The Next Phase of Globalisation: Democracy, Capitalism and Inequality in the Industrialised World

The next phase of globalisation: democracy, capitalism and inequality in the industrialised world

Oxford 2017

Policy Network, FEPS and Renner Institut Conference, St. Catherine’s College, University of Oxford

3-4 July 2017

At this fifth annual Oxford conference, we will explore a progressive reform programme for the institutional structure of society, the changing role of the state in the pursuit of social justice, and the evolving relationship between citizens and the state.

The debate about globalisation over the last thirty years has had a major impact on our understanding of political developments in advanced economy states. The consequences of globalisation have been argued about vigorously among scholars in economics and the social sciences, as well as within political elites, NGOs, and civil society. But there is still relatively little agreement about the causes, effects and long-term impact of globalisation. In recent years, globalisation appears to have entered a new phase of disruption and disorder; the impact of economic globalisation and technological change in driving dissatisfaction with established political systems is increasingly apparent. These structural changes have been felt acutely in the advanced industrialised countries, given the rise of new forms of political populism that seek to exploit the economic and political polarisation and resentment created by globalisation. The shift in politics was symptomized by the decision of UK voters to leave the European Union (EU) in June 2016, the November 2016 election of Donald Trump to the presidency of the United States, as well as the rise of populist movements on left and right throughout much of Europe. The Harvard economist Dani Rodrik has insisted that the three goals of liberal democratic industrialised economies – global economic integration, national sovereignty, and political democracy – are becoming increasingly incompatible. The reaction against globalisation is leading to demands for national barriers and protections that safeguard jobs and living standards within the nation-state. This has thrown the post-war project of European political integration into turmoil. Since the financial crisis and great recession post-2008, globalisation no longer appears to be delivering the goods in a climate of deflation and ‘secular stagnation’ where growth rates are declining; wages and living standards are falling; the blue collar working class is in open revolt against the political establishment; and

1 economic anxiety and insecurity are rising fast across most developed economies, breeding popular discontent with government bureaucracy and representative democracy. The eight years since 2008 have witnessed the slowest and most anaemic recovery in the history of western capitalism. To many voters, the economy appears to be broken and politics is failing. Parties of the left and centre-left have struggled to forge a convincing response to this new phase of globalisation in the aftermath of the 2008 economic crisis. In the 1990s, social democratic parties embraced globalisation almost without qualification, arguing that government intervention to increase the supply of human capital and skills would enable everyone to benefit from global economic integration. That initial optimism has been confounded; it is increasingly apparent that globalisation is not working for those on lower to middle-incomes, leading to a crisis of confidence in mainstream social democracy. The central question at the heart of this Policy Network-FEPS symposium will be what challenges does the new era of globalisation pose for centre-left parties across Europe and the United States? The seminar will examine the ‘next phase of globalisation’ bringing together leading thinkers and experts from across the world to debate the structural causes and political consequences of the new wave of globalisation. The output from the conference will be a set of papers alongside a major book publication (IB Tauris, 2018). Agenda

Day 1

09:45 – 10:30 Welcome Coffee & Registration

10:30 – 11:00 Introductory Remarks Alfred Gusenbauer, president, Renner Institut Ania Skrzypek, senior research fellow at FEPS Patrick Diamond, co-chair, Policy Network

11:00 – 13:00 Session 1: Taking stock of Brexit, the Trump Presidency, and the political impact What was the impact of globalisation and deindustrialisation on Brexit and the US Presidential result? How far were globalisation and deindustrialisation responsible for inflicting the political shocks of Brexit and the Trump presidency? Was Brexit and Trump’s victory a reaction by the ‘losers’ against austerity and long-term economic restructuring? What are the implications of Brexit and a Trump presidency for other EU member-states? What are the similarities between the Brexit ‘shock’ and Trump victory; how are they similar to political turbulence in other parts of the western world? Andrew Gamble, professor of politics at the University of Sheffield and emeritus professor of politics at the University of Cambridge

‘How far is globalisation responsible for the rise of political populism and polarisation in the advanced economy states?’ Roger Liddle, co-chair of Policy Network and member of the House of Lords (chair) Philip Stephens, associate editor of the Financial Times ‘The Threat of the Trump Presidency to the liberal international order’ Dimitris Tsarouhas, associate professor at the department of international relations, Bilkent University ‘What will be the long-term impact of Brexit on the cohesion and sustainability of the EU? Will new populist pressures now be unleashed?’ Loukas Tsoukalis, professor of European integration at the University of Athens, visiting professor at King’s College, London, and the College of Europe in Bruges ‘How far was Brexit a revolt against globalisation? Are we likely to see similar revolts elsewhere in Europe?’ Helen Wallace, honorary professor, University of Sussex ‘Why did Brexit seem so plausible in June 2016? Will it continue to appeal as and when the consequences become more clear?’

