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AMONG the many things that Donald Trump dislikes are big global firms. Faceless and rootless, they stand accused of unleashing "carnage" on ordinary Americans by shipping jobs and factories abroad. His answer is to domesticate these marauding multinationals. Lower taxes will draw their cash home, border charges will hobble their cross-border supply chains and the trade deals that help them do business will be rewritten. To avoid punitive treatment, "all you have to do is stay," he told American bosses this week.

Mr Trump is unusual in his aggressively protectionist tone. But in many ways he is behind the times. Multinational companies, the agents behind global integration, were already in retreat well before the populist revolts of 2016. Their financial performance has slipped so that they are no longer outstripping local firms. Many seem to have exhausted their ability to cut costs and taxes and to out-think their local competitors. Mr Trump's broadsides are aimed at companies that are surprisingly vulnerable and, in many cases, are already heading home. The impact on global commerce will be profound.
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The end of the arbitrage

Multinational firms (those that do a large chunk of their business outside their home region) employ only one in 50 of the world's workers. But they matter. A few thousand firms influence what billions of people watch, wear and eat. The likes of IBM, McDonald's, Ford, H&M, Infosys, Lenovo and Honda have been the benchmark for managers. They co-ordinate the supply chains that account for over 50% of all trade. They account for a third of the value of the world's stockmarkets and they own the lion's share of its intellectual property-from lingerie designs to virtual-reality software and diabetes drugs.

They boomed in the early 1990s, as China and the former Soviet bloc opened and Europe integrated. Investors liked global firms' economies of scale and efficiency. Rather than running themselves as national fiefs, firms unbundled their functions. A Chinese factory might use tools from Germany, have owners in the United States, pay taxes in Luxembourg and sell to Japan. Governments in the rich world dreamed of their national champions becoming world-beaters. Governments in the emerging world welcomed the jobs, exports and technology that global firms brought. It was a golden age.

Central to the rise of the global firm was its claim to be a superior moneymaking machine. That claim lies in tatters (see Briefing). In the past five years the profits of multinationals have dropped by 25%. Returns on capital have slipped to their lowest in two decades. A strong dollar and a low oil price explain part of the decline. Technology superstars and consumer firms with strong brands are still thriving. But the pain is too widespread and prolonged to be dismissed as a blip. About 40% of all multinationals make a return on equity of less than 10%, a yardstick for underperformance. In a majority of industries they are growing more slowly and are less profitable than local firms that stayed in their backyard. The share of global profits accounted for by multinationals has fallen from 35% a decade ago to 30% now. For many industrial, manufacturing, financial, natural-resources, media and telecoms companies, global reach has become a burden, not an advantage.

That is because a 30-year window of arbitrage is closing. Firms' tax bills have been massaged down as low as they can go; in China factory workers' wages are rising. Local firms have become more sophisticated. They can steal, copy or displace global firms' innovations without building costly offices and factories abroad. From America's shale industry to Brazilian banking, from Chinese e-commerce to Indian telecoms, the companies at the cutting edge are local, not global.

The changing political landscape is making things even harder for the giants. Mr Trump is the latest and most strident manifestation of a worldwide shift to grab more of the value that multinationals capture. China wants global firms to place not just their supply chains there, but also their brainiest activities such as research and development. Last year Europe and America battled over who gets the $13bn of tax that Apple and Pfizer pay annually. From Germany to Indonesia rules on takeovers, antitrust and data are tightening.

Mr Trump's arrival will only accelerate a gory process of restructuring. Many firms are simply too big: they will have to shrink their empires. Others are putting down deeper roots in the markets where they operate. General Electric and Siemens are "localising" supply chains, production, jobs and tax into regional or national units. Another strategy is to become "intangible". Silicon Valley's stars, from Uber to Google, are still expanding abroad. Fast-food firms and hotel chains are shifting from flipping burgers and making beds to selling branding rights. But such virtual multinationals are also vulnerable to populism because they create few direct jobs, pay little tax and are not protected by trade rules designed for physical goods.

Taking back control

The retreat of global firms will give politicians a feeling of greater control as companies promise to do their bidding. But not every country can get a bigger share of the same firms' production, jobs and tax. And a rapid unwinding of the dominant form of business of the past 20 years could be chaotic. Many countries with trade deficits (including "global Britain") rely on the flow of capital that multinationals bring. If firms' profits drop further, the value of stockmarkets will probably fall.

What of consumers and voters? They touch screens, wear clothes and are kept healthy by the products of firms that they dislike as immoral, exploitative and aloof. The golden age of global firms has also been a golden age for consumer choice and efficiency. Its demise may make the world seem fairer. But the retreat of the multinational cannot bring back all the jobs that the likes of Mr Trump promise. And it will mean rising prices, diminishing competition and slowing innovation. In time, millions of small firms trading across borders could replace big firms as transmitters of ideas and capital. But their weight is tiny. People may yet look back on the era when global firms ruled the business world, and regret its passing.

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AMONG the many things that Donald Trump dislikes are big global firms. Faceless and rootless, they stand accused of unleashing "carnage" on ordinary Americans by shipping jobs and factories abroad. His answer is to domesticate these marauding multinationals.

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Big macroeconomic changes happen slowly, sometimes they aren't clearly visible until years later.

We may currently be living through a structural change in the global economy as big as any since World War II without fully realising it.

The world economy may be becoming less integrated, with one of the important drivers of globalisation swinging into reverse.

This week the Dutch Bureau for Economic Policy Analysis released its latest estimates of world trade.

This widely-followed measure showed that world trade grew by 3.3% in 2014, that's up from 2.7% in 2013 and 2.1% in 2012 but still well below the long term average of growth of 5%.

Global trade grew strongly from the late 1970s until 2008 when the global recession caused it to collapse.

