The Cadario Lecture: Daniel Trefler on Populism and Globalization
April 11, 2018 | By Piali Roy |
The U of T trade economist explored the conditions that have weakened the economic, political and social pillars of liberal democracy and fuelled a populist response.
A captivated audience at the Isabel Bader Theatre was eager to hear the University of Toronto’s own Daniel Trefler, the last minute replacement for Harvard political economist Dani Rodrik. The theme of the 2018 Cadario Visiting Lecture remained the same, Populism and Globalization, but with an added twist – From the Rialto to Wall Street. He drew parallels between the rise and decline of economic, political and social mobility of Venice and that of contemporary United States.
“We are enormously grateful to Dan Trefler for stepping in when an emergency prevented Prof. Rodrik from coming to Toronto, says Carolyn Tuohy, Professor Emeritus at SPPG. “There could not have been a more ideal alternate. Dan is a world-leading authority on the implications of long-term international economic trends for the health of liberal institutions and social cohesion. His lecture was an arresting demonstration of how an increasing concentration of wealth at the very top can lead to a vicious spiral that undermines the economic, political and social pillars upon which democracy depends.”
Daniel Trefler is the J. Douglas and Ruth Grant Canada Research Chair in Competitiveness and Prosperity at the Rotman School of Management and a Senior Research Fellow at the Canadian Institute for Advanced Studies. He is an internationally respected trade economist whose research has been instrumental in the design and pursuit of trade agreements, including helping frame the document that launched the Canada-EU trade agreement.
Trefler began his talk by admitting that when he first started thinking about how globalization could affect society, he did not expect to come to the conclusion that it would, as he says, “fundamentally alter the fabric of our societies.” He would spend the rest of the lecture comparing two seemingly different societies, the great medieval trading city of Venice with contemporary America, and the perils of rising income inequality.
His Venice reached its apex almost three hundred years before the grand palazzos were built on the Grand Canal when a single trader whose grandfather had been a former slave could also have grandchildren who became parliamentarians. This was a period of great social, political and income mobility that later generations would extinguish by turning an elected parliament into a hereditary fiefdom where only nobles, who were the richest in society, could sit.
In response to changing geo-politics, Trefler proposed that Venetian society developed a quid pro quo between its government and the very rich. The government would supply the capital-intensive galleys so crucial with the trade that enriched the nobility, and in turn the nobility would defend Venice, and its geo-political interests, in a time of need. With the increasing concentration of wealth at the top, that implicit contract broke down, weakening Venice as a naval power and leading to its long-term decline.
An analogous quid pro quo between government and business, said Trefler, has been under challenge in the United States, specifically since President Ronald Reagan said in his inaugural address: Government is not the solution to our problems; government is the problem.
He calls it a fundamental change in the American ethos: “It delegitimizes everything the government does,” said Trefler. It’s a shift that led to massive deregulation of industries such as the financial sector, resulting in events such as the collapse of Enron and the sub-prime mortgage crisis. And it has a role to play in growing populism as the economically disadvantaged wonder how government can help them while the very rich say they do not need public infrastructure.
“But the reason the government has let down the disadvantaged is precisely because a small group of very affluent individuals has been pushing a message to us that government is bound to fail,” said Trefler.
Here is a sample of the live event coverage that took place on Twitter under #sppgtalks:
Still enamoured by economist Daniel Trefler's #sppgtalks using 800 yrs of Venetian history to draw lessons for Trump's populism & what happens when quid pro quo between govt & business breaks down. The best of history & econ on display at the @SPPG_UofT Cadario Lecture. pic.twitter.com/QtS4G4Gzda
— Jennifer Bonder (@jenbonder) April 7, 2018
Infusing history with current economic dynamics, Prof Trefler provided an illuminating discussion on the disturbing narrative that has enveloped America over the past fifty years – enabling the American 1% to transform the socio-political mythos. Thought provoking #SPPGTalks
— Scott Surphlis (@_scottysays) April 6, 2018
Trefler: United States, 1929-2016. The Fall and Rise of the 1%. Just before the great crash, 20% of income went to 1%. It fell to 8% because of regulations from the New Deal and now it has returned to earlier heights. #SPPGTalks
— SPPG (@SPPG_UofT) April 5, 2018
— Marvin JS Ferrer (@mjsferrer) April 6, 2018
— Ola Mirzoeva (@omirzo) April 6, 2018
— Paul Cadario (@paulcadario) April 6, 2018
— Anna-Kay (@reddibowe) April 6, 2018