Q Academy of Management Review

2019, Vol. 44, No. 4, 719–723.

https://doi.org/10.5465/amr.2019.0278

EDITORS’ COMMENTS: THE RISE OF NATIONALISM

(REDUX)—AN OPPORTUNITY FOR REFLECTION AND RESEARCH

The neoliberal utopia of a borderless and peace- world of politics are now focused on outcomes
ful globe requires that millions of ordinary peo- (see Rangan, 2018). Should management scholars
ple throughout the world have the flexibility to
tolerate—perhaps as often as every five or ten care? If our research is to be relevant, then
years—a prolonged spell in which they must sur- scholars should not look away, hoping this de-
vive on half or less of what they previously earned. velopment will subside as rapidly as it rose. Is
Polanyi believes that to expect that kind of flexi- there a better way beyond painful oscillation?
bility is both morally wrong and deeply unrealistic. What structural flaws in the market system that
To him it is inevitable that people will mobilize to
protect themselves from these economic shocks we study and proudly teach are remediable? To
(Fred Block, in the Introduction to Polanyi’s The what extent should the state alone remain a buffer
Great Transformation, 2001: xxiv). of last resort? How can enterprises engage more
effectively than they have in the past?
Enduring hope and predictable disappointment
In these Editors’ Comments we attempt three
in self-regulating markets appear to be hallmarks
things. First, we outline very briefly a couple of
of our modern world. Yet, from Adam Smith to
patterns that characterize the grievances related
Paul Samuelson, seminal promarket thinkers have
to the intensification of globalization since the
maintained that the state has to buffer the less
1980s. Fundamentally, power has shifted from
powerful in society from the vagaries of the market.
labor to capital, inequality has risen, and worker
When states are perceived to neglect this moral
life seems more precarious and anxiety ridden.
duty—either because of ideology or, worse, capture
Second, we look beyond the patterns and offer
by business—then an opening appears for nation-
three broad observations about what we perceive
alists and populists to retake, with the impassioned
as the problems implied. Essentially, we call into
backing of “the people,” the reins and discretions of
question distributive and procedural justice. We
sovereign power. This reaction to untrammeled
note that labor adjustment, although essential to
laissez-faire is the “double movement” that Karl
any dynamic economy, still receives lip service in
Polanyi (2001/1944) foretold in his treatise, The Great
too many regions. We observe, too, that the idea
Transformation. Indeed, in such circumstances the
of globalization may be good as a start-up but not,
lure swells of a tough-talking nationalist swearing
as yet, as a scale-up. We conclude with a set of
to wrest from soulless markets and their greedy
questions for future research.1
masterminds control for “us,” the governed. Alas,
if history is an indication, the cure is often as
bad as or worse than the disease. GLOBALIZATION AND ITS DYNAMICS
As the twenty-first century advances, we seem
Humans have engaged in long-distance trade
to be again witnessing a stark oscillation away
and exchange, if not globalization, for thousands of
from globalism and even regionalism to nation-
years. Globalization increases competition and, in
alism and populism in several established and
its modern incarnation, influenced by information
emerging economies (including the United States;
and communication technology, brings creeping
the United Kingdom; parts of Europe, such as Italy;
contestability. Competition would appear to be a
Brazil; India; and perhaps Russia and China).
force (perhaps the most powerful force) for sus-
Whether one goes by size of GDP or population, the
tained, endogenous efficiency and innovation.
development touches a sizable swath of the world.
Competition causes lower prices and, in turn, higher
More broadly, the ideas of liberalism, interna-
standards of real material well-being. Consumer
tionalism, and multilateralism seem stalled, if not
welfare rises. Global (like local) competition follows
in outright retreat. The world of business still
seems focused on output, while society and the
1
An important caveat is that technology is likely an even
We are grateful to Antonio Fatas, Carrie Leana, John Pres- larger factor in the picture. Technology is a secular and
cott, Metin Sengul, and especially Jay Barney for helpful crosscutting development. Yet, given the focus of this piece,
comments. we restrict our comments here to trade and globalization.

