Globalisation

There is story that when the Berlin Wall came down in 1989, the British diplomat Robert Cooper had rubber stamps made that read “OBE” (Overtaken By Events).   In my view, it feels that many of us could stamp ‘OBE’ on our foreheads, right now.  What’s happening? Where are we going?

When I was at university in the early 1970s, the great ideological battle was between Communism and Capitalism.  Later, with the fall of the Soviet Union between 1989 and 1991, capitalism and its hungry child, globalisation, was very much in the ascendency.  Global economic, political, and cultural integration – along with a freer movement of capital and labor across borders – appeared to be unstoppable.  Liberal democracy according to one scholar was “The End of History” – the end of major ideological conflicts. The liberal, capitalist West had won, and everyone would be better off.
Unfortunately, the promised material benefits for all never materialised; history shows us there are always winners and losers when economic and political systems undergo change.  China benefited greatly from increased capital mobility with a decrease in the poverty rate from 84 percent in 1981 to only 12 percent by 2012.  In contrast, in richer countries like the US, the working and middle classes saw their real income growth fall to zero or below (see previous blog post: Global disruption: What’s an elephant go to do with it?). 

In the last months of 2016, the ‘inevitable’ march toward global integration is very uncertain.  Brexit, the election of Donald Trump, and the rise of Marine Le Pen in France have shaken the complacency of global elites, cosmopolitans, and free-traders.  The developing ideological battle now is between the forces of globalisation and nationalism (or as The Economist puts it between Open and Closed).  No one knows how this is going to play out, but it is going to be turbulent, and, perhaps, even bloody. 

Currently, there is no real vision for how we can reconcile these forces.   With democracies answerable to their aggressively nationalistic electorates, and global companies answerable to their location-neutral shareholders, governmental and corporate interests could become more polarised.  Business strategies will have to be re-thought, and expectations for growth revised.  Country-by-country trade deals will need to be negotiated which is going to take time.  A slowing down in global business is pretty much assured.  A headline in the Financial Times (July 13, 2016) says it all – Global trade slowdown is worse than thought: Volume of goods traded stagnates as protectionism rises around the world.  The slowing of growth could further increase political and social frictions.

It is not just globalisation – or Americanisation as some see it – that is under attack, but the underlying belief system.  Neo-liberal (laissez-faire) capitalism with its faith in unfettered market forces to generate maximum prosperity has begun to pick away at the seams of the social fabric, especially in Europe.  A dominant force since the 1970s and 80s, neo-liberalism with its emphasis on free-trade, privatisation, deregulation, and free flows of capital and people is being challenged.  

What do people want protection from?

1. As mentioned above, neo-liberalism has enabled capital to move freely across borders to wherever labor has been cheapest.  Over the last several decades, that freedom has diminished the bargaining power of labor; it is easier for capital to move than it is for people.  With populist calls to exit trade agreements like NAFTA, TTIP, and the EU getting louder, protectionist policies are sure to follow.  Those policies will shift relative bargaining power from capital to labor.  Many people feel that their lives are beyond their control – or even their government’s control. Life-altering decisions are made in regional capitals like Brussels or in multinational board rooms, neither of which are seen to be particularly sympathetic to the working lives of ordinary people.  The simple solution: Economic protection.

2. What is uppermost in many people’s minds is the issue of immigration: relatively open borders allowing people to move and settle wherever the jobs are.  The perceived threat of immigration itself being compounded by refugee crises.  Even more powerful than pressure on employment opportunities is the perceived threat to national, cultural, ethnic and racial identities.  Many populist movements have relied heavily on idealised images of the past and the loss of ‘greatness’, as well as stronger demarcations between ‘Us’ and ‘Them’.  The simple solution: Border Protection, or, perhaps in the case of Russia, Border Expansion – we’ll have to wait and see on that one.

What about China?  China may be one of the few friends that globalisation has left.  The Chinese President, Xi Jinping at the 24th APEC Economic Leaders’ Meeting in Lima, Peru on November, 20, 2016, called on APEC economies to “stay committed to taking economic globalisation forward, increasing openness in the Asia-Pacific economy, breaking bottlenecks in regional connectivity and blazing new trails in reform and innovation.”
As for the West, globalisation is not getting a huge amount of love right now.  Time for some rethinking?   

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