It rebounded strongly as the global economy recovered in 2010 and 2011 but since then trade growth has been weak.

Before the crisis world trade generally grew faster than world GDP, so trade as a share of world output rose.

Since the recession, world trade has been sluggish and outpaced by growth. As a share of global GDP, trade has been falling.

In other words, on one important measure the world economy is becoming less integrated, as a share of world output, fewer goods and services are crossing borders.

Cheaper energy

There are reasons to think that the weakness of trade may reflect longer term factors than just the immediate aftermath of the credit crisis.

A report this week from Oxford Economics was optimistic that trade growth would pick up but identified structural reasons for its recent weakness - factors which may endure.

The first is the process of "reshoring" or bringing manufacturing that was previously outsourced abroad back to the home country.

Cheaper energy costs driven by the shale oil revolution have been one large driver of this in the US, but it appears to be a broader trend across the developed economies.

That relates to the weakness in the global goods trade, but the global trade in services has also been weaker post-financial crisis.

One reason for that may be a pulling back from overseas activity by banks.

RBS has announced it was pulling out of operations in 25 countries, driven by tighter regulation and need to conserve capital, more and more banks are choosing to focus more on their domestic markets. That slows the growth of global services trade.

Finally, Oxford Economics identified a lack of trade liberalisation. This is not to say that protectionism (using tariffs or quotas to limit imports and try to protect domestic firms) is on the rise, but that if trade is not being more regulated, it is becoming more liberalised at a slower pace.

Trade treaties and deals are estimated to have contributed around 20% to the growth of world trade between 1994 and 2007. Without the spur of additional deals, world trade growth could be slower.

An IMF report in January reached similar conclusions, arguing that there were signs of a slowing of global trade even before 2008 and it was driven by a "slower pace of expansion of global supply chains".

So, if the world economy really is becoming less globalised, what would this mean?

Financial stability

The traditional answer, for the advanced economies such as the UK, is to say that a more open economy has meant the destruction of certain kinds of jobs, but overall a welfare gain for the country through importing cheaper goods.

There are potentially serious consequences for countries in the developing world if the era of ever deepening globalisation is truly over.

Export-led growth has been a key development strategy for many nations and a slowing of global trade will have consequences.

Counter-intuitively enough, a less globalised economy might actually have a positive impact on financial stability.

In a speech in 2011, the then Governor of the Bank of England Mervyn King argued that "global imbalances" had played a key role in the run up to the financial crisis.

He noted that during the era of the Bretton Woods agreement (by which countries fixed their exchange rates against each other and globalisation was, to an important extent, limited) between the late 1940s and early 1970s, global growth was strong and less volatile than before or since and banking and financial crisis were rarer.

On the broader topic, I highly recommend this talk by Professor Dani Rodrik.

It makes sense that weaker global trade flows leave less room for imbalances which can endanger the development of financial stability.

All of which leads me to two thoughts.

The first is that neither faster nor slower global trade growth is necessary desirable.

There are costs and benefits to rapidly increasing global trade and there are costs to diminishing global trade.

At heart, macroeconomics is all about trade-offs. But when considering something like the pace of globalisation itself, it is unclear who (if anyone) is considering these trade-offs.

We may stumble into second-best solutions - a world less globalised than is ideal, or more globalised than is ideal by accident.

A lack of policy co-ordination between economic policy authorities across borders makes this more likely.

The second is that for years our politics has taken increasing globalisation as a given.

Those who have occasionally advocated slowing have been accused of saying "stop the world I want to get off".

The world might not be stopping, but it could well be slowing.

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Big macroeconomic changes happen slowly, sometimes they aren't clearly visible until years later. We may currently be living through a structural change in the global economy as big as any since World War II without fully realising it. The world economy may be becoming less integrated, with one of the important drivers of globalisation swinging into reverse.

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A "deeply concerning" slowdown in trade, particularly with China, will lead to lower global economic growth this year, says the Organisation for Economic Co-operation and Development.

Global GDP is now expected to grow by 2.9%, down from 3% forecast in September, but will hit 3.3% in 2016.

The OECD said trade had dropped to levels perilously close to those "associated with global recession".

Worldwide trade growth is forecast at 2% this year, down from 3.4% in 2014.

Catherine Mann, the OECD chief economist, said: "This is deeply concerning. Robust trade and global growth go hand in hand."

Calling world trade a "bellwether for global output", she said sluggishness in Europe had now been replaced by weak growth in emerging markets.

China, the world's largest trader of goods, seemed to be "at the heart of this" as its economic slowdown had hit other Asian economies and commodity exporters, she said.

The OECD has repeatedly cut its 2015 global growth outlook from the 3.7% it initially forecast last November.

'Stimulus measures'

But in its bi-annual outlook, the organisation said stimulus measures in China and other countries would help the world economy speed up next year, before accelerating to 3.6% in 2017.

"Policy actions are already being implemented that will help to address the weak underlying trends," Ms Mann said.

Last month, China's central bank cut interest rates for the sixth time in nearly a year, while the ruling Communist party has also ratcheted up infrastructure spending.

However, the OECD expects Chinese authorities will still miss their economic targets, with GDP growth forecast to cool to 6.2% in 2017.

Chinese President Xi Jinping has said China must keep annual growth at 6.5% in the next five years to hit the country's goal of doubling 2010 GDP and household income by 2020.

OECD key 2015 growth figures:

The OECD called for the US Federal Reserve to go ahead with its first rate hike since the financial crisis as a recovery gains steam in the United States and Europe.

Expectations of a rise in US interest rates next month have soared following strong employment figures from October.

UK economic growth is projected to continue at a "robust pace", with GDP growing 2.4% this year and in 2016, before dropping slightly to 2.3% in 2017.

