Domestic inequality,heterogeneous redistribution,and the globalization backlash

Abstract

Why do democracies pursue retrenchment policies against economic globalization? Through a formal model situated in a country party to an international agreement creating domestic ‘winners’ and ‘losers,’ I offer a novel explanation of the globalization backlash grounded in the logic of domestic electoral competition whereby leaders vary in their ideological willingness to implement redistributive policies designed to offset losers’ incurred damages. Leaders with large ideological biases against redistribution cannot credibly promise to compensate for the losses these agreements cause to voters, and thus often have electoral incentives to propose anti-globalization policies rather than maintain the globalized status quo. In particular, as the gains from globalization are more unequally distributed between winners and losers, redistribution becomes politically suboptimal, and anti-globalization policy more attractive. The intersection of inequality and political leaders’ willingness to implement policies of embedded liberalism within the context of electoral competition generates incentives to withdraw from the international order.