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By John Ross

This article originally appeared on the blog Key Trends in Globalisation on 31 January 2010.

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In his blog from Davos Martin Wolf, chief economics commentator of the 

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notes: 'I am listening to Lawrence Summers as I write. He has emphasised that we cannot
maintain global integration if it is seen as a source of domestic disintegration. This tension -
that between the global economy and domestic politics - is a central challenge of our time. It
affects everything we try to do.'

Martin Wolf is a very strong supporter of global economic integration for reasons he set out
in Why Globalisation Works and numerous other writings. The danger he warns against is
that popular backlashes in favour of protectionism will undermine the process of global
economic integration. In the US and a number of European countries popular sentiment in
favour of protectionism has increased - although its effect on those who make economic
policy, as regards the most important issues, is as yet far more limited.

For slightly different reasons to Martin Wolf this blog is also strongly in favour of the process
of global economic integration and against protectionism. The reason for this is that division
of labour, followed by investment, is the most powerful force in economic growth and in the
modern era participation in increasing division of labour is necessarily international in scope.
Preventing popular, indeed any, backlashes in favour of protectionism is therefore an
important question.

In dealing with this issue Martin Wolf could reflect on the difference in sentiment between
India and China on the one hand and the US and Europe on the other. In India a government
pledged to take the country down the strategic path of integration in the international
economy was re-elected with a convincing mandate. In China, as anyone who visits the
country knows, popular support for the 'opening up process' (official terminology for the
country's orientation towards globalisation) remains high. The contrast in popular mood
between India and China on the one hand and the US and Europe on the other is therefore
striking.

Part of this difference is, of course, the much more rapid growth of India's and China's
economies compared to Europe and the US. However, simply rapid growth is not sufficient to
maintain popular support for international economic integration - and while the US and
European economies have been expanding less rapidly than India and China they were, prior
to the current recession, still growing.

The former BJP government in India achieved rapid economic growth but was tossed out of
office by the electorate. Entirely rationally the population will not support globalisation if this
merely yields higher GDP figures recorded in statistical works,. They will support
globalisation only if it delivers better living standards for them. The majority of India's
population considered the BJP's rapid economic growth had not delivered for them and
therefore voted against the government.
The strategic concept of the new Congress government under Manmohan Singh was, and
remains, 'inclusive growth'. It aimed at rapid growth, using global economic integration as a
key means to achieve this, but did not rely on 'trickle down' to make sure the mass of the
population shared in its benefits. Conscious programmes of redistribution of resources to
rural areas, and less well off sections of the population, were part of the bedrock of 'inclusive
growth'.

It is also notable in China that Hu Jintao's 'harmonious society' has included direct measures
to redistribute the benefits of growth to those who were not previously perceived as having
gained sufficiently. In China's stimulus package to confront the international financial crises,
price reductions on consumer durables were targeted on rural areas, the government has
reintroduced free education, a major expansion of the health care system is taking place, large
scale investment is taking place in the less well off inland provinces etc.

In short, both India and China have abandoned 'trickle down' as the method of ensuring all
share in the growth produced by international economic integration.

In the US and Europe, on the contrary, the movement has been towards greater reliance on
unfettered free markets. The evidence shows, however, that unfettered operation of the
market increases inequality sharply. The most notable result of this is that median wages in
the US have relatively stagnated for two decades at the same time as relatively sustained
economic growth occurred - it is necessary to look no further than this to understand populist
backlashes in the US. In the US the gap in income and wealth between the bottom and top of
society has widened greatly, as it has in Britain. The US and Britain by relying on 'trickle
down', by the operation of the free market, have therefore sharply increased inequality - and,
in the case of the US, deterioration of the economic situation for significant layers of the
population has occurred.

India and China, in short, have abandoned 'tickle down' while the US and Europe have
embraced it. In India and China support for strategic global economic integration remains
high. In the US and Europe a backlash against it has developed.

Martin Wolf, in his entirely justified argument against the US and Europe embarking on
protectionism, can therefore consider the contrast in the popular mood in India and China. It
may indicate why, to maintain popular support for globalisation, the US and Europe also need
to abandon reliance on 'trickle down'.