OECD Chief Economist Declares Globalization Backlash Misplaced
Chief Economist for the Organization for Economic Cooperation and Development (OECD) Catherine L. Mann argued that the backlash against economic globalization that currently dominates the political discourse is misdirected in an October 12 speech at Georgetown University sponsored by the BMW Center for German and European Studies, MSFS Program, and BSFS Program. At the OECD, Mann oversees maximizing efficient production protection, collecting country-specific surveys, and developing new projects to foster economic growth.
Econometric analysis by OECD economists suggests that the loss of manufacturing jobs in advanced economies like the United States and the European Union represents advances in technology more so than an erosion of competitiveness against developing countries. Mann referred to data that show that the main shift in U.S. manufacturing has been from low-complexity goods to more efficient production of high-complexity goods, and that the fall in the number of jobs in the high-complexity goods sector is a result of technological advances.
“We decompose [manufacturing job losses] into trade effects, technology effects, and taste effects...so the taste and technology effects...are the largest reason why we have lost manufacturing jobs,” Mann explained. The taste effect refers to the change in consumption habits as a country becomes more advanced, typically consuming fewer manufactured goods and more services. Mann then showed a graph of OECD data estimating what percentage of jobs in each country are vulnerable to automation or obsoletion. Estimates for the U.S. showed around 10 percent of jobs at risk for automation and 35 percent for “significant changes in task.”
Mann also said that data show that China, the bogeyman of anti-globalization activists, is not responsible for most losses due to trade competition, saying, “The competition between 2000 and 2015 by the advanced countries with each other is a much more important factor in the competition within a high-complexity basket [of goods].”
Data also show that the manufacturing industry has high regional concentration as compared to services. This means that the effects of shocks to the manufacturing industry are disproportionately felt in certain communities. Mann used Britain as an example, arguing that the focus on the development of London has left manufacturers in the Midlands and the North of England with little support or attention from the government.
Mann also argued that, although anti-globalists misdirect their anger toward developing countries, governments in the OECD and around the world must do more to correct the negative effects of automation and shifting tastes on highly-concentrated and often undervalued manufacturing workers. She asserted that proper international policies responding to these changes will not only improve the wellbeing of citizens, but will also create stable economic growth for countries around the world.