13:00 – 14:00 Lunch

14:00 – 16:00 Session 2: The changing shape of globalisation Globalisation has been underway in the western world since the early 20th century as Keynes observed in the 1920s, but it has been through many cycles and reversals, not least the impact of two world wars and the sporadic return to protectionism among national elites. There are indications that globalisation has reached a ‘new’ and more intensive stage in the 21st century, due to the impact of technological change, demography, climate change and inequality in the advanced economies that are combining with the ongoing integration of capital, product and labour markets to produce a new phase of globalisation with unforeseen political and economic consequences. New technologies have been especially significant in shaping western economic and industrial restructuring. The diffusion of ICT has made the world immeasurably better connected, but this has negative as well as positive effects, not least in creating the infrastructure for the complex financial trading that led to the 2008 crash. Financial globalisation has been especially important in sweeping away the barriers to the free movement of capital, thereby eroding the social contract that traditionally underpinned the modern capitalist economies. This fracturing is having disruptive effects, widening further the divide between ‘winners’ and ‘losers’, exacerbating economic inequalities, and leading to a collapse of confidence in economic and political elites.

The globalisation process has continued against the backdrop of the 2008 crisis and its aftermath: western economies are caught in what Andrew Gamble of SPERI terms a ‘deflationary trap’: interest rates are at historically low levels and central banks are forced to print money (QE) in order to inject liquidity into the economy without which businesses and consumers would be deprived of access to credit. The problem for policy-makers has been that QE policies have merely advantaged existing owners of assets; the inequalities created by the market liberal policy consensus of the last three decades including weakening collective bargaining power, deregulating labour markets, cutting taxes, and reducing social security entitlements have fuelled further rises in social and economic inequalities across the west. Jeffry Frieden, professor of government at Harvard University ‘How far has globalisation entered a new, more disruptive phase’? Zaki Laidi, professor and director of research at the Sciences Po in Paris ‘To what extent has increasing migration to the West exacerbated popular resentment against globalisation? André Sapir, economics professor at the Université Libre de Bruxelles and senior fellow at Bruegel ‘The changing shape of globalisation in Europe and the US: key trends and challenges’ Ania Skrzypek, senior research fellow at FEPS (chair) Helen Thompson, professor of political economy at the department of politics and international studies, University of Cambridge ‘To what extent were the 2008 financial crisis and globalisation inter- connected? Have policy responses to the 2008 crisis encouraged a growing backlash against globalisation?’ Shahin Vallée, former economic advisor to Herman Van Rompuy and former economic advisor to Emmanuel Macron and senior economist at Soros Fund Management ‘Does globalisation still mean a ‘race to the bottom’ given the battle for comparative economic advantage?’

16:30 – 18:30 Session 3: Domestic and international policies to deal with globalisation What policy options are available to progressive policy-makers at the domestic and international level to deal more effectively with the disruptive and destabilising effects of globalisation combined with the long-term fall-out of the financial crisis? What can we learn from policy successes (and policy failures) so far? How damaging has fiscal austerity been, and was a ‘quasi-Keynesian’ policy strategy feasible after 2008? How should nation-states negotiate the dilemma of whether to put in place protections that limit their access to

4 global markets and weaken growth; or accept the removal of barriers and regulations which in turn compromise their policy autonomy and potentially expose their citizens to greater economic volatility? As the FT commentator Martin Wolf has argued, if political legitimacy is to be protected, ‘economic policy must be orientated towards promoting the interests of the many, not the few…the marriage of liberal democracy with capitalism needs some nurturing’. How far can policy-makers and political actors prevent insular nationalism and liberal globalisation from colliding through effective governance and activist public policy? Bea Cantillon, professor of social policy, and director of the Centre for Social Policy at the University of Antwerp (chair) Bill Emmott, is a former editor-in-chief of The Economist, and is the author of The Fate of the West: The Battle to Save the World's Most Successful Political Idea (Respondent) Will Hutton, principal of Hertford College, Oxford University ‘How far have austerity policies increased the resentment against globalisation in Europe and the US? Is there a policy alternative?’ Gavin Kelly, chief executive of the Resolution Trust ‘From a “winner takes all” to a “rising tide” economy – what role for policy?’ Silvia Merler, affiliate fellow at Bruegel, a Brussels based thinktank ‘Europeans, globalisation, investment and social policy.’ Jeromin Zettelmeyer, senior fellow at Peterson Institute for International Economics, Washington, DC ‘How can the global productivity crisis best be addressed through public policy?’

18:30 Closing Remarks Ernst Stetter, Secretary General, FEPS

19:30 Drinks Reception Location: St Catherine’s College Bar

20:00 Formal Conference Dinner Location: St Catherine’s College Hall Day 2

08:00 – 08:30 Welcome Coffee

08:30 – 10:00 Session 4: Domestic and international policies to deal with globalisation (Part II)

Bea Cantillon, professor of social policy, and director of the Centre for Social Policy at the University of Antwerp (chair) Anton Hemerijck, professor of institutional policy analysis at VU Amsterdam ‘The social investment paradigm as a response to disruptive globalisation’ Vivien Schmidt, Jean Monnet professor of European integration, professor of international relations and political science at Boston University ‘Where might the next generation of progressive ideas and programmes come from?’ Frank Vandenbroucke, professor at the University of Leuven, Antwerp ‘The compatibility of international openness and domestic social cohesion: understanding the EU’s promise, it successes and its failures.’

