Article referenced
Commentary by Pettis:
The CEO of Warburg Pincus reflects the opinions of many at Davos when he worries that globalization is threatened because geopolitics has moved from the "the fringe of the way we thought” to "front and center".
“You’re not optimizing the economic outcome," he said of rising geopolitical tensions, "you’re creating friction in the system.” Geopolitical concerns, in other words, are a kind of frictional cost that limits the mobility of financial capital.
I think it isn't surprising that global financial institutions and owners of mobile capital are worried about the reversal of the kind of globalization that dominated the past few decades, but I disagree that this brand of globalization optimized economic outcomes.
It optimized financial outcomes, and often at the expense of economic outcomes. It allowed and encouraged the repression of workers' income relative to productivity, and this hurt not just the bottom half of the income distribution but the overall economy.
Among other things it kept demand weak and ensured that the only way to keep growth steady has been through a surge in household and fiscal debt. The global surges in income inequality and debt are direct consequences of financial globalization.
Pettis linked this paper: The savings glut of the rich
The CFO of Airbus also worries about the reversal of globalization: "If a meaningful part of decades of productivity gains driven by globalisation was reversed in a short period of time, this would drive inflation up and result in a major, protracted recession.”
But he may be confusing productivity gains with downward pressure on wages. In our globalized world, countries become internationally competitive not by investing in making their workers more productive by rather by directly or indirectly lowering wages.
We constantly hear warnings that historically the reversal of globalization has led to bad things, and so we should try to prevent this reversal, but this just an example of the "post hoc ergo propter hoc" fallacy.
When globalization leads to unsustainable processes and systemic imbalances, the "bad things" will come anyway as a consequence of globalization, and the longer we take to reverse them, the worse they will be.