Writing a speech? Stuck for an opening line? Well, if you work in business or politics, you could always go for something like ‘we live in an increasingly global world.’ This is the sort of uncontroversial, but important-sounding, statement that people expect from uncontroversial, but important-sounding, speeches.
Of course, it isn’t the most original of thoughts and, what’s worse, it isn’t even true – not these days. In an eye-opening piece for the Boston Globe, Joshua Kurlantzick lays out the facts:
“Global trade growth has slowed dramatically from its normal pace. Banks’ investments and lending outside their borders have plummeted, and investors have pulled out of stock markets across the developing world. Cross-border migration is down.”
The current overall trend towards deglobalisation (unlike Mr Kurlantzick, I will not write of ‘deglobalization’) can be dated back to the financial crisis of 2008:
“…banks in most developed countries drastically slashed their lending to companies in other nations… McKinsey & Co. has estimated that cross-border capital flows are down 60 percent from before 2008…
“1983, before the end of the Cold War and the computerization of banking, said Kristin Forbes, a leading economist and member of the Bank of England’s external monetary policy committee, in a major speech in November. It is time, she said, to stop talking about globalization and to rethink the ‘assumption that global financial integration is an unstoppable trend….This deglobalization of banking will have widespread repercussions.’”
These repercussions include the growth of protectionism:
“The Center for Economic Policy Research, a leading Britain-based economic think tank, recently published a comprehensive analysis of trade-related measures implemented between 2009 and 2013. It found that in 2013, the wealthiest nations passed 23 percent more protectionist measures than they had in 2009.”
Deglobalisation is also restricting the flow of capital to those countries that need it most:
“Credit Suisse estimates that European banks’ return to lending in their home markets will take away $1 trillion in funding from emerging markets in the next two decades.”
Kurlantzick argues that deglobisation is as much a political phenomenon as an economic one. Countries that were once viewed as moving towards to the West – like Russia and Turkey – have explicitly rejected our liberal norms. Meanwhile, within the West, politics has been disrupted by the rise of parties that are hostile to some or all of the key aspects of globalisation.
The author calls on our political leaders to take on the anti-globalisers and make the case for the free flow of money, goods, people and ideas across borders. He’s right, but only up to a point. We won’t save what’s good about globalisation by overlooking what’s bad about it.
The current deglobalisation trend is, in part, a corrective to past mistakes. For instance, one aspect of this phenomenon is the insourcing (or re-shoring) of manufacturing jobs previously outsourced (or off-shored) to countries like China. In many cases, what seemed like a great way of cutting overheads proved to be a costly mistake. Despite the internet and cheap air travel, it’s not always possible to globalise things like culture, community and face-to-face communication.
Indeed, as we discovered during the credit crunch and the Eurozone crisis, doing away with real relationships, and the particularity of place, can have disastrous consequences.
To summarise: globalisation is great – as long as it doesn’t go too far.