Are There Winners and Losers of Globalization? (episode 3)

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- [Narrator] Are there winners
and losers of globalization?

That's a big question
you could tackle

in a variety of ways.

Are we talking about who's
making more or less money?

Whether inequality
is better or worse?

The environment?

We'll tackle all these questions
in upcoming videos.

Let's start with the question
of money --

who's making more or less of it.

It's a bit complicated,

but with the help
of Tyler, Ian, and an elephant --

yes, an elephant --
we'll get to the answer.

- [Tyler] So I think globalization
has been good

for virtually all groups,

but the very biggest winners

are the previously
quite poor people.

Big winners have been
the wealthy and the very wealthy.

People in the middle have gained,

but, in percentage terms,
by not nearly as much.

- [Narrator] What is Tyler
talking about?

The elephant, of course.

Let's take a look
at a chart so famous

it got its own mascot.

This chart looks
at the entire world,

broken down by income.

Over here, on the left,
are the poorest of the poor.

Remember,
this is of the entire planet.

Over here, on the right,
are the most wealthy.

If you're poor
in a developed country,

like the United States,
you're not here,

not even close.

You'd fall somewhere around here.

On the vertical,
we're going to plot

how much these people's
living standards grew in 20 years,

from 1988 to 2008.

1988 to 2008 are
the transformative years

of the information revolution.

1988 was still Globalization 2.0.

The internet was tiny,
the domain of a select few nerds,

and a mobile phone looked like this
and cost a fortune.

The information revolution
exploded over the next two decades.

By 2008, we had graduated
to Globalization 3.0.

Companies leveraged this technology

to slice and dice their factories
into global supply chains

and automate tasks
with robots and software.

The elephant visualizes the impact

of this 20-year
technology transformation.

Let's start with the tail
of the elephant.

This is the poorest 5%
of the world,

and we don't see much growth --

only a 20% improvement
in living standards over 20 years.

These people live in countries

too remote or too violent
or too unpredictable

to become integrated
into global supply chains.

As we move to the right,

we can see
the story changes quickly.

There has been dramatic growth
of 50, 60, even 70%

in just 20 years.

This is the back
and the head of the elephant.

Here we see the developing nations

who were incorporated
into these supply chains --

India, China, Mexico,
Brazil and the like.

For people who study
the global economy,

this development has been
both exciting and inspiring.

- [Ian] That's been
the biggest development,

not just in terms of globalization,
but the entire planet

for the last 40 years,

is that a whole bunch of countries

that we used to call "third world" --

they weren't even
on the same planet as us!

- There's a village
in Mexico I visited many times.

In that village,
people could starve

if they didn't have
a good rain and a good harvest.

They just grew corn,
and hoped each year

that they could grow
enough corn to eat.

People in that village, over time,

they've diversified a way
from growing corn.

One thing they do

is they make pottery
and they paint pictures,

and they sell these
pictures and pottery abroad.

They use email.
They use Federal Express.

And, every year,

the income of that village
has climbed steadily.

So, today, there's
a school in the village.

No one in the village
dies of starvation.

Life is much more comfortable.

There's electricity.

People are much happier.

- [Narrator] This sort of rise
out of extreme poverty

has been experienced
by 1.1 billion people

in the past few decades.

1.1 billion!

That number is so big,
it's hard to wrap your head around.

To get to 1.1 billion people

you'd need all of the U.S.,
Mexico, and Canada... twice!

Plus a side of France
and Saudi Arabia.

Seriously.

Of course, getting out
of extreme poverty

isn't the ultimate goal,
but it's a good first step.

Back to the elephant.

If we keep moving to the right,
the story gets less rosy.

Now we're moving
into the working and middle classes

of developed countries
like the U.S., Canada,

and Western Europe.

As you can see,

many of them have seen
low or even no growth

in a generation's time.

It doesn't go negative,
so, in that sense, on average,

these people didn't lose money.

But it's far below
what was expected.

This is the trunk of the elephant.

- These middle-class workers
in the developed economies,

they're not only competing more
with cheaper labor abroad,

but they're also competing more
against their own automations

in their own countries,

so this too has, to some extent,
held down wages

for some classes of workers.

- [Narrator] Does this mean
these workers make less

than those in China,
Mexico, and Brazil?

No.

Remember, the vertical axis
doesn't compare income,

but rather growth in income
over 20 years.