10:00 – 10:15 Coffee Break

10:15 – 12:15 Session 5: What is to be done? The social democratic political response and ‘post-truth’ democracy How should centre-left parties in Europe and the United States respond to the dilemmas and challenges posed by the ‘next’ phase of globalisation? How should moderate left parties relate to more polarised and anxious electorates? How do centre-left parties campaign in an environment where faith in reason and expertise appears to have collapsed? Where might the next generation of social democratic governing ideas, principles and programmes come from? Tim Bale, professor of politics at Queen Mary, University of London Robert Biedroń, mayor of Slupsk, Poland Manuel de la Rocha, economist at Fundación Alternativas and former Secretary of Economy of PSOE Robert Misik, Austrian journalist, writer and political commentator Vicky Pryce, economist and former Joint Head of the United Kingdom’s Government Economic Service (chair)

12:15 – 13:00 Working Lunch

13:00 – 14:00 Presentation: ‘Global inequality is going down, but not everybody is happy. Why?’ Branko Milanović, economist specialising in income inequality and author of Global Inequality: a new approach for the age of globalization

14:00 Thanks & Close

Participant List

Lorenza Antonucci is a senior lecturer in social policy, Teesside University and author of Student Lives in Crisis: Deepening inequality in the times of austerity.

Thomas Aubrey is director of the Centre for Progressive Capitalism and chief executive and founder of Credit Capital Advisory.

Tim Bale is professor of politics at Queen Mary, University of London and is the author of Five Year Mission: The Labour Party Under Ed Miliband.

Robert Biedroń is the mayor of Slupsk, Poland.

Silke Breimaier works as a project manager for Friedrich-Ebert-Stiftung’s London office.

Charlie Cadywould is a researcher at Policy Network.

Bea Cantillon is professor of social policy, and director of the Centre for Social Policy at the University of Antwerp.

Patrick Diamond is co-chair of Policy Network and lecturer in public policy at Queen Mary, University of London.

Bill Emmott is a former editor-in-chief of The Economist, and is the author of "The Fate of the West: The Battle to Save the World's Most Successful Political Idea" (Profile Books, April 2017).

Jeffry Frieden is professor of government at Harvard University and author of Global Capitalism: Its Fall and Rise in the Twentieth Century, Lost Decades: The Making of America's Debt Crisis and the Long Recovery and Currency Politics: The Political Economy of Exchange Rate Policy.

Andrew Gamble is professor of politics at the University of Sheffield and emeritus professor of politics at the University of Cambridge.

Jane Gingrich is an associate professor in comparative political economy at Oxford University.

Alfred Gusenbauer is president of the Renner Institut.

Anton Hemerijck is professor of institutional policy analysis at VU Amsterdam.

Will Hutton is principal of Hertford College, Oxford University.

Gavin Kelly is chief executive of the Resolution Trust.

Zaki Laidi is professor and director of research at the Sciences Po in Paris.

Mathew Lawrence is a senior research fellow at IPPR.

Roger Liddle is co-chair of Policy Network and member of the House of Lords.

Matthew Lloyd is project manager at Policy Network.

Silvia Merler is an affiliate fellow at Bruegel, a Brussels based thinktank.

Branko Milanović is an economist specialising in income inequality and author of Global Inequality: a new approach for the age of globalization.

Robert Misik is an Austrian journalist, writer and political commentator.

Vicky Pryce is an economist and former Joint Head of the United Kingdom’s Government Economic Service.

Katherine Roberts is head of finance and operations at Policy Network.

André Sapir is an economics professor at the Université Libre de Bruxelles and senior fellow at Bruegel.

Sebastian Schublach is head of the international politics department at the Renner Institute

Vivien A. Schmidt is Jean Monnet professor of European integration, professor of international relations and political science at Boston University.

Ania Skrzypek is a senior research fellow at FEPS.

Philip Stephens is the associate editor of the Financial Times.

Ernst Stetter is secretary general at FEPS.

James Stafford is a lecturer in modern history at St. Hugh's College, Oxford, and co-editor of Renewal.

Helen Thompson is professor of political economy at the department of politics and international studies, University of Cambridge.

Dimitris Tsarouhas is associate professor at the department of international relations, Bilkent University.

Loukas Tsoukalis is professor of European integration at the University of Athens, visiting professor at King’s College, London, and the College of Europe in Bruges.

Shahin Vallée is senior economist at Soros Fund Management and former economic advisor to Herman Van Rompuy and former economic advisor to Emmanuel Macron.

Frank Vandenbroucke is a professor at the University of Leuven, Antwerp.

Manuel de la Rocha is an economist at Fundación Alternativas and former Secretary of Economy of PSOE.

Helen Wallace is an honorary professor at University of Sussex.

Rick Wylie is the academic director for Samuel Lindow Foundation.

Jeromin Zettelmeyer is a senior fellow at Peterson Institute for International Economics, Washington, DC.