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A "deeply concerning" slowdown in trade, particularly with China, will lead to lower global economic growth this year, says the Organisation for Economic Co-operation and Development. Global GDP is now expected to grow by 2.9%, down from 3% forecast in September, but will hit 3.3% in 2016.

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International Trade Infographics | tutor2u Economics

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We've just flicked the switch on moving all our digital resources to instant digital download - via our new subject stores. For every subject you can now access each digital resource as soon as it is ordered. This will always be the latest edition of each resource too (and we'll update you automatically if there is an upgraded version to use).

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Use these sources to help you form an opinion.

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The world is getting smaller. That is the unbidden meme of our generation, thanks to the juggernaut of growth unleashed by an outpouring of global bodies, free trade agreements, technology and international capital. Every business and person now has a global reach and audience.

Today's paradigm is globalisation and free trade is its evangelical mantra.

But this narrative has become worn and no longer fits the facts. In recent months, there has been a backlash, accompanied by emotive talk about the reversal of globalisation and the battle for society's future. The Organisation for Economic Co-operation and Development used its latest health check on the global economy to warn of the costs of protectionism.

The hand-wringing is half a decade too late, because globalisation is already dead and we are already some miles into the journey back.

Donald Trump and Theresa May are not flagbearers in the distance, they are catapults battering at the walls. Trump's stated intent to pull the US out of the TPP on his first day in office underlines the new reality we inhabit, as does the European Union's recent troubles closing a trade agreement with Canada thanks to Wallonia's obstinance.

Today, we have a new meme - deglobalisation - as people turn their backs on an interconnected world economy and societies turn iconoclastic.

It is not for the first time.

Globalisation may be defined as when trade across nations is growing faster than GDP. People interact more, transact more and create more wealth. Deglobalisation is the alternate state where trade grows less than GDP. Countries focus inwards, trade declines as a proportion of GDP and growth shrinks. A clear cycle of the two emerges over history.

Proto-globalisation (1820-1870): Rapid global trade growth, thanks to the Industrial Revolution and the spread of European colonial rule

Globalisation 1.0 (1870-1913): Empire building became the norm. Rapid advancements in transport and communications grew trade. But rapid change also meant volatile bouts of economic obsolescence and crisis

Deglobalisation 1.0 (1913-1950): Limited growth, unequal outcomes and a huge debt overhang from previous decades stoked economic nationalism and protectionism. Trade fell and a collective failure to tackle deeper structural issues led to the 1930s

Globalisation 2.0 (1950-2010): Since then, we have been on a tearaway expansion with unparalleled growth of both global trade and GDP

Deglobalisation 2.0 (2010-?): The last financial crisis focused policymaker attention inwards and crystallised the growing sense of social disenfranchisement. A toxic mix of suppressed wages, rocketing debt and political myopia have largely destroyed the allure of globalisation.

This is more than a sense of ennui. Global trade today is not slowing down but has plateaued - hardly a barometer of rude global health. After their peak in January 2015, global exports fell -1.6% by the end of August 2016. The blame lies not with commodity price falls, but shifts in trade policy. Protectionism is en vogue. Restrictive trade measures have outstripped liberalising measures three to one this year and increased by almost five times since 2009, as policymakers try to circumvent the WTO. Meanwhile, the deleveraging of banking balance sheets over recent years has hit global lending, as banks retreat from peripheral to core domestic activities, cutting vital credit flows through key arteries.

All of this preceded the populist deluge of 2016 and, indeed, contributed as policymakers myopically prioritised stability over social cohesion, ignoring the lessons of the past.

But globally, politicians are now fast realigning to shifting public moods. A year ago, to imagine a world where the major western leaders included Trump, the Brexit brigade and Marine Le Pen was the province of satire. Today, we are two-thirds there. Their ascendancy has shifted the political debate towards nativism in a hauntingly familiar nationalist narrative, as others follow suit.

Our new politics are not leftwing or rightwing, merely whether you are in this world or out of it. Even defenders of globalisation are falling into the same trap. By demonising those that voted against and not providing alternative options, they cling tighter to those that confirm and affirm their beliefs. That is still nativism of a different sort and still the politics of division, not unity.

This is Deglobalisation 2.0.

Monetary policies such as quantitative easing and its newborn sibling, fiscal easing, cannot change this dynamic. Absent structural change, their cumulative corrosive impact on savings and fillip to global debt ensure a limited runway and only inflame the rhetoric of disenfranchisement. Meanwhile, divorces are turning ugly as emotions override reason, viz the talk of Brexit fees and anti-dumping levies, the metaphorical Kristallnacht of populist victors like May and Trump as they struggle for coherence, and emerging divisions between central banks and politicians, to name but a few.

Democracy is fast turning to kakistocracy - government by the least qualified leaders. Globalisation is transmuting to nationalism. The effects are well documented in history - autarky, economic naivety, protectionism and a rush to grab what remains of the pie, only to trample it underfoot.

Me first always ends in me last. The world is still getting smaller, but just in our minds and horizons now, and thoughtless we risk becoming all the poorer for it.
Bob Swarup is the author of Money Mania
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It's too late for hand-wringing - globalisation is already dead

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The world is getting smaller. That is the unbidden meme of our generation, thanks to the juggernaut of growth unleashed by an outpouring of global bodies, free trade agreements, technology and international capital. Every business and person now has a global reach and audience. Today's paradigm is globalisation and free trade is its evangelical mantra.

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Arguments against Protectionism | Economics | tutor2u

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Key facts: The global economy

The world's economies have developed ever-closer links since 1950, in trade, investment and production.

Known as globalisation, this process is not new, but its pace and scope has accelerated in recent years, to embrace more industries and more countries.

There have been losers as well as winners from globalisation, with China the biggest winner, and blue-collar workers the biggest losers.

The changes have been driven by liberalisation of trade and finance, changes in how companies work, and improvements to transport and communications.

