The pro-leave result of the Brexit referendum has brought the issue of inequality back to the forefront of political debates in developed countries. In light of Brexit, policy wonks around the world are trying to come to terms with the implications of a population feeling left behind by globalization and automation, particularly in manufacturing regions such as eastern and southwestern Ontario. I fear many of them are coming to the wrong conclusions, because they are defining the problem too narrowly.

The most useful representation of working-class wage stagnation in the developed world is Branko Milanovic’s elephant chart, showing the relationship between global income distribution and real income gains between 1988 and 2008:

Two groups have benefited from global economic changes since the 1980s. The first group of winners is clustered around point A, and are mostly made up of the emerging middle class in China and India. The second group of winners, denoted by point C, is the so-called “one per cent” of North America and Europe. Point B, the only group that did not see any income gains between 1988 and 2008, is almost entirely made up of the working class from developed countries such as Canada.

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A simple narrative emerges from the elephant graph: A rapidly globalizing economy allowed companies to offshore production to low-wage countries, benefiting both the workers in those countries and wealthy investors in the developed world. This came at the expense of the working class in “rich” countries, who saw their jobs either offshored to low-income countries, or automated out of existence by domestic firms that needed to keep their costs low to survive.

The simple narrative of the elephant graph would suggest that first-world countries should either try to slow down the rate of automation or reverse course on globalization. Of these two options, reversing globalization seems more realistic and desirable for many. But is it?

In a thought-provoking piece, economist Stephen Gordon points out that trade is effectively just another form of technology. For example, to supply the nation’s grocery stores with bananas, Canada has basically two options. It can build elaborate, state-of-the-art greenhouses to cultivate bananas in a cold climate, or it can do what it does now: trade with countries where bananas already grow easily.

“As far as Canada is concerned, trade with rest of the world is an alternative technology for producing TVs and bananas,” Gordon writes.

Gordon’s discussion of the “technology” of globalization is incomplete in one important respect: Trade is often used by companies as a technology to avoid complying with environmental and child-labour rules, by offshoring production to countries with lax (or non-existent) laws and then exporting the finished product back to countries with acceptable levels of concern for human rights and the environment. Economists call this phenomenon regulatory arbitrage. This might suggest that governments should rip up free trade agreements to re-level the playing field.

But in his recent speech to Canada’s Parliament, U.S. President Barack Obama pointed out trade deals are the solution to, not the cause of, the regulatory arbitrage problem.

A theme I hear over and over again is the feeling of a loss of control

He acknowledged that other countries don’t always play by the same rules as the U.S. or Canada. “They impose unfair tariffs or they suppress workers’ rights or they maintain low environmental standards,” he said.

But he underlined that these unjust practices existed before free trade, and argued that a trade pact such as the proposed Trans-Pacific Partnership “affords us the opportunity to increase protections for workers and the environment and promote human rights, including strong prohibitions against human trafficking and child labour.”

If turning back the clock on globalization (and automation) isn’t the answer, then what is? The typical economist answer would be redistribution. Globalization has strengthened Canada’s economy as whole, it has created winners (namely the one per cent) and losers (blue-collar workers). In theory, because there has been a net total gain, the winners should be able to compensate the losers and make everyone better off.

But as political economist Will Davies explains, this is exactly what the U.K attempted, when governments under the Labour Party tried to spread wealth by strategically locating public sector jobs in economically depressed regions such as South Wales and England’s northeast. In Davies’s view, these attempts were at best ineffective and at worst counterproductive.

“This effectively created a shadow welfare state that was never publicly spoken of, and co-existed with a political culture which heaped scorn on dependency,” he writes. “It also failed to deliver what many Brexit voters perhaps crave the most: the dignity of being self-sufficient… in a communal, familial and fraternal sense.”

This, in my view, is the most important lesson for Ontario in Brexit. If we solely think of the issues around globalization and automation in terms of dollars and cents, our policies to address those issues will be lacking. I have spent the last few years talking to various groups across southwestern Ontario, and a theme I hear over and over again is the feeling of a loss of control. That what happens to our communities is more and more being determined by forces outside of our control and our success and failures being decided in boardrooms thousands of miles away. Given plant closures from Sterling Truck in St. Thomas to Honeywell in Amherstburg, the feeling is both understandable and justified.

In order to combat the very real feelings of alienation and a lack of control brought on by automation and globalization, policy makers at all three levels of government need to find ways for citizens to create and have a stake in the economic prosperity of their community. There is no magic bullet to allow this to happen. Rather it will require a suite of policies, all with a focus on local and individual decision making.

One policy Ontario should examine is the proposed California Local Economies Securities Act, which would make it easier for citizens to invest in their communities (and for local entrepreneurs to obtain access to capital). This allows local businesses, who are far less likely to leave their town or city for a better offer elsewhere, to prosper, while giving citizens an economic stake in the success of their community.

The challenge is less about finding policies that leave citizens having more control over their fate, and more about convincing policy makers to examine the problem of working-class stagnation not simply through an economic lens, but one of local autonomy.

Mike Moffatt is an assistant professor with the business economics and public policy group at Western University’s Ivey Business School.