Globalization is being “Trumped” by Nationalism
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Globalization has been a fact almost from the dawn of history, several decades ago it emerged in its current expanded “household” form.
The Big Q: How long will it continue in its current form?
A report from the Credit Suisse Research Institute (CSRI) in Y 2015 considered 3 potential futures for the increasingly interconnected world.
The most dramatic outcome is Key reversal of current trends, with globalization Trumped by nationalism.
This has happened before.
It was not that long after the Industrial Revolution ushered in a long wave of globalization in which European exports surged and more than 60-M Europeans migrated to North America that the US and Europe began implementing restrictive tariffs on trade, and nationalism took hold. Then World War I ended 44 years of globalization.
Will it happen again?
The CSRI compiled a scorecard of the most serious threats to globalization. Slowing economic growth, augmented by rising levels of central government debt, income inequality, and high levels of immigration, are important stressors. Others include trade protectionism, an increase in military spending, and a move away from democratic governance.
Some of these risks are rising.
The prevalence of non-tariff barriers to trade, such as import quotas, subsidies, and sanctions, has been increasing since Y 2005, while rising wealth inequality and high debt levels can be found in the developing and developed world alike.
Democracy is nonexistent in China and much of the Middle East, while so-called managed democracies, which are authoritarian governments in all but name, are taking hold in some African countries and Russia.
Another alternative: Globalization continues to expand much as it has since the 1990’s, with the United States remaining as the world’s lone financial and military superpower.
Credit Suisse research shows that the US stock market influences international markets more than activity on foreign exchanges influences the DJIA and the S&P 500, and the USD is the world’s most important reserve currency, with 62% of known reserves held in USDs.
Finally, US military spending is larger than that of the next 9 highest-spending countries combined. In this scenario, the CSRI says we can expect to see more international trade, more powerful multinational and mostly Western corporations, the continued spread of democracy and the Internet economy, and more open immigration policies, though that is being questioned in a major way in both the EU and US today.
CSRI, says the most likely outcome, is neither a relatively unchecked expansion of globalization nor its collapse.
Instead, the CSRI believes that the world is becoming more multipolar and more regionally focused. Regional trade agreements such as the Trans-Pacific Partnership (TTP) and the Transatlantic Trade and Investment Partnership (TTIP) are on the table but now are in question, as global trade talks have largely stalled.
China established the Asia Infrastructure Investment Bank (AIIB) in Y 2014 as a direct challenge to the World Bank’s (WB) hegemony, and the fact that Chinese e-Commerce firm Alibaba (NYSE: ABAB) successfully completed the largest-ever initial public offering in January 2015 made it clear that Western corporations will not dominate forever.
Even the European Central Bank’s (ECB) interventions to stabilize a debt crisis that threatened global financial markets show that the balance of global economic and financial power is becoming more spread out.
Notably, they UK’s citizens voted to leave the EU and go it alone, a step that took the world by surprise.
The CSRI expects to see 3 major centers of world power in Asia, Europe, and the US, more regional institutions like the Asian Infrastructure Investment Bank, and immigration restrictions that lead to an increase in regional migration.
The Research Institute also foresees more barriers to trade, and as a result, more companies focused on regional and domestic markets than global ones.
So, while the nations of the world are not closing their doors to one another completely, they increasingly prefer letting only close friends and neighbors in.
By: Ashley Kindergan
Paul Ebeling, Editor