So while these middle-class workers
in developed countries

have seen much less income growth,

because they had
a much higher income to begin with,

they still make far more

than most workers
in developing countries.

What about the rest of the trunk?

The higher you go
up the income distribution

the better it gets.

The very richest have seen
a 70% increase in their incomes

over the span.

Remember how "The Avengers"
made a billion dollars

in just 11 days?

Those who reach global markets

reap unprecedented rewards.

Take a highly successful company

like Apple.

On the one hand,
you have the designers,

engineers, and marketers
who have seen their fortunes rise

as Apple's products sell
across the globe.

On the other hand,

Apple products used to be
manufactured in the U.S.,

but those jobs are gone --
either moved overseas or automated.

When these middle-class workers
look around, they see prosperity

for everyone but them.

On one side are places
like China, India, and Mexico

growing rapidly.

On the other, they see
the wealthy getting much wealthier.

- And that is the working
and middle class in rich countries --

here in the United States,
and in Europe, Canada,

Australia, even though no one
ever talks about them,

but they're a whole damn continent.

All of those people

suddenly are not getting
the opportunities that they were.

They believed that their lives
were going to get better,

and yet over the last 40 years,

on balance, they've made
no more money.

And so as a consequence,

you have a large number of people
living in the wealthy countries

that are really angry
about globalization

and free trade and open borders,

and they're angry with that 1%,
the 0.1%, the 0.01%

that were telling them
that globalization was great

but that didn't actually
benefit them.

Yeah, they still were able
to buy cheaper stuff,

but if you no longer have a job

and no one's making sure
that you still have opportunities,

then why would you want
to support those people?

And that's not just happening
in the United States,

that's actually happening
all over the developed world today.

- [Narrator] The natural question
is to ask, "What's next?"

Is the next 20 years going to be
a repeat of the same elephant?

Some other animal?

Looking back, the story
was the information revolution.

Looking forward,

it appears to be one of robots
and artificial intelligence.

- I talk to a lot of business people,

and they all tell me
that if they need to,

they can make more money
in the next ten years

with fewer people,

that almost every company
you can think of

is getting transformed
by processes of automation

that makes it easier for them
to get things done.

And that's true with banks
that don't need as many tellers

or as many financial analysts

to determine where you should
and shouldn't put your money.

It can be done
by algorithm and trading.

Adidas has a new
big sneaker company in Germany

that has almost no people in it,

because they can make
all of these customized sneakers

through a robotic process.

Today, the vast majority
of manufacturing jobs

in the United States that go away

are not being stolen
by a cheaper worker in China.

In fact, one estimate shows
almost 90%,

88% of all manufacturing jobs
in the U.S. that are displaced

are being displaced by robots.

- [Robot] Reporting for duty.

- [Narrator] The rise of automation
is a source of much consternation

in places like the U.S. and Europe,

but it might actually
impact those countries

at the head of the elephant
more than anyone else.

- [Ian] So a country like China,

or like Brazil or Mexico,

benefitting enormously from jobs
in the United States

that went to them
in the last 40 years,

suddenly will be more vulnerable
to the robots and the automation

than the United States will be
over the coming 10 to 20 years.

That's a really significant change

in how we think
about globalization.

- [Narrator] It's time
to say goodbye to our elephant.

Aggregating the lives
of the entire planet

into a single graph

gives us a window
into which groups won big

and which did not.

However, trying to represent
hundreds of millions of lives

with a single dot

can feel disconnected
from what the real impacts are.

- Globalization -- it's a big concept.

And it's important to realize,
for any concept that big

the correct way to think about it
will be highly complex,

and there will be many negatives.

But, overall, the ledger, I think,

is strongly positive
on behalf of globalization.

It's spread health improvements.

It's given people longer lives,

greater opportunities for children,

overall higher wages.

Many more countries
are democracies,

and the world today,
largely because of globalization,

is simply a much better,
richer, and freer place

than the world
I initially grew up with.

- [Narrator] In the next videos,
we'll go beyond money

to talk about inequality,
the environment, and more.

If you're a teacher,
you should check out

our globalization curriculum
that incorporates this video.

If you're a learner,
make sure this video sticks

by taking a few
quick practice questions.

Or, you can click
to go to the next episode

in the series

or check out
the entire series playlist.

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