During this U.S. election season, a diverse group of business leaders - including Charles Koch, Warren Buffett, Meg Whitman and Mark Cuban - have taken a stand against the Republican presidential nominee, Donald Trump. Usually CEOs are more cautious when it comes to politics, but this election is anything but usual. However, while many have questioned Trump's personality or track record, very few have addressed the larger trend that his candidacy represents: the decline of globalization.
Since the end of the Second World War, business and government have largely been of one mind on increased globalization. For governments, the notion that trade mitigates conflict among nations has always been a tenant of laissez-faire capitalism. For business, access to wider sources of labor and capital is seen to help corporate profit. Moreover, the argument goes, globalization helps to eliminate poverty around the world through a larger distribution of jobs and wealth. Indeed, since 1990, extreme poverty levels have fallen from 37.1 percent of the world's population to 9.6 percent in 2015, which is truly a staggering accomplishment.
Unfortunately, many of these redistributed jobs have come at the expense of Western middle classes, including in the United States. The idea that when labor-intensive jobs leave Western countries they will be replaced by higher-paying jobs in the knowledge economy hasn't panned out. Attempts to retrain workers have been insufficient, and displaced workers often end up in low-paying jobs or out of work entirely. A study by MIT economist David Autor showed that, between 1991 and 2007, before the financial crisis had even hit, the U.S. had lost roughly 1 million jobs due to low-wage competition from China.
Now, it seems, is the time of reckoning. The public is angry, and Trump and former Democratic presidential hopeful Bernie Sanders have played this card to great effect. In July, Trump raised an impressive $82 million, not from businesses but through small donations from passionate supporters, further highlighting the current resentment. Even Trump's famous "Americanization, not Globalization" is remarkably similar to Sanders' rhetoric, which in turn moved Hillary Clinton to oppose her own administration's Trans-Pacific Partnership agreement. The recent Brexit vote in the United Kingdom showed that people in other Western countries are also tired of declining incomes and lost jobs, with many of them blaming globalization.
Yet on these critical issues, corporations have largely remained silent, even as they benefitted from outsourcing to developing countries, and despite both of the main U.S. political parties starting to converge against big business's global agenda. Republican and Democratic platforms now support policies that oppose trade liberalization - a return to finance regulation by Glass-Steagle, the closing of tax loopholes that allow corporations to shelter profits overseas, and a clamping down on tax inversions.
Businesses need to wake up to the growing backlash. Blasting Trump as "bat shit crazy" (as Mark Cuban did) might qualify as engagement by business, but leaders must go further. CEOs need to pivot company agendas closer to the public mindset, because this election represents a deeper feeling of loss and resentment around the globe that can't be bottled back up.
The reality is that agreements like the Trans-Pacific Partnership are dead, and probably will be for another decade. Businesses should acknowledge this, hit the pause button on globalization agendas and look instead for trade solutions that are more reassuring to voters. This could mean getting behind an alternate trade deal of like-minded countries or potentially supporting a renegotiation of existing trade deals such as NAFTA.
If business leaders continue to remain silent, the consequences could be a complete disintegration of hard-won trade agreements like NAFTA and, in the case of the Brexit vote, a reevaluation of the European Union.
As Henry Kissinger wrote after the Brexit vote, "...challenging this expression of popular sentiment (and) ignoring the concerns it manifests is a path to greater disillusionment."
No matter which party wins in November, the orthodoxy around globalization is changing and the business world needs to wake up.