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Key facts: The global economy The world's economies have developed ever-closer links since 1950, in trade, investment and production. Known as globalisation, this process is not new, but its pace and scope has accelerated in recent years, to embrace more industries and more countries.

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It's not on a boat, it's not on a plane, it's on a train. The newest way to send your freight from China to Europe involves spending 15 days on a train that doesn't have a buffet car in sight.

On 3 January in Yiwu in eastern China, a bright orange locomotive pulling 44 containers laden with suitcases, clothes and an assortment of household goods set off on a 7,500-mile (12,000km) journey to western Europe.

Ten containers were taken off at the German cargo hub of Duisburg. The rest made up the first cargo train from China to arrive in London at Barking's Eurohub freight terminal.

London is the 15th European city to find its way on to the ever-expanding map of destinations for China's rail cargo. Last year, 1,702 freight trains made the voyage to Europe, more than double the 2015 figure.

Yiwu Timex Industrial Investments, which is running this service with China's state-run railways, says prices are half that of air cargo and cut two weeks off the journey time by sea.

Market demand

The UK's biggest supermarket, Tesco, doesn't have any goods on this particular train but does use rail to carry toys, electrical goods, homeware and clothing from China to European rail hubs such as Bratislava in Slovakia and Krasnaje in Belarus.

Alistair Lindsay, Tesco's head of global logistics, says the supermarket prefers shipping its goods because this is the most environmentally friendly way, as well as offering the best value for money, but that "where we need to move products quicker we have that option to do it by rail".

This decision would normally be driven by customer demand for particular products, he says.

It demonstrates how market demand and the realities of globalisation are increasingly allowing China's President Xi Jinping to realise his ambitious plan to revive the ancient Silk Road.

Trade route

For centuries the fabled trade route from the ancient capital of Xian provided a link to the bustling markets of European cities such as Istanbul and Venice.

In the 21st Century China has become the world's biggest exporter, with the export of goods totalling $2.28 trillion (£1.85tn) in 2015.

This rail expansion is part of President Xi's "One Belt, One Road" (OBOR) trade policy. For Beijing it offers another way to sustain its economic growth.

Kazakhstan is one of the countries on the route and it was there that Mr Xi first outlined his vision in a speech in 2013 saying, "This will be a great undertaking benefiting the people of all countries along the route."

Extolling the virtues of globalisation was a theme he repeated again at Davos this week.

For some, this is as much political as economic, offering Beijing the chance to project soft power as well as demonstrating it has the influence to thread disparate nations from Russia to Spain together.

"[OBOR] is set to become Xi Jinping's grand legacy," says Dr Sam Beatson, of King's College London.

"Regardless of the returns on offer... the policies will continue to be pushed as a means of seeking to fulfil Xi's dream under his leadership."

Reduced emissions

One of the other legacies President Xi is trying to tackle is China's pollution problem. While rail cargo is not as green as sea transport it emits less carbon dioxide (CO2) than air travel.

This is the "first argument when trying to get our customers to re-evaluate their options", says Johan Ignell, rail freight manager at Swedish cargo firm Greencarrier.

It calculates that a 40ft (12m) container with 20 tonnes of cargo would account for just 4% of the CO2 emissions it would take to move it by air (though emissions would be more than halved again if it were moved by sea).

Freight transport accounts for about 7% of global greenhouse gas emissions, but it is "fraught with difficulty" to compare emissions from different transport modes, says Prof Alan McKinnon of Germany's Kuehne Logistics University.

Prof McKinnon, one of the authors of a 2014 report by the Intergovernmental Panel on Climate Change (IPCC), says "load factor, energy efficiency and power sources all make a difference and can be hard to ascertain".

He adds: "While shifting air cargo to rail will certainly cut emissions, container shipping will continue to command a significant carbon advantage over transcontinental rail, particularly now that most vessels are slow steaming to save fuel."

There is also a business case for this emerging trade route to grow. Not least among European companies looking to export to China.

At the moment there are no plans to run a return train service from London but that could change quickly. China is already the European Union's second biggest export market - though there is an EU trade deficit in goods of about $190bn.

Growth potential

For UK companies facing up to the reality of Brexit, China is an attractive proposition and the train carries new opportunities.

Brand Avenue is a company that already exports British-made goods including cosmetics and jewellery to China, and chief executive Jody Jacobs says he's exploring moving to rail.

"We deal a lot in goods which weigh a lot in comparison to their volume [which is] where airfreight becomes expensive, such as cosmetics and baby food.

"So for us a service which is quicker than sea and cheaper than air is a great middle ground."

For established cargo companies rail also offers the potential for growth. Shipping lines have seen profits fall because of overcapacity attributed to the aftermath of the global financial crisis.

The world's biggest shipping company, Maersk, told the BBC it is investigating "possible opportunities" in long-distance rail, though it sees them as supplementary to sea and air routes.

China is planning another 20 European routes for rail freight, and with the world's demand for consumer goods continuing to grow, all the ingredients seem to be there for rail to help the global economy steam ahead in 2017 and beyond.

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All aboard the China-to-London freight train

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It's not on a boat, it's not on a plane, it's on a train. The newest way to send your freight from China to Europe involves spending 15 days on a train that doesn't have a buffet car in sight.

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Free trade is something of a sacred cow in the economics profession.

Moving towards it, rather slowly, has also been one of the dominant features of the post-World War Two global economy.

Now there are new challenges to that development.

The UK is leaving the European Union and the single market - though in her speech this week, British Prime Minister Theresa May promised to push for the "freest possible trade" with European countries and to sign new deals with others around the world.

Most obviously Donald Trump has raised the possibility of quitting various trade agreements, notably Nafta, the North American Free Trade Agreement with Mexico and Canada. Even the World Trade Organization (WTO) has proposed new barriers to imports.

