are being toted from all over the world that has an emissions cost. This is something contrary to what Parag was saying, that is now actually becoming a revolution in manufacturing, additive manufacturing, which is basically making parts and making entire cars or in the case of houses, homes now being done all over the world. It’s done in Austin, Texas, California, India. You can do things locally; the technology is there. And that is what is going to stop a large part of climate change. Likewise, localization of things like food production, the number one cash crop in this in terms of produce in this country is Iceberg lettuce. Why? Because you can tote it for six months in a car, and you know, it’ll still be good. Does anybody really want to eat iceberg lettuce? No. That’s why there are now vertical farms that are being developed that are growing produce up the side of buildings and on roofs, that kind of hyper localization is going to be a really important part of fixing the emissions problem that is at the core of climate change.

John Donvan:

Okay, I want to give Parag a shot at the same question.

Parag Khanna:

Rana has walked into two of my favorite traps [laughs]. Okay, the first is the point —

John Donvan:

I feel like I want to tell you to choose one also.

Parag Khanna:

All right. Well, the thing about most, you know, Western or American multinational, saying they’re going to regionalize, part of the reason is because by manufacturing in Mexico, you can then more easily export to preferential markets that Mexico has freer trade agreements within Asia than the United States does. And why is China expanding its manufacturing presence in Mexico as well is in order to access the United States more readily through the U.S.MCA trade agreement. So, again, all of the trade liberalization that continues to go on in the spirit of the globalization definition that we are using is alive and well and American firms and Chinese firms and all firms continue to exploit it. So, globalization again, thriving. Now on the climate change question, this is the real trap, is this idea that we are engaging this hyper localization process and everything is domestically produced and consumed, and nothing comes from anywhere else anymore.

Well, I want to ask you something. That 3D printer, right, that beautiful device that sits on our countertop and is meant to make anything we want any solid or liquid object and print it out for us, and somehow there’s no international supply chain that depends on, well, I want to ask you where that was built. Where did you get that 3D printer that is making your stuff for you? Oh, yeah, you imported it from Korea. I think globalization is doing okay. How about that vertical farm, right?

Rana Foroohar:

All made — the ones I’m talking about were all made locally, but many of them are made locally.

John Donvan:

All right, we have to go down the homestretch now and go to each of our debaters for closing remarks. It’s again the question to remind you is has globalization backfired? And Parag, I’ll let you go first to make 90 seconds, to make one more pitch for your side of the story.

Parag Khanna:

Sure, thank you. Well, first is a political paradox because Rana pointed out earlier that, you know, politics should only take place at the level of the nation state and globalization is in retreat. Well, we should be careful what we asked for. Because in a world where we don’t have any international political influence through partially through that commercial interconnectivity that results from globalization, how do we ever expect to spread norms, whether those norms are norms of free markets, or democracy and so forth? So, we should be very careful about that. The fundamental point, though, is that globalization is a spiderweb with so many connections that a disruption in one place, be it due to a backlash politically in that country against the elites of that country for their mismanagement of globalization, does not mean that the web has somehow collapsed.

Far from it, because there continues to be an ever expanding set of pathways for supply to meet demand, and fundamentally, in a neutral way, not in a limited to the neoliberal ideology that prevailed at a particular point in time view is most fundamentally what globalization is, it’s about supply meeting demand across geography, the movement of people, the movement of goods, the movement of technology, moving ideas, capital, and so forth. And that’s actually what makes globalization so anti fragile. It might well be alongside the internet itself, the most anti fragile thing. That’s what Nassim Taleb himself describes it as being in his book by the same name and it will continue to evolve. As I said, at the top, it’s going to outlast any backlash, any backfiring movement against it, because those always proved to be far more narrow and parochial than they purport to be. And in the end, people realize that globalization remains much more in their own interest than the opposite.

John Donvan:

Thank you. And Rana, you get the last word.

Rana Foroohar:

Okay. Well, thank you. First of all, I just want to say thank you to Parag. And thank you to everybody for listening, really great questions and great debate. I always learn so much from these things, so I’m really happy to be here. I’ll go back to really where I started, which is that if you look at the promises of the Washington consensus of neoliberal globalization, it was the capital goods, and people were going to be able to go where it was most productive, and that it would benefit all. But the truth of the matter is, it benefited two groups of people and in particular, the wealthiest of us way more than anybody else. We have seen in this country stagnating wages for all since the early 1990s. We have seen a lot of working people stagnant wages since the ’70s. That’s roughly true in most OECD economies. At the end of the day, we need global institutions. But you have to have buy in from the people that are voting for the politicians that enact liberal democracy. Otherwise, you’re going to get not only a backlash against globalization, which is already happening, but a backlash against liberal democracy.

That to me is where we are politically right now. And it’s because this economic pendulum has swung a bit too far towards global and needs to swing a little bit further back to local.

John Donvan:

Thank you. And I would like to ask you to thank both of our debaters for what they brought here today.

[applause]

Thanks. So, we would like to pull you again, now that you’ve heard what each of the debaters has to say we’re curious to see whether any of you moved on the argument. As I said, at the beginning, we aspire to get people who disagree with one another to listen to each other and for people to listen to ideas that they might disagree with. So, we’re curious to see how many people here might have changed their mind. So, I’m told the results are in. So, before the debate began on the question of has globalization backfired, 35 percent said yes and 42 percent said no, and 23 percent were undecided. And in the second poll 37 percent said yes, 55 percent said no, and 8 percent were now undecided.

So, cumulatively, 34 percent of you changed your minds. We really find that quite impressive that you were willing to listen and to shift, and I’m sure that your shift, your thinking on this will evolve as the arguments continue. But it’s exactly — everything that’s just happened here is exactly why we do these debates. And I’m just so pleased to have had all of you here. I want to say that this concludes our debate. And I want to thank again our debaters and our founder and chairman and YPO alum, Robert Rosencrantz, and to you, our audience for keeping such an open mind when listening to this insightful debate. I’m John Donvan from Intelligence Squared. We will see you next time.

[applause]

[music playing]

Thank you for tuning into this episode of Intelligence Squared made possible by a generous grant from the Laura and Gary Lauder venture philanthropy fund. As a nonprofit our work to combat extreme polarization through civil and respectful debate is generously funded by listeners like you, the Rosenkranz Foundation, and friends of Intelligence Squared.

Robert Rosencrantz is our chairman, Clea Conner is CEO, David Ariosto is head of editorial, Julia Melfi, Che O’Meara and Marlette Sandoval are our producers. Damon Whitmore is our radio producer, and I’m your host, John Donvan. We’ll see you next time.

[end of transcript]

This transcript has been lightly edited for clarity. Please excuse any errors.