July’s G20 Summit in Hamburg Ended With Mixed Results.

The G20 meeting in Hamburg last week brought the city to the brink of chaos. While the heads of state or government probably hardly noticed the side-effects of their get-together, they clearly show that anti-trade and anti-globalization sentiments continue to arouse activists – not only on the rims of the political spectrum, but throughout society.

The G20 meeting achieved what the Finance Minister in March 2017 did not: a commitment to international trade and to fighting protectionism. Even though a loophole has been included, namely the recognition of “the role of legitimate trade defence instruments”, it still is a step ahead vis-à-vis Trump’s protectionist agenda. Given the rising dissatisfaction with globalization and its outcomes worldwide, it should also be positively noted that this year’s G20 Leader’s Declaration put strong emphasis on “sharing the benefits of globalization”.

These benefits are well-known and they certainly have lifted millions of people out of poverty. They also have been a valuable contribution to economic development over the past decades. In our Globalization Report 2016, we showed that out of the 42 countries we looked at every single one was able to reap benefits from increasing globalization between 1990 and 2014. However, the cumulated per-capita income increase for this period differed widely, ranging from US$400 for India to US$1.470 for Japan. Our study thus also shows that while a number of emerging and developing countries have been able to benefit from globalization, industrialized countries did so even more. This also means that, as Thieß Petersen has put it, “the income gap in absolute terms between industrialized countries and emerging or developing countries has actually increased due to globalization.”

This is especially true for African countries. Many of them still struggle along and have not been able to spur their economic development, although they have opened their door to international trade. For least developed countries, e.g. in Sub-Saharan Africa, globalization may even result in negative growth effects, since their economic structure might be ill prepared for international competition with developed countries.

It therefore is of utmost importance that the G20 have promised to continue, and eventually take on more, responsibility in regard to Africa by announcing the “G20 Africa Partnership”, which “will foster sustainable and inclusive economic growth and development, in response to the needs and aspirations of African countries, contributing to create decent employment particularly for women and youth, thus helping to address poverty and inequality as root causes of migration.” However, we should not forget that this commitment was preceded by the refugee crisis and thus is not exclusively an act of altruism.

Another downside of globalization is the potential increase of inequality within countries. It is a truism that especially in less developed countries with nepotist tendencies, the benefits of economic openness and international trade might be concentrated in the hands of a small group of people. In recent years, however, rising inequality has become a major issue in well-developed democracies, such as Germany, too. Along with this comes an increasing acceptance throughout society of globalization as the scapegoat. These developments gave room for the increasing populist tendencies we have seen in Europe and the, climaxing in Trump’s ascent as the president of the United States.

In order for globalization to progress and in order to prevent harmful populist policies from taking root, social acceptance is a crucial prerequisite. It therefore is an important task for governments to address the undesirable of international trade, such as jobs losses in less competitive sectors. “It is here where a strong welfare state provides an important service in ensuring transition and mitigating negative effects for individuals”, as Christian Bluth states in his paper on “Globalization and the Welfare State”. The role of the welfare state has eroded over the past two decades, not keeping up with the pace that international trade has developed in the same period. Hence, “the increasing discontent with trade and globalization may have to do with the inadequate manner in which welfare states are performing their redistribution and insurance roles.”

Against this backdrop, it is noteworthy that the “Hamburg Action Plan” emphasized the increase in inequality within countries as an important issue to be addressed by the G20. It also put forward measures taken by member states aimed at “promot[ing] inclusive growth and rais[ing] the living standards of all our citizens.”

By now, the 20 heads of state or government have already left Hamburg. Political action is what should be next. If the G20 members want to pave the way towards truly “sharing the benefits of globalization”, they should put this issue on top of their agendas – not only internationally, but especially at home. In regard to the latter, developed countries have quite a bit of homework left to do. The anti-G20 protests in Hamburg were only one proof for that.