In Europe, trade negotiations with the United States and Canada have run into difficulty, reflecting public concerns about the impact on jobs, the environment and consumer protection.

The WTO's Doha Round of global trade liberalisation talks has run aground.

The case for trade without government imposed barriers has a long history in economics.

Comparative advantage

Adam Smith, the 18th Century Scottish economist who many see as the founding father of the subject, was in favour of it. But it was a later British writer, David Ricardo in the 19th Century, who set out the idea known as comparative advantage that underpins much of the argument for freer trade.

It is not about countries being able to produce more cheaply or efficiently than others. You can have a comparative advantage in making something even if you are less efficient than your trade partner.

When a country shifts resources to produce more of one good there is what economists call an "opportunity cost" in terms of how much less of something else you can make. You have a comparative advantage in making a product if the cost in that sense is less than it is in another country.

If two countries trade on this basis, concentrating on goods where they have a comparative advantage they can both end up better off.

Another reason that economists tend to look askance at trade restrictions comes from an analysis of the impact if governments do put up barriers - in particular tariffs or taxes - on imports.

There are gains of course. The firms and workers who are protected can sell more of their goods in the home market. But consumers lose out by paying a higher price - and consumers in this case can mean businesses, if they buy the protected goods as components or raw materials.

Avoiding protectionism

The textbook analysis says that those losses add up to more than the total gains. So you get the textbook conclusion that it's best to avoid protection.

And this conclusion is regardless of what other countries do. The 19th Century French economist Frederic Bastiat set it out it like this:

"It makes no more sense to be protectionist because other countries have tariffs than it would to block up our harbours because other countries have rocky coasts."

The implication is that unilateral trade liberalisation makes perfect sense.

A more recent theory of what drives international trade looks at what are called economies of scale - where the more a firm produces of some good, the lower cost of each unit.

The associated specialisation can make it beneficial for economies that are otherwise very similar to trade with one another. This area is known as new trade theory and the Nobel Prize winner Paul Krugman was an important figure in developing it.

Post-war trade

The basic idea that it's good to have freer trade has underpinned decades of international co-operation on trade policy since World War Two.

The period since 1945 has been characterised by a gradual lowering of trade barriers. It happened in the General Agreement on Tariffs and Trade, which began life in 1948 as a forum for governments to negotiate lower tariffs.

Its membership was initially small, but by the time it was replaced by the World Trade Organization in 1995, most countries had signed up.

The motivation was to end or reduce the protectionism or barriers to trade that went up in the 1930s. It is not generally thought that those barriers caused the Great Depression, but many do think they aggravated and prolonged it.

The process of post-war trade liberalisation was driven largely by a desire for reciprocal concessions - better access to others' markets in return for opening your own.

But what is the case against free (or at least freer) trade?

First and foremost is the argument that it creates losers as well as winners.

What Ricardo's theory suggested was that all countries engaging in trade could be better off. But his idea could not address the question of whether trade could create losers as well as winners within countries.

Work by two Swedish Nobel Prize winners, Eli Hecksher and Bertil Ohlin, subsequently built on by the American Paul Samuelson developed the basic idea of comparative advantage in a way that showed that trade could lead to some groups losing out.

Putting it very briefly, if a country has a relatively abundant supply of, for example, low-skilled labour, those workers will gain while their low-skilled counterparts in countries where it is less abundant will lose.

There has been a debate about whether this approach fits the facts, but some do see it as a useful explanation of how American industrial workers (for example) have been adversely affected by the rise of competition from countries such as China.

A group of economists including David Autor of the Massachusetts Institute of Technology looked at the impact on areas where local industry was exposed to what they call the China shock.

"Adjustment in local labour markets is remarkably slow, with wages and labour-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences.

"Exposed workers experience greater job churning and reduced lifetime income."

Compensating losers

Still if you accept that overall countries gain, then the winners could in principle fully compensate the losers and still be better off.

Such programmes do exist. Countries that have unemployment benefits provide assistance to people who have lost their jobs. Some of those people will have been affected by competition from abroad.

The United States has a programme that is specially targeted for people who lose their jobs as a result of imports, called Trade Adjustment Assistance.

But is it enough? Lawrence Mishel of the Economic Policy Institute, a think-tank in Washington writes: "The winners have never tried to fully compensate the losers, so let's stop claiming that trade benefits us all."

In any case, it is not clear that compensation would do the trick. As Mark Carney, the Bank of England governor noted, they may lose their jobs and also "the dignity of work".

He is keen on maintaining open markets for trade, but recognises the need to do something about what you might call the side effects.

To return to recent political developments - Donald Trump clearly did get support from many of those people in areas of the US where industry has declined.

We don't yet know how he will address those issues when he takes his place in the White House.

Perhaps his threats to introduce new tariffs are just that - threats. But the post-war trend towards more liberalised international trade looks more uncertain than it has for many years.

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Free trade is something of a sacred cow in the economics profession. Moving towards it, rather slowly, has also been one of the dominant features of the post-World War Two global economy. Now there are new challenges to that development.

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Perhaps the defining feature of the global economy is precisely that it is global.

Toys from China, copper from Chile, T-shirts from Bangladesh, wine from New Zealand, coffee from Ethiopia, and tomatoes from Spain.

Like it or not, globalisation is a fundamental feature of the modern economy.

In the early 1960s, world trade in merchandise was less than 20% of world economic output, or gross domestic product (GDP).

Now, it is around 50% but not everyone is happy about it.

There is probably no other issue where the anxieties of ordinary people are so in conflict with the near-unanimous approval of economists.

Arguments over trade tend to frame globalisation as a policy - maybe even an ideology - fuelled by acronymic trade deals like TRIPS and TTIP.

But perhaps the biggest enabler of globalisation has not been a free trade agreement, but a simple invention: the shipping container.

