SaveSave story

Automation leads to globalization and inequality

Since Donald Trump was elected and before, economists and politicians have debated whether disaffected Rust Belt communities are struggling because of the impact of automation, globalization, or foreign trade. Which is the culprit?

None of them by itself, according to new research by economists Laura Tyson and Michael Spence. They argue that automation, trade and globalization are part of the same, sometimes brutal cycle: Automation first allows companies to contain and cut employee counts, and goes on to trigger a "turbo-charged" reverberation around the world.

Why it matters: If Tyson and Spence are right, the policy answer to rising income inequality and popular disaffection is more complicated than simply attacking robots or globalization. It's been the interplay of these forces that's in part driven a steady decline in labor costs as a share of company profits over the past generation or two.

Data: University of Groningen and University of California, Davis, Retrieved from FRED; Chart: Andrew Witherspoon / Axios