Tilting at trilemmas
Supporting climate action, global poverty reduction, and the rich world's middle classes is not doomed to failure.
As a scholar of political economy, I'm well aware that perhaps the strongest structure around is a three-legged stool assembled by Dani Rodrik. His "globalization trilemma" is a classic; a skeleton key that unlocked much of global international political economy for the first two decades of the 21st century. As he recently summarized it, "advanced forms of globalization, the nation-state, and mass politics could not coexist. Societies would eventually settle on (at most) two out of three." Just so.
In a recent column for project syndicate, he offered up a new trilemma.
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.
On its face, these goals do feel to be in tension. The FT provides updates on the trade war nearly every business day, with EVs -- a key tool to combat climate change -- often taking central stage. Yet if one stands back, there are all manner of actions and policies can improve the situation for one or more of these without harming the others that should lead one to the conclusion that these goals are not simultaneously impossible. While it is perhaps the case is that no one set of politicians is interested in pursuing all three of these goals, these goals are far from incompatible and a better world likely requires action on all fronts. Indeed, despite the framing, Rodrik himself seems to understand this.
Start with different places.
Chinese politicians may act on climate change (reducing their own emissions and promoting clean energy technologies at home and abroad) in ways that probably reduce global poverty through increasing access to energy. Whether or not these “boost the middle class in advanced economies” is the question, and while many may answer in the negative based on some idealized factory worker as the avatar of those classes, the reality is more sanguine: most middle class workers operate in the service sector and are consumers of such tradeable commodities.
US/EU politicians act on climate change by promoting domestically produced clean energy technologies (at higher costs than their Chinese alternatives) and establishing non-Chinese supply chains in an effort to prop up their own middle classes. However, these efforts may or may not increase the global supply of these technologies. By cutting off access to the wealthiest markets through tariffs, bans, and sanctions, these Western actions might reduce Chinese investment in these sectors, thereby increasing global average prices. Chinese producers, on the other hand, could continue to barrel ahead, piling unprofitable investment on top of unprofitable investment regardless of what Washington and Brussels might decide. In such a world, all three goals should be supported.
We might imagine that an even more justice-oriented policy might involve the Western world investing in or subsidizing clean energy production in the global south that they would import. Yet the European CBAM (Carbon Border Adjustment Mechanism) is aimed squarely at the opposite idea, aiming to prevent “carbon leakage” by imposing taxes on products that didn’t have to pay carbon taxes. [Some American politicians are so enamored of the idea of additional tariffs on China here that they are interested in mimicking the European policy without the US having, you know, carbon taxes itself.]
And even here, Rodrik is skeptical.
Luckily, Rodrik understands that this trilemma is in many ways illusory. Immediately following that paragraph comes a rebuttal.
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. And economic growth and poverty reduction in developing economies will be fueled mainly by the creation of more productive jobs in their service sectors.
For instance, the “middle class in advanced economies” is almost always depicted to be a factory worker, but in fact the plurality of middle class works in the service sector.
Building and rebuilding a decarbonized economy is a moral imperative and an incredible opportunity. If we manage it well, trillions will be invested, cities will be cleaner, quieter, and safer, lives will be longer and healthier, and nature will retvrn. In the global north, China, and the rest of the world.
I think rather than really positing this trilemma will be as constraining on the world to come as his prior one was for globalization, Rodrik is doing something else. He is warning against the laziest impulses of mercantilism, of viewing tariffs as a panacea, and of seeing the most visible products of the energy transition as the most critical for its economics. It is a call to recognize the need to pursue all of these goals simultaneously and balance them rather than describing a prison from which we cannot escape.