It is just a corrugated steel box, 8ft (2.4m) wide, 8ft 6in (2.6m) high, and 40ft (12m) long but its impact has been huge.

Find out more

BBC World Service's 50 Things That Made the Modern Economy programme highlights the inventions, ideas and innovations that helped create the global economy.

You can find more information about its sources and listen online or download the programme podcast.

Consider how a typical trade journey looked before its invention.

In 1954, an unremarkable cargo ship, the SS Warrior, carried merchandise from New York to Bremerhaven in Germany.

It held just over 5,000 tonnes of cargo - including food, household goods, letters and vehicles - which were carried as 194,582 separate items in 1,156 different shipments.

Just keeping track of the consignments as they moved around the dockside warehouses was a nightmare.

But the real challenge was physically loading such ships.

Loading by hand

Longshoremen would pile the cargo onto a wooden pallet on the dock.

The pallet would be hoisted in a sling and deposited in the hold.

More longshoremen carted each item into a snug corner of the ship, poking the merchandise with steel hooks until it settled into place against the curves and bulkheads of the hold, skilfully packed so that it would not shift on the high seas.

There were cranes and forklifts but much of the merchandise, from bags of sugar heavier than a man to metal bars the weight of a small car, was shifted with muscle power.

In a large port, someone would be killed every few weeks.

In 1950, New York averaged half a dozen serious incidents every day, and its port was safer than many.

Researchers studying the SS Warrior's trip to Bremerhaven concluded the ship had taken ten days to load and unload, as much time as it had spent crossing the Atlantic.

In today's money, the cargo cost around $420 (£335) a tonne to move.

Given typical delays in sorting and distributing the cargo by land, the whole journey might take three months.

Sixty years ago, then, shipping goods internationally was costly, chancy, and immensely time-consuming.

Surely there had to be a better way?

Vested interests

Indeed there was: put all the cargo into big standard boxes, and move those.

But inventing the box was the easy bit - the shipping container had already been tried in various forms for decades.

The real challenge was overcoming the social obstacles.

To begin with, the trucking companies, shipping companies, and ports could not agree on a standard size.

Some wanted large containers while others wanted smaller versions; perhaps because they specialised in heavy goods or trucked on narrow mountain roads.

Then there were the powerful dockworkers' unions, who resisted the idea.

Yes the containers would make the job of loading ships safer but it would also mean fewer jobs.

US regulators also preferred the status quo.

The sector was tightly bound with red tape, with separate sets of regulations determining how much that shipping and trucking companies could charge.

Why not simply let companies charge whatever the market would bear - or even allow shipping and trucking companies to merge, and put together an integrated service?

Perhaps the bureaucrats too were simply keen to preserve their jobs.

Such bold ideas would have left them with less to do.

Spotting an opportunity

The man who navigated this maze of hazards, and who can fairly be described as the inventor of the modern shipping container system, was called Malcom McLean.

McLean did not know anything about shipping but he was a trucking entrepreneur.

He knew plenty about trucks, plenty about playing the system, and all there was to know about saving money.

As Marc Levinson explains in his book, The Box, McLean not only saw the potential of a shipping container that would fit neatly onto a flat bed truck, he also had the skills and the risk-taking attitude needed to make it happen.

First, McLean cheekily exploited a legal loophole to gain control of both a shipping company and a trucking company.

Then, when dockers went on strike, he used the idle time to refit old ships to new container specifications.

He repeatedly plunged into debt.

He took on "fat cat" incumbents in Puerto Rico, revitalising the island's economy by slashing shipping rates to the United States.

He cannily encouraged New York's Port Authority to make the New Jersey side of the harbour a centre for container shipping.

But probably the most striking coup took place in the late 1960s, when Malcom McLean sold the idea of container shipping to perhaps the world's most powerful customer: the US Military.

Impetus of war

Faced with an unholy logistical nightmare in trying to ship equipment to Vietnam, the military turned to McLean's container ships.

Containers work much better when they are part of an integrated logistical system, and the US military was perfectly placed to implement that.

Even better, McLean realised that on the way back from Vietnam, his empty container ships could collect payloads from the world's fastest growing economy, Japan.

And so trans-Pacific trading began in earnest.

A modern shipping port would be unrecognisable to a hardworking longshoreman of the 1950s.

Even a modest container ship might carry 20 times as much cargo as the SS Warrior did, yet disgorge its cargo in hours rather than days.

Gigantic cranes weighing 1,000 tonnes apiece lock onto containers which themselves weigh upwards of 30 tonnes, and swing them up and over on to a waiting transporter.

The colossal ballet of engineering is choreographed by computers, which track every container as it moves through a global logistical system.

The refrigerated containers are put in a hull section with power and temperature monitors.

The heavier containers are placed at the bottom to keep the ship's centre of gravity low.

The entire process is scheduled to keep the ship balanced.

And after the crane has released one container onto a waiting transporter, it will grasp another before swinging back over the ship, which is being simultaneously emptied and refilled.

Zero-cost transport?

Not everywhere enjoys the benefits of the containerisation revolution.

Many ports in poorer countries still look like New York in the 1950s.

Sub-Saharan Africa, in particular, remains largely cut off from the world economy because of poor infrastructure.

But for an ever-growing number of destinations, goods can now be shipped reliably, swiftly and cheaply.

Rather than the $420 (£335) that a customer would have paid to get the SS Warrior to ship a tonne of goods across the Atlantic in 1954, you might now pay less than $50 (£39).

Indeed, economists who study international trade often assume that transport costs are zero.

It keeps the mathematics simpler, they say, and thanks to the shipping container, it is nearly true.

Tim Harford writes the Financial Times's Undercover Economist column. The 50 Things That Made the Modern Economy programme was broadcast on the BBC World Service. You can find more information about its sources and listen online or download the programme podcast.

