Opinion Ashutosh Varshney writes: Democracy has provided the rationale for tariffs. It will produce a reaction against it

Note that this empirical point is different from whether US tariffs are economically desirable or justified. The size of the tariffs can certainly be critiqued. The formula for the calculation of tariff rates for each trading country can also be lambasted. The formula for each country is as follows: ½ (size of trade deficit divided by the size of imports). Those economists whose work has been cited by the Trump administration to calculate the size of the tariffs say they have been misused or misunderstood. But a welfare or economic critique of tariffs is wholly different from its political logic. The two logics, political and economic, are not aligned.

In theory, globalisation represents the free movement of capital, goods and labour across national boundaries. In reality, compared to capital and goods, labour was always allowed lower freedom to move, though all moved more than before. Thus, the actually existing globalisation came to mean two things: One, greater overall economic freedom beyond national borders; or loosening of national control over economic activity. And two, within that larger trend, freer movement of capital and goods than of labour.

Trump’s attack on globalisation has two aspects. Immigration controls would restrict the movement of labour, and tariffs would create new obstacles for the movement of goods. Only capital would in principle be free to move but that too can be viewed as falling under new controls. He wants capital from everywhere to come to the US, but would make it harder for American capital to move abroad.

Politically speaking, why is all this happening? Trade theory was rooted in the doctrine of comparative advantage – Americans producing airplanes, Japanese producing cars, Chinese producing textiles and footwear, Indians producing software. If each produced what it was good at and exported it, while importing what others were good at, free trade would benefit all. Theoretically, all boats would be lifted.

There is no doubt that over the last 40-odd years of globalisation, more people have come out of poverty than ever before. Over a billion have been pulled out of poverty by the growth processes unleashed by globalisation, especially in China, India and Indonesia, three of the largest countries. Inequality between nations has gone down. Asia’s rise in particular is noteworthy. In 1980, China and India had the 50th and 51st largest GDPs in the world. They are the second- and fifth-largest today.

But inequality within nations has increased. Income distribution consequences of trade have been serious, especially in the Global North. Those with lower education and lower skills have lost out; those with higher education and higher skills have won. Only 37-38 per cent of Americans are college-educated. Most have high school education or less — their skills are fit for manufacturing, not for the high-tech, high-skills sectors of the East Coast and the West Coast. Primarily because of low labour costs, Asia, especially China, became the centre of world manufacturing.

As manufacturing moved to Asia, goods became cheaper. Americans undoubtedly benefited from cheaper clothing, footwear, cars, computers, washing machines etc. But the lower-educated Americans lost jobs in the industrial heartland: The Midwest and South. Under globalisation, businesses became global. If businesses didn’t like country A’s policy, they could outsource their production to country B. Businesses moved labour intensive production out of America.

In short, as against the assumptions of trade theory, all boats were not lifted, or some were lifted more than the others. The retreat from globalisation has been led by the US and Europe, not by China/India/Asia.

The economic inequalities have had serious political consequences. Populist politics, which Trump embraces, and rising inequalities are integrally connected. As an ideology, populism claims to authentically represent the people, the masses, the average Joe and Jane, against a globally networked elite and the global arrival of immigrants.

The American version of populism also has an added dimension. It comes with an attack on the so-called “deep state”, the part of the state that is not dependent on periodic elections and has a longer term. It does not wield power right at the top of the polity, but does so via the civil services lodged in the echelons below the political summit. The populist argument is that the deep state serves the elite, not the masses.

But are tariffs and state contraction a solution to the problem? The cheaper goods that globalisation made possible will almost certainly be more expensive as a result of tariffs. Manufacturing jobs may not return in the short run. And the poorer states, mostly Republican, also depend more on government programmes that are being cut than the richer Democratic states. Disaffection and protests are likely to grow, and may deeply affect the mid-term legislative elections next year.

In its current incarnation, democracy has undoubtedly provided the rationale for tariffs. Democracy is also likely to produce a reaction against it, as the full consequences become clearer. Whether that will lead to a restoration of globalisation remains unclear.

The writer is Sol Goldman professor of International Studies and the Social Sciences at Brown University, where he also directs the Saxena Center for Contemporary South Asia at the Watson Institute. Views are personal