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The term “globalization” — in the sphere of economics — describes an increase in trade, and greater movement of capital and labor across national and regional boundaries.

Free trade has long been among the driving factors behind economic globalization, and for centuries, economists have generally agreed that free trade is an important force in building wealth and economic growth. Even economists who disagree on almost everything else, can often agree that lowering barriers to trade is a good thing.

Politically, however, things have changed. Nowadays, organized labor groups, once the lone voices opposing economic globalization (and, whose role it is to protect their members from competition both domestic and foreign), have been joined by “anti-establishment” political campaigns, from Bernie Sanders on the left to Donald Trump on the right, both tapping into widespread popular discontent. Even Hillary Clinton, who once referred to the ostensibly free-trade pact known as the Trans-Pacific Partnership as “the Gold Standard” of trade deals, now claims to oppose it. The politicians are, not surprisingly, following the popular sentiment in the hopes of getting votes. The anti-trade stance is now the easier stance for an American politician to take — at least publicly.

This is an important shift. Tariffs are, after all, taxes. They are taxes that apply to a broad tax base (all consumers). And yet, the anti-tax position is becoming too politically dangerous to advocate.

Does Free Trade Cause Economic Inequality?

Why has protectionist sentiment grown? What has changed?

Central to the declining political fortunes of free trade is the perception that globalization and the rise of inequality have gone hand in hand, and thus the one must have caused the other. Writing for Forbes in May, 2015, Mike Collins writes, “[t]he general complaint about globalization is that it has made the rich richer while making the non-rich poorer. It is wonderful for … owners and investors, but hell on workers ...” He continues, “[d]uring the most recent period of rapid growth in global trade and investment … inequality worsened both internationally and within countries.”

But did globalization worsen inequality and drive down wages for lower-income workers? Or did globalization simply coincide with these trends? Is there some other, over-arching factor? After all, globalization is expected to create job market friction, but only as one part of a larger improvement in efficiencies. This, in turn, will reduce in prices and increase real wages, across the global market. Did that simply fail to materialize? Or did some other force come into play, allowing for the job market competition but offsetting or reducing — or diverting — the benefits in terms of prices?

Globalization has indeed weighed against rising prices. The net effect of globalization on prices has been described in one word: disinflation. Writing for the Roubini Economonitor in August 2013, Gregor Schwerhoff and Mouhamadou Sy write, “[f]rom 1990 to present, tariff rates around the world have declined continuously in a worldwide push to liberalize trade. As a result, trade has surged. The share of imports and exports in GDP increased from a global average of 38% in 1990 to 54% in 2005. While the causal link between tariff rates and trade is straightforward, there has been another and perhaps more surprising development. In the same period inflation fell from an average of 26% to a mere 4%, a trend called ‘Global Disinflation.’”

Deflation and Rising Real Incomes

But if that is the case, why did real wages and salaries, and real incomes of the bottom 99 percent of Americans, not improve, but stagnate, while the real incomes of the top 1 percent of Americans rose?

Schwerhoff and Sy’s next observation reveals the bigger force at work: “[g]lobalization … increases the efficiency of the economy, which allows firms to produce more output. If the central bank does not increase the quantity of money in response to this additional growth in output, inflation decreases.”

This observation, however, is incomplete. We must also note that (1) naturally, efficiency improvements will, all other things equal, and with stable money, produce deflation, not merely disinflation, and (2) we know that the money supply was not stable: the central bank, in nearly every country, did increase the quantity of money, significantly. In fact, the central banks did so deliberately to reach a “target” inflation rate of 2 percent, out of a strategy designed to “fight deflation” — in Ben Bernanke’s words, to “[m]ak[e] sure it doesn’t happen here.”

This means that without the central banks’ inflationary intervention, globalization would likely have produced not only disinflation but deflation — which would have more likely yielded the promised increase in real incomes, which would have resulted in popular satisfaction, not dissatisfaction, with globalization.

That we have experienced “disinflation” rather than “deflation” shows that Ben Bernanke and his fellow central bankers succeeded in “making sure it doesn’t happen here,” but “it” was a fall in real prices, or, a rise in real incomes (i.e., the primary benefit that globalization was supposed to confer, and would have conferred, on most people).

Consequently, the advantages of deflation — as explored here, here, here, here, and here — were never realized. Instead, the central-bank commitment to easy money led to a worldwide real estate and commodities bubble, and the overall inflation of stock and bond markets worldwide.

The real problem with globalization has not been an increase in trade or — to the extent it exists — a true liberalization in restrictions on trade. In an unhampered economy, these trends would lead to obvious and measurable benefits. Unfortunately, these benefits have been diverted, via money-supply inflation, from workers and savers to the holders of financial assets.

The only way for money-supply inflation to have been a sound policy would be if Bernanke’s thesis had been correct. Unfortunately, the thesis is not correct. Indeed, we know that deflation is not a threat, but a boon to the economy, especially to workers and savers. Indeed, in a 2004 NBER paper, the authors — two economists working for the Minneapolis Fed — concurred with the Austrian view, pointing out that historically there is no correlation, much less indication of any causal link, between episodes of depression and falling prices. Even if one were to believe in “good” vs “bad” deflation, deflation resulting from efficiencies is “good” deflation.

In fact, the money-supply inflation foisted upon us by the central banks did not stave off some mysterious economic death spiral. It merely put in motion the economic forces now resented by workers who have seen their real earnings decline in the face of asset-price inflation in money-supply inflation.

Patrick Trombly is a senior vice president with a commercial bank in New York City.