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The simple steel box that transformed global trade

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Perhaps the defining feature of the global economy is precisely that it is global. Toys from China, copper from Chile, T-shirts from Bangladesh, wine from New Zealand, coffee from Ethiopia, and tomatoes from Spain. Like it or not, globalisation is a fundamental feature of the modern economy.

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Free trade and globalisation had a bad 2016, but it looks like 2017 could be even worse.

For decades there has been a consensus that globalisation brought more jobs, higher wages and lower prices - not just for richer countries but also for developing and poorer nations.

But there is now a growing movement of anger as people see jobs being taken by machines, old industries disappearing and waves of migration disturbing the established order.

Global trade flows are falling and trade deals are being ripped up.

The new US President Donald Trump has threatened to impose tariffs of up to 45% on Chinese goods, accusing the country of economically "raping" the US.

One of China's fiercest critics, Peter Navarro, has been appointed as a top trade advisor.

An executive order pulling out of the 12-nation Trans-Pacific Partnership (TPP) agreement aimed at deepening economic ties between the twelve countries that border the Pacific Ocean was one of Mr Trump's first acts on moving into the White House.

The future of free trade is looking very gloomy.

But what's behind the anger that threatens decades of relative global consensus on globalisation?

US manufacturing's decline

The sense of grievance in the US is clear: the manufacturing sector in the country has seen six million jobs disappear between 1999 and 2011, according to the Bureau of Labor Statistics.

Studies have shown that the decline in the US has been mirrored by gains in China.

But Chinese imports only explain 44% of the decline in employment in manufacturing in the US between 1990 and 2007, according to a report by the Institute for the Study of Labor in Bonn.

Part of the decline has been down to the outsourcing of jobs to other countries but automation and more efficient processes have also taken their toll.

"All countries end up with losers from technological development - whether it is telephone operators or bank tellers," says Gary Hufbauer, a trade expert from the Peterson Institute for International Economics.

"The problem in the US is that we don't do much to help those people who lose out through social security support or job retraining," says Mr Hufbauer.

The anger that flows from this has found a home in the protectionist rhetoric of politicians like Mr Trump.

"There has been no growth in household income during the last decade in Europe, the US and Japan. People are not happy and if you have to blame someone, it is easy to blame foreigners,"' says Mr Hufbauer.

The rise of political opposition to globalisation has coincided with - and contributed to - a period of declining world trade growth since the financial crisis of 2008.

Between 1986 and 2008 world trade grew at an average of 6.5%, according to the World Trade Organization.

Between 2012 and 2015 that rate has slowed to an average of 3.2% and is predicted to expand by just 1.7% in 2016.

That slowdown would make it the longest period of relative trade stagnation since the Second World War.

Since the financial crisis the slowing of the Chinese economy and political and economic stagnation in the eurozone have contributed to this flat-lining of world trade.

At the same time, in an attempt to insulate companies and industries at home, politicians have turned to tariffs and restrictions on imports from other countries.

"Governments worldwide have almost doubled their resort to trade distortions in the last two years," says Prof Simon Evenett, a trade expert at St Gallen University.

"The recent surge in 'beggar-thy-neighbour' activity predates Trump and Brexit, suggesting that populist pressures are likely to exacerbate protectionism," he says.

The flat lining of economic growth has increased pressure on politicians.

"Governments across the world are enacting protectionist policies often masquerading as 'industrial policy," according to Prof Evenett.

He says this often involves offering government subsidies to local companies, introducing import barriers and new '"local" standards for products from abroad.

Yet while protectionism may seem appealing to politicians assailed by angry workers, they often only end up raising prices for consumers.

For example, there was an outcry in 2012 when cheap Chinese tyres flooded into the US market, putting the viability of the domestic producers in question.

President Obama responded with punitive tariffs to get China "to play by the rules".

The protectionist measures were well received in the US, but a study by the Peterson Institute established that the tariffs meant US consumers paid $1.1bn more for their tyres in 2011.

Each job that was saved effectively cost $900,000 with very little of that reaching the pockets of the workers.

Free trade fightback?

With the economic and social benefits of free trade coming increasingly under attack, proponents of globalisation have tried to launch a counterattack.

For example, The World Bank recently published a study of developing countries showing that average incomes for people living in the bottom 40% increased between 2008 and 2013, despite the impact of the financial crisis.

"There is a realisation in rich countries and among rich elites that there are problems with globalisation," says Branko Milanovic, an economist whose work on income inequality has driven much of the debate.

"They realise that for their own political self-preservation they have to tackle them."

But the solutions are not obvious, nor easy to implement.

"Most of the benefits of globalisation have been enjoyed by a relatively small group within each country.

"The question is not whether there are benefits to globalisation - there clearly are. But the question is about who is enjoying those benefits," says Andrew Lang from the London School of Economics.

Part of the anger might dissipate if economic growth was to stop its stubborn flat-lining trajectory, lifting incomes around the world.

"To help solve these problems you need to get the world economy revved up. Governments need to commit to fiscal stimulus to get their economies going again," says Gary Hufbauer.

Branko Milanovic points to the success of previous politicians in turning round seemingly intractably weak economies.

"It's not impossible for politicians to address these issues.

"Thatcher and Reagan managed to effect change in relatively short periods of time - a presidential term of four years should be enough to start making a difference," he says.

But Prof Evenett is pessimistic: "I expect the global plateau in world trade to continue in 2017 and that is before Donald Trump enacts any of the protectionist measures he has threatened."

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Will Trump mean the end of global trade?

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Free trade and globalisation had a bad 2016, but it looks like 2017 could be even worse. For decades there has been a consensus that globalisation brought more jobs, higher wages and lower prices - not just for richer countries but also for developing and poorer nations.