719
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720 Academy of Management Review
this logic. Globalization also means access to larger
markets, which, recalling Adam Smith, supports
greater specialization. Specialization also drives
efficiency and quality. Globalization permits geo-
graphic diversification, which can reduce volatility
of earnings and reduce business risk. Importantly,
globalization brings hope, economic growth, and a
better life to people in remote parts of the world.
Globalization can be a solid contributor to effi-
ciency, welfare, and human well-being. What, then,
is the problem? Recall “contestability.” When
workers elsewhere (say, in another country) can
perform a task more cost effectively than I can, then
efficiency dictates that I (1) improve my productivity
sufficiently in that task, (2) accept a sizable cut in
wages, or (3) cede that task or sector. Improving
productivity is easier said than done. While wage
increases are a norm, widespread or sharp (nominal)
wage cuts are taboo. Hence, it is often easier (faster,
cheaper, less awkward) to shift jobs to the available
cheaper new workers. However, what if the in-
cumbent workers’ exit options are bleak owing to a
lack of skills and/or lack of local opportunities? Labor
is significantly less mobile than capital, including
across sectors and especially across geography.
The facts are not easy to disentangle. While
experience across countries is heterogeneous, in
general, during this last era of globalization that
began in the late 1970s (with the opening of China,
Mexico, etc.), the share of national income going
to workers has been declining markedly (by more
than 10 percentage points in countries like Italy,
Spain, and the United States, and more than 15
percentage points in countries like Turkey).2 In
the United States, one pattern that has caught the
attention of observers is a divergence between
worker productivity and wages. Even as pro-
ductivity rose during the 1990s and 2000s, wages
did not keep up (OECD, 2015). Contestability in
the product market does keep a check on prices
(thereby benefiting consumers), but contestability
in the labor market keeps a check on wages (and
can therefore hurt some workers). On balance,
the owners of capital seem to come out ahead.
Since capital tends to be more concentrated
than labor, the decline in labor share3 has also
been associated with an increase in inequality
2
Estimates of changes in labor share in national income of
selected countries can be found in OECD (2015).
3
National income (or the GDP) is divided between labor
and capital. The labor share is compensation for work, and
the capital share is profits for investment.
October
within societies. That is, the Gini coefficient—
a measure of inequality—has in many societies
been rising. One recent study of these patterns
concludes that
globalization is a driving factor behind income
inequality, as it is negatively correlated with the
labor share. Therefore, globalization, especially
trade channel, deserves serious consideration from
policy makers dealing with declining labor share.
While increasing trade is . . . a stimulus for growth,
remedies to improve labor market conditions, bet-
ter investment in education and training to up-
grade workers’ skills would be possible options to
pursue (Doan & Wan, 2017: 11).
Finally, trade-related loss of work (over and
beyond loss related to technology) seems sizable
and costly in its broader consequences. The
economists Autor, Dorn, and Hanson (2018) found
that trade-related loss of work has important
negative consequences for family and commu-
nity. Based on analysis of U.S. data between 1990
and 2014, they reported that
on average, trade shocks differentially reduce
employment and earnings of young adult males.
Consistent with Becker’s model of household spe-
cialization, shocks to male’s [sic] relative earnings
reduce marriage and fertility. Consistent with
prominent sociological accounts, these shocks
heighten male idleness and premature mortality,
and raise the share of mothers who are unwed and
the share of children living in below-poverty,
single-headed households.
In sum, coterminous with the rise of globaliza-
tion, labor has seen its bargaining power decline.
Unions in many (though not all) parts of the world
are smaller and weaker. Labor mobility is still
limited, especially for adults without technical
skills. Meanwhile, business has constituted and
lobbied the establishment (for tax cuts, liberal
labor laws, etc.). Profits as a share of GDP have
risen sharply, and this has contributed in part to
the steep rise over the past two to three decades in
stock markets. The media, too, have made these
take-most winners more visible. Combustible
sociopolitical fuel has been building up. We
speculate that the issue of immigration in the
established economies and corruption in the
emerging economies caused the sparks. The anti-
establishment sentiment seems in full flame.
THREE OBSERVATIONS
A first observation we would offer is that while
trade and globalization are proposed as Pareto
2019 Editors’ Comments
optimal, at least at the national level, this is of-
ten not so at lower levels of analysis. Individual
sectors and, of course, workers may come out
net losers, even over time. In other words, while
globalization is in theory and in practice asso-
ciated with an increase in the “size of pie,” both
