Globalisation isn't over, but we need to ditch the fantasies it ushered in
WED, MAR 16, 2022
LEON HADAR
INTELLECTUALS
in the West love debating Big Think issues in terms of wars of ideas of
thesis and antithesis that signify a la Hegelian philosophy - the end
of one historical epoch and the birth of a new one, the "fall" of this
power and the "rise" of that alternative force that would shape the
Zeitgeist.
In
the pre-Internet era, those debates were confined to university
seminars and scholarly magazines and recapped in jargon-filled books
issued by academic publishing houses.
In
the aftermath of the Cold War, these Big Think debates, of trying to
make sense of what had happened, produced such high-brow works like
Francis Fukuyama's "The End of History" and Samuel Huntington's "Clash
of Civilizations", while the entry of the former Soviet bloc, China and
India into the global economy, and the growing trade and investment ties
between national economies ushered a new intellectual consensus - that
we were in the Age of Globalisation.
The
idea of globalisation or "neo-liberalism" assumed that the march of
history would lead to the removal of official barriers between states
and market forces. Governments would not determine where products,
services, capital, knowledge and even people would flow. Instead, under a
new trading system, nations would focus on the industries and services
they do best, with the World Trade Organization (WTO) serving as a
referee during the occasional dispute.
For
30 years, political leaders and business executives declared that the
age dominated by the power of governments, ideology and spheres of
influence was over, a vision that was celebrated during the annual
meetings of the World Economic Forum (WEF) at Davos, Switzerland, and
memorialised by learned tomes with titles like "The End of the
Nation-State" or "The Borderless World".
There
is no doubt that globalisation as a concept has been triumphant in
Western capitals, embraced by its political and intellectual elites. But
in recent years, that vision has been under attack, by growing
political pressure on Western governments as well as by emerging
geopolitical rivalries.
Western
publics seemed to be disillusioned with globalisation and the benefits
of trade with emerging economies like China that seemed to come at the
expense of the working middle class. That has given rise to economic
nationalism and calls for placing restrictions on trade and immigration
that were given a boost after the 2008 global financial crisis, and
highlighted by the election of President Donald ("America First") Trump
and to Brexit, a major blow to the European Union (EU) as a symbol of
globalisation.
At
the same time, notwithstanding the hopes of the Davos Man, economic
integration did not mark the end of nationalism and the rivalries
between great powers. With rising geopolitical tensions between China
and the US, President Trump launched a trade war against Beijing which
ignited counter-measures, raising the prospects of the two economies
"de-coupling".
The
Covid-19 pandemic and the ensuing pressures on global supply chains may
have accelerated the anti-globalisation trend and strengthened the
hands of industrial policy advocates in the United States by
demonstrating its dependence on foreign-made products.
And
now the war in Ukraine has provided a process that some refer to as
"de-globalisation" with enormous momentum. Following the economic
sanctions imposed by the West on Russia, including scaling back
purchases of Russian oil, gas and coal, the ousting of Russian banks
from international financial networks, and the bipartisan call in the US
Congress to suspend Russia's membership from the WTO, we are now being
asked to embrace the new intellectual fad: That the Era of Globalisation
is Over.
Hence
the various nightmare scenarios that predict a return to the Cold War
era when two blocs - one led by the US and the other by Russia -
dominated the global economy, with China totally isolated, as the old
nation-state and geopolitical forces set the rules of international
trade and investment, and in the process restricting them.
In
retrospect, we may have gotten all the globalisation "thing" wrong. The
pressure by the US and its allies to liberalise the flows of
international trade and investment as a way to promote stability and
peace goes back to the end of World War II and, in fact, was first
advocated by President Woodrow Wilson in the aftermath of the First
World War.
Indeed,
the post-1945 liberal international economic system, operating under
institutions like the World Bank, the International Monetary Fund (IMF)
and the General Agreement on Tariffs and Trade (GATT), which excluded
most members of the communist bloc, including China, was based on the
basic assumptions as those that guided what we refer to as
"globalisation". Liberalising international trade and investment helps
nations to create more wealth and prosper.
But
then American and Western leaders in the post-WWII era also recognised
that the international economic system was based on international
political foundations, on the geo-strategic power of a hegemonic US and
on public support at home for major military and economic expenditures.
From
that perspective, the US was willing to back the industrial policies
that ran contrary to liberal economic dogma that were pursued by Japan
and Germany, and later by South Korea and Taiwan, while adopting similar
policies at home to protect and advance American industries.
Nationalism remained alive and well as the international economy was
liberalised.
Similarly,
we need to recall that the European Economic Community (EEC) from which
the EU evolved was in part a geo-strategic project under which France
and Germany were adamant at preserving peace in Europe after two bloody
world wars.
To
put it in simple terms, the post-Cold War globalisation trend was in
essence an attempt to spread the benefits of free trade and investment
to China, India, Russia and other emerging economies.
The
problem was that unlike their post-WWII predecessors, the post-Cold War
political and intellectual elites failed to factor into their decisions
basic political concerns and national interest considerations, with
some of them assuming that the magic of free markets and a liberal trade
system would override them and create a brave new world.
In
fact, the post-Cold War globalisation process did dramatically raise
China, India and other countries out of poverty and help foster new
middle classes in those countries, while growing the standard of living
in Eastern Europe and Russia, not to mention the opening of new markets
for businesses and making a variety of consumer goods more affordable.
But
contrary to what proved to be wishful thinking by some Western elites,
decision-makers in China, India or Russia regarded opening their markets
to foreign trade and investment not as a way to liberalise their
politics, strengthen individual rights or promote cosmopolitan values.
In
fact, globalisation was supposed to increase the national wealth of
those countries, allow them to adopt new technologies, and as a result
help them build their militaries and increase their geo-strategic
status.
That
China's membership in the WTO would help transform it into a
liberal-democracy and a peace-loving nation was a Western fantasy as was
the notion that a Russia integrated into the global economy would give
up its drive for regional hegemony.
If
anything, the more economically prosperous India, Poland, Hungary and
Turkey as well as China have become more nationally assertive and
certainly not more liberal. And the world, contrary to earlier
neo-liberal fantasies, has not become more united behind free trade and
increasing global democracy.
Indeed,
as the growing geopolitical tensions with both China and Russia
demonstrate, considerations of national interests continue to drive the
policies of governments, and in particular, great powers.
And
in a paradoxical way, the success of globalisation allows the US to
employ its geo-economic power, in the form of economic sanctions, to
geo-strategically restrain Russia and to some extent, China.
Yet,
it is doubtful that Russia, China or the West are willing to pay the
huge costs of bringing globalisation to a halt in the form of
Chinese-America decoupling or returning to the Cold War system.
After
all, globalisation has proved beneficial to everyone concerned, and
what is required now is to restructure parts of the existing system,
such as the WTO; ditch the fantasies of "one world" and adjust it to the
new political realities at home and abroad. In short, not to throw the
baby out with the bathwater.