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There is, to use the great cliche, an elephant in the room.

The room is globalisation, the increasing international economic integration we have lived through over the last few decades.

The elephant is what that development has arguably done to the distribution of income.

Why an elephant?

Because there's a graph showing what has happened that looks like one (especially if you join the dots up carefully and add in some ears, eyes and legs).

It shows what has happened to incomes across the global income distribution in the 20 years up to 2008.

Understanding the elephant

The horizontal axis shows the position in that distribution. The fifth dot, for example, is the 25th percentile. If you ranked everybody by income, that person would be a quarter of the way up the rankings.

The vertical axis shows the percentage change in income (in real terms, taking out inflation) in that part of the distribution between 1988 and 2008.

It is the work of a former World Bank economist, Branko Milanovic, and his colleague Christoph Lakner.

1. Middle classes in countries such as China, India and Brazil

2. Lower earners in countries such as the USA and UK

3. The richest individuals around the globe

What does it show?

Some of it is consistent with what is widely assumed to be the case. The very richest have gained a lot.

So have many round the middle of the range. That includes the growing middle classes in emerging economies such as China, India and Brazil. There are also some striking gains towards the lower end of the range.

But the very poorest got no better off at all.

And there is another group between the 75th and 90th percentile or so, where the gains appear to have been very small - and some of them appear to have actually lost out.

Who are they? Many of them are from the bottom half of the income range in the rich countries.

And that's why this graph has attracted so much attention. Perhaps these are the ones who have lost out because of globalisation.

Political significance

Branko Milanovic doubts we can really tell for sure.

"Establishing causality between such complex phenomena that are also affected by a host of other variables is very difficult and perhaps impossible," he cautions.

Still, he doesn't dismiss the idea and recognises the political significance.

"The temporal coincidence of the two developments and the plausible narratives linking them - whether made by economists or by politicians - make the correlation in many people's mind appear real."

Those "plausible narratives" include the idea that some workers have lost jobs or seen their incomes fail to rise because of low-wage competition in emerging economies, or at home in the shape of immigrant labour.

We have certainly seen significant political developments that you could characterise as, in part, a backlash against globalisation and the increased flows of goods and workers across borders.

It was a factor in the British vote to leave the EU, the rise of anti-establishment political parties across Europe (Podemos in Spain, the Five Star movement in Italy and more) and in Donald Trump's criticism of American trade agreements in the US election campaign.

Of course, it's important not to forget the very large gains made by a substantial swathe of the population in the developing and emerging economies.

Globalisation has surely got a good deal to do with that, as jobs in exporting industries in China, for example, have helped to drive rising living standards.

Liberalisation brake

The perception that has gained strength in the rich world is that this improvement is driven by trade relations that are in some way unfair: workers in emerging economies are exploited, firms are subsidised, or that improved access to rich countries' markets is not adequately reciprocated.

That in turn underpins pressure on governments to rethink trade agreements and to impose new barriers to imports.

The World Trade Organization, for example, has found some evidence of an increase in new measures that restrict trade.

But it is nothing like a massive upsurge in protectionism that reverses the trade liberalisation of the post-World War Two period.

Where the backlash is perhaps making more difference is in making governments more wary of new trade liberalisation agreements.

The EU and the US have run into major difficulties in the negotiations known as TTIP (the Transatlantic Trade and Investment Partnership). Responding to popular concerns about the negotiations, senior European figures (including French President Francois Hollande) have poured a lot of cold water on TTIP.

It is not officially extinguished, but is under serious political pressure.

Another deal, the Trans-Pacific Partnership, has been agreed by governments, but not ratified by the US Congress, and has been disavowed by both the leading candidates in the presidential election.

One of them, Hillary Clinton, said when it was being negotiated that she hoped it would be the gold standard, but when the deal was done, she said it didn't live up to the "high bar" she had set.

She said her position was consistent, but it could be that she was responding to the scepticism about trade deals of Bernie Sanders and now Donald Trump - respectively, her rivals for the Democratic nomination and for the presidency itself.

'Rising inequalities'

But there is a wrinkle to this interpretation. Has this group of less affluent people in the developed world done as badly as the data suggest?

A separate analysis by Adam Corlett of the Resolution Foundation of the data compiled by Prof Milanovic comes to a slightly different conclusion about what has happened to income distribution.

For one thing, there are more countries in the data for 2008 than for 1988. Faster population growth in emerging economies than in the rich world means that, for example, the group of people at the 75th percentile aren't necessarily the same in both 1988 and 2008.

And there are some important differences between the rich countries.

The weak results for this group, he says, are "driven by Japan (reflecting in part its two 'lost decades' of growth post-bubble, but primarily due to likely flawed data) and by Eastern European states (with large falls in incomes following the collapse of the Soviet Union after 1988)".

He concludes: "It would be hard to argue that the incomes of the developed world's lower middle class stagnated during this period, although the income growth of this part of the global income distribution still appears weak relative to other parts."

Still, relatively weak growth, especially when the people concerned can see that others have done much better, could feed resentment.

And there is no denying that the new political movements that have taken shape in some rich countries do partly reflect concerns that are about globalisation.

The last word goes to Prof Milanovic. "The political implications of a global 'elephant graph' are being played out in national political spaces," he says.

"In that space, rising national inequalities, despite being accompanied by lower global poverty and inequality, may turn out to be difficult to manage politically."

Find out more

On Thursday, 6 October the BBC will be reporting from around the world on the impact of globalisation on people's lives and on the growing movement against free trade.

There will be special coverage on TV, radio and online.

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Globalisation: Where on the elephant are you?

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There is, to use the great cliche, an elephant in the room. The room is globalisation, the increasing international economic integration we have lived through over the last few decades. The elephant is what that development has arguably done to the distribution of income. Why an elephant?