across nations and even for a given nation, it
can cause severe and durable dislocations in
the “share of pie” (as between capital and labor,
consumers and producers, and foreign and do-
mestic actors). Promoters of globalization ap-
pear to neglect the crucial issue of distributive
justice (perhaps wishfully assuming that the
visible hand of the state will enact appropriate
transfers).
Should there be more to it than bargaining skill
and outside options when we decide my share
and your share of the pie? Capital is more mobile,
so labor has to tolerate the consequences. In such
situations labor may behave as if no loaf is better
than half a loaf. Experiments in game theory yield
steady evidence that unfairness puts the very
game at risk. Globalization is not intentionally
unjust, but if it unintentionally leads to unjust
outcomes, then the system builds discontents.
There is undoubtedly a hint of retributive justice
in developments such as Brexit. Here is how Nobel
Laureate and stalwart of international economics
Paul Samuelson characterized the predicament:
Contemplate a scenario where Schumpeter’s fruit-
ful capitalist destruction harms a really sizable
fraction of the future U.S. population and, say, im-
proves welfare of another group and does that so
much as to justify a calculation that winners could
be made to transfer some of their gains and thereby
leave no substantial U.S. group net losers from free
trade. Should noneconomists accept this as cogent
rebuttal if there is no evidence that compensating
fiscal transfers have been made or will be made?
Marie Antoinette said, “Let them eat cake.” But his-
tory records no transfer of sugar and flour to her
peasant subjects . . . The economists’ literature of the
[past] . . . perpetrates something of a shell game in
ethical debates about the conflict between effi-
ciency and greater inequality (2004: 144).
Our second observation is about the challenge
of structural adjustment. When workers exit and
enter different sectors, the composition of a coun-
try’s economy and employment changes. This
process is referred to as structural adjustment.
Workers released in one sector are absorbed into
another (with perhaps a temporary decline in
wages). The absorbing sector may already exist or
may be a new one—think of electronics in the 1970s,
721
computers in the 1980s, biotechnology in the 1990s,
renewable energy in the 2000s, and digital tech-
nologies now. Structural adjustment is good for ef-
ficiency. Such structural adjustment has been
happening for more than a century, but in the past
two or three decades there has been a foreboding
sense of time compression. More and more activi-
ties and industries are becoming “contested,” and
in light of recent trends, economists confess that it
is hard to forecast which jobs/functions are going to
become contested. Technology is also shifting the
boundaries of tradables and nontradables and is
helping to increase contestability. Given a gener-
ation, adjustment seems feasible and even natural.
Given just five or ten years, it seems oppressive
and infeasible. Especially for adults, this may dis-
courage continued participation in the labor force.
To the extent this is happening, we are simply
“kicking the can down the road.”
We need to better understand adult labor ad-
justment and mobility. Our own sense is that at
the individual level the challenge remains hard to
tackle confidently. At the same time, the macro
(national government) level may also be unsuited
to effectively address the issue. We suspect it is at
the local, regional, sectoral, and enterprise levels
that practical solutions lie. Liberal economists’
defense of globalization may be that the net mag-
nitudes of dislocations are small (i.e., dislocations
are occurring, but they are not widespread). This
recalls an insightful observation: when you read
that the unemployment rate is 5 percent, it does not
mean that all of us are 5 percent unemployed;
it means that 5 percent of us are 100 percent
unemployed.
Our third and final observation about the chal-
lenge of globalization concerns a potential fallacy
of composition. To use today’s jargon, perhaps
globalization is promising as a start-up idea, but it
runs into serious difficulties as a scale-up. When
internationalization was primarily a transatlantic
affair (i.e., among the United States, Canada, and
Western Europe), perhaps it worked largely as
theorized. Perhaps the assumptions of trade
theory (including similar skill levels and prefer-
ences) applied more readily. However, as more
and different nations, including China, India,
and others, enter the game, the assumptions hold
less well. In this heterogeneity the institutions
of global governance (such as the WTO) have a
hard time scaling up. Finding an overlapping con-
sensus becomes harder with different priorities
and preferences, not to mention demographics,
722 Academy of Management Review
worldviews, political systems, and cultures. In-
terdependence is hard to manage, but is even more
so when compounded by heterogeneity and anar-
chy (which may be a fair description of our multi-
polar world today). It is no surprise, then, that the
Doha Round of multilateral trade talks of the WTO
that commenced back in 2001 failed to reach a sat-
isfactory conclusion. The Financial Times (2015)
characterized the termination of the Doha talks in
