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Dani Rodrik

I wrote a speculative article in 2000 on what I called “the political trilemma of the world economy”. My claim was that advanced forms of globalisation, the nation-state and mass politics could not coexist. Societies would eventually settle on, at most, two out of three.
I suggested that it would be the nation-state that would give way in the long run, but not without a struggle. In the short term, the more likely consequence was that governments would seek to reassert national sovereignty to address the distributive and governance challenges posed by globalisation.
To my surprise, the trilemma proved to have long legs. My book, The Globalisation Paradox, published a decade later, developed the idea further. The concept of the trilemma has become a handy way to understand the backlash against hyper-globalisation, Britain’s exit from the European Union, the rise of the far-right and the future of democracy in the European Union, among other issues.
Lately, another trilemma has preoccupied me. This one is the disturbing possibility that it may be impossible simultaneously to combat climate change, boost the middle class in advanced economies and reduce global poverty. Under current policy trajectories, any combination of two goals appears to come at the expense of the third.
During the early post-war decades, policies in the developed and developing world alike emphasised economic growth and domestic social stability. The advanced economies built extensive welfare states but also progressively opened their markets to poorer countries’ exports, so long as the distributional and social consequences were manageable.
The result was inclusive growth in the rich countries, as well as significant poverty reduction in those developing countries that were pursuing the right policies. Successful as this strategy was, it sidestepped the risks of climate change. Over time, the consequences of economic growth powered by fossil fuels have become increasingly difficult to ignore.


The post-war Keynesian-social democratic bargain in the advanced economies was further undone by the internal contradictions generated by my original trilemma. As hyper-globalisation replaced the earlier Bretton Woods model, labour markets in the advanced economies experienced greater disruption, undermining the middle class and democracy itself. Both of these developments required new strategies.
In the United States, President Joe Biden’s administration has tackled these new realities head-on. It has broken new ground by promoting substantial investment in renewables and green industries to combat climate change. It deliberately aims to restore the middle class by promoting labour’s bargaining power, reshoring manufacturing and creating jobs in regions that were badly hit by imports from China.
This new focus on climate and the middle class is long overdue. But what US and European policymakers see as a necessary response to neoliberalism’s failures looks to poor countries like an assault on their development prospects.
Green subsidies in the US incentivise the use of domestic over imported inputs. The EU’s carbon-pricing mechanism will soon require “dirty” exporters from developing countries to pay additional tariffs. Governments in poor countries believe such measures will sabotage their efforts to replicate East Asian nations’ export-oriented industrialisation.

We can imagine an alternative combination of policies that focus on poor countries and the climate. This would entail a large transfer of resources – financial and technological – from the North to the South to ensure the requisite investments in climate adaptation and mitigation in the latter.
It would also require significantly greater access in the North’s markets to goods, services and workers from the poor countries of the South to enhance these workers’ economic opportunities. This policy configuration is morally appealing; it would effectively apply the philosopher John Rawls’ principles of justice on a global scale.
But here, too, the trilemma rears its ugly head. Such an approach would work at cross purposes with the imperative of rebuilding the middle class in advanced economies. It would create much greater competition for workers without college or professional degrees, driving down their wages. It would also reduce the fiscal resources available for investment in their human capital and physical infrastructure.
Fortunately, some of these conflicts are more apparent than real. In particular, policymakers in advanced economies and poor countries alike need to understand that the vast majority of the good, middle-class jobs of the future will have to come from services, not manufacturing. Economic growth and poverty reduction in developing economies will be fuelled mainly by the creation of more productive jobs in their service sectors.


Labour-absorbing sectors such as care, retail, education and other personal services are non-traded for the most part. Promoting them does not create trade tensions in the same way as in manufacturing industries. This means that the conflict between the middle-class imperative in rich economies and poor countries’ growth imperative is less severe than meets the eye.
Similarly, it will be virtually impossible to address climate change without significant cooperation from developing countries. While emissions from the US and Europe have been declining, developing-country emissions are still rising. Hence it is in rich countries’ self-interest to promote green-transition policies that poor countries regard as part of their own growth strategies, not just as pure cost.
Climate change is an existential threat. A large and stable middle class is the foundation of liberal democracies. Reducing global poverty is a moral imperative. It would be alarming if we had to abandon any of these three goals. Yet our current policy framework imposes a trilemma that appears difficult to overcome. A successful post-neoliberal transition requires us to formulate new policies that put these trade-offs behind us.


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Climate change

Can world tackle climate crisis, boost middle class and cut poverty?

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The US and China must avoid dropping a ‘Silicon Curtain’

Illustration: Craig Stephens

A cyclist rides past IBM’s China System Centre building in Beijing, on August 26. Photo: AFP

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US, China fracking boom is reshaping global energy sector but at what cost?

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People use umbrellas to shield themselves from the sun on a hot summer day in Tokyo’s Ginza district. Photo: Reuters

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China, US vow to work together on climate issues, but American election may alter path

Chinese Foreign Minister Wang Yi meets US climate envoy John Podesta in Beijing on September 6. Wang said the climate dialogue sent “a positive signal to the outside world”. Photo: Xinhua

US climate envoy John Podesta says of the US and China, “we can find places to collaborate for the good of our people and of our climate”. Photo: Getty Images/TNS

Tens of thousands in South Korea protest lack of climate progress

Climate activists cheer while holding placards which collectively read “Consciously ignoring climate change is unconstitutional” outside South Korea’s Constitutional Court in Seoul on August 29, 2024. South Korea’s Constitutional Court ruled on August 29 that much of the country’s climate goals were unconstitutional, handing a landmark victory to young environmental activists, who wept for joy on the court steps. Photo: Reuters

Members of a collective of environmental activist groups shout slogans during a rally for climate justice, in Seoul, South Korea, August 8, 2024. South Korean activists are taking part in protests demanding action on climate issues, under the theme ‘Change the World, Not the Climate’. Photo: EPA-EFE

Opinion

World Opinion

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World

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Global Economy

It may be impossible to simultaneously combat all three issues under current policy trajectories. It’s time for new policies that put these trade-offs behind us


It may be impossible to simultaneously combat all three issues under current policy trajectories. It’s time for new policies that put these trade-offs behind us.


Business of climate change

European Union

United States

US-China decoupling

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Can world tackle climate crisis, boost middle class and cut poverty?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}It may be impossible to simultaneously combat all three issues under current policy trajectories. It’s time for new policies that put these trade-offs behind us

It may be impossible to simultaneously combat all three issues under current policy trajectories. It’s time for new policies that put these trade-offs behind us