Is the end of globalisation nigh?
Globalisation has been the cornerstone of global growth in the new millennium. Facilitated by privatisation and the deregulation of the labour market, it has, among many other things, encouraged the rapid expansion of the emerging markets and kept the price of goods down by allowing production to be outsourced to low-cost countries.
But is globalisation now a victim of its own success? The pace of economic and, to a degree, social transformation has seen politicians from left and right attack it. On the left, there is anger against capitalism and rising inequalities – faceless global corporations exploiting workers and avoiding tax. On the right, growing populism rails against the centralisation of power to the detriment of national interests.
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It is rare for world trade to decline outside of recessions: the recent decline is therefore unusual.
The challenge to globalisation gathered force in the aftermath of the global financial crisis and is being accelerated by the retreat of the US from global leadership. The rise of China, India and other populous emerging nations has seen the US’ share of global gross domestic product (GDP) fall. The current US administration does not wish to lead the world on issues such as climate change and, indeed, sees reduced benefits in maintaining global alliances. The recent move towards trade barriers and protectionism illustrates more clearly than anything its more insular attitude.
So with the US no longer willing to enforce global rules, nation states are starting to fall into regional arrangements. Asian countries, for example, are now developing closer trading ties in response to China’s own move to a more introspective economic model.
Any shift from globalisation to regionalisation will likely present increasing economic and political risks. Nation-states could gravitate to the largest influencer-country in their sphere and step back from the US-led global system. And if countries decide to redress perceived imbalances, or even settle old grievances with their neighbours, the potential for intra-regional conflicts will rise.
The global financial crisis began the movement away from unfettered capitalism and globalisation as economic ideals. The huge shift in production patterns associated with the entry of China into the modern economic system has left many ordinary people bewildered and frightened by the pace of change. Protectionism is on the increase and the growth in world trade has stalled.