2015 as “a death scene so drawn-out it would have
done credit to a Victorian melodrama.” One may
hope for a return to multilateralism; right now,
however, bilateralism and even unilateralism are
on the rise.
To recap, our observations about the retreat of
globalism and the advance of nationalism relate
to problems of distributive justice, labor mobility
and adjustment, and the challenge of scaling up a
multilateral system in a world of heterogeneous
preferences and systems.
OPPORTUNITIES FOR RESEARCH
As we outline below, a widespread return to
nationalism raises some fundamental if familiar
questions that merit renewed attention.
1. What can we learn about enterprise en-
gagement when it comes to the mobility and
the adjustment of employees? What can we
learn from other economies about regional
and cross-firm engagement on this issue?
More research in management needs to
address this important dilemma, which
promises to become even more urgent with
the coming of new technologies.
2. Work promises to remain an important part
of our conscious existence. If work is gener-
ally not a generative source of well-being,
then management scholars would be failing
to understand one of the most important
contributors to life outcomes. How should
we address the issues of wage inequality,
worker dignity and anxiety, and meaning
and well-being at work?
3. In political sociology an important ques-
tion relates to the reconciliation of au-
tonomy and interdependence. In a world
where nations still value national cham-
pions, where nations still worry about na-
tional security (and now national clouds),
there is a question of whether global lib-
eralism can gain acceptance and stay. The
questions of control, accountability, and
sovereignty in an interconnected and in-
terdependent world merit greater research
and understanding.
October
4. What is the role of the state when it comes
to the economy? To what extent should the
state be responsible for jobs, for technol-
ogy (and R&D investment), for taxes, for
enterprise ownership and governance?
Does a global liberal order require a “pil-
low” state to cushion citizens from the
vicissitudes of unpredictable changes in
the market? The “varieties of capitalism”
comparative literature has outlined the
liberal, statist, and corporatist models
and has implied a set of historical and
path-dependent choices. We need more
research to guide private and public
leaders on designs that will be more com-
patible with globalism, not to mention
changes in climate, demographics, tech-
nologies, and immigration.
5. The supranational institutions initiated in the
post-World War II era now seem stretched
and mostly decorative. Even regional in-
stitutions such as the European Union inspire
little engagement. Beyond just international
bargaining and politics, what processes and
structures can deliver more effective global
governance?
6. More than a decade ago, with the emer-
gence of information and communication
technology, leaders of multinationals envi-
sioned a geographically distributed set of
value-added activities that would be in-
tegrated virtually through technology. Each
activity would be located optimally in the
manner of a geocentric organization. It was
a promising idea in terms of global talent,
efficiency, and innovation. How can re-
search in international management help
revive that dream of the “globally integrated
enterprise”?
7. If there is to be economic plenty and political
peace, then systems, be they liberal, global,
or multilateral, have to be regarded as
genuinely inclusive. No system that is not
inclusive in its intentions, processes, and
outcomes is likely to fare well and release us
from the unappealing orbit of nationalism
and populism. What, in the very paradigm of
modern business and management, needs
rethinking and evolution?
The earth may be a fact, but the world is an
idea. Better ideas tend to make a better world.
As management scholars, we have the capacity
and privilege to contribute. Let us choose to
do so.
REFERENCES
Autor, D., Dorn, D., & Hanson, G. 2018. When work disappears:
Manufacturing decline and the falling marriage market
value of young men. CESifo Working Paper Series 7010,
2019 Editors’ Comments 723

CESifo Group, Munich. Available at https://www.ddorn.
net/papers/Autor-Dorn-Hanson-MarriageMarket.pdf.
Doan, H. T. T., & Wan, G. 2017. Globalization and the labor
share in national income. ADBI Working Paper 639, Asian
Development Bank Institute, Tokyo. Available at https://
www.adb.org/publications/globalization-and-labor-
share-national-income.
Financial Times. 2015. The Doha Round finally dies a merciful
death. December 21: https://www.ft.com/content/9cb1ab9e-
a7e2-11e5-955c-1e1d6de94879.
OECD 2015. The labour share in G20 economies. Avail-
able at https://www.oecd.org/g20/topics/employment-
and-social-policy/The-Labour-Share-in-G20-Economies.pdf.
Polanyi, K. 2001. (First published in 1944.) The great transforma-
tion. Boston: Beacon Press.
Rangan, S. 2018. Capitalism beyond mutuality? Perspectives
integrating philosophy and social science. Oxford: Oxford
University Press.
Samuelson, P. A. 2004. Where Ricardo and Mill rebut and
confirm arguments of mainstream economists support-
ing globalization. Journal of Economic Perspectives, 18:
135–146.
Sharon Alvarez
Subramanian Rangan
Associate Editors
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