This essay tries to answer the question, whether the current time can be described as an era of deglobalization.
The genesis of deglobalization can be traced from the advent of 1997 Asian financial crisis, the 2008 global financial crisis and the world economic order based on liberal, rule based multilateral principles which are resilient and durable. The changing dynamics of the world economic order has motivated deglobalization to take root. This creates a world without superpowers and ironically at the same time still remains to be multiplex and multipolar.
The genesis of deglobaization can be traced from the advent of 1997 Asian financial crisis, the 2008 global financial crisis and the world economic order based on liberal, rule based multilateral principles which are resilient and durable. The changing dynamics of the world economic order has motivated deglobalization to take root. This creates a world without superpowers and ironically at the same time still remains to be ‘multiplex’ and ‘multipolar’ (Wang Z. and Sun Z, 2020).
When globalization was at its peak ( 1815 – 2008), there was accelerated integration of production and markets at the international level. There was reduction and in some instances elimination of tariffs and quotas in international trade. Capital flows and direct investment amongst nations was on an all-time high. Transnational and multinational organizations made profits since they negotiated diplomatically against trade barriers. They invested in offshore manufacturing of some of their products and at the same time they outsourced some vital services. They enjoyed economies of scale since their products were offered at competitive prices in the wider international market ( Baylis et al, 2017; O’Brien and Williams, 2020).
Deglobalization which is akin to slowbalization ( a term coined by Bakas as cited by Wang Z. and Sun Z.) has been observed as motivating deeper links within the regional blocs and at the same time filling in the ‘vacuum’ of economic globalization which has been retreating for the last decade.
According to Baldwin (2016), the regional blocs will create production networks which will produce goods to be consumed within the regional markets. Baldwin notes that there will be ‘Factory Asia’,’ ‘Factory North America’ and ‘Factory Europe’. Even the value chains during the production process will be domesticated. This is a reality which has been noted in the past decade. This has disrupted global trade. This has now compelled most Transnational and Multinational companies to re-evaluate their operational strategies. Most of them are now re-thinking and re-strategizing where to place production plants and how they will locate their operations (Findlay and O’Rouke, 2008)
International organizations: The United Nations, the World Trade Organization, The International Monetary Fund, the G7 and G20 demonstrate more of disintegration than integration (Wade R., 2009).The five permanent members of the UN Security Council: USA, UK, France, Russia and China attempt to apply ‘neutrality’ and ‘impartiality’ on issues that affect the 195 member states ( Doyle M., 2011). The council has not been able to maintain peace and international security. Equal sovereignty among nations has not been witnessed. Promotion of economic progress and social development has not been witnessed especially in the global South. Above all, protection of human rights in the world exists in the scripted UN Charter but has not been actualized ( Morales A., 1988, Mingst et al 2015).
The Rohinjas are being persecuted in Myanmar. Afghanistan has been fighting an intricate civil war since the early 1980s, the Armenians have encountered persecution since the first World War. Somalia is embroiled in a longwinded civil war. The Rwandan genocide of 1994 was never resolved by the UN. It was resolved by a local initiative spearheaded by the Ugandan leadership. The UN has attempted preventive diplomacy however this has been deemed by the warring factions as being partial and unfair. ‘Localized’ diplomacy is what has been deemed as a viable panacea to resolve these challenges ( Morales A., 1988).
Donald Trump’s presidency (2016- 2020) advocated for deglobalization to ‘make America great again’ (Roach S., 2016). His governance policies were anti- liberal world order, against global trade and anti- multilateralism. He never subscribed to the tenets of international law which advocate for globalization ( Baylis et al, 2017), he trashed the Paris climate change accord(Harold J. 2017) and he out rightly violated the human rights ( erecting the wall along the Mexican border to curb migration into USA) Wang Z. and Sun Z., 2020). His political actions covert and overt demonstrated that America wish to recover its lost hegemony in all the major fronts ( political , economic and cultural ) and be the outstanding and unique nation as it was by the end of the Second World War ( Strange S., 1987;Saull R., 2012 ; Wang Z. and Sun Z., 2020 ; Gill S., and Law D., 1988).
The UK Brexit is also a facet of deglobalization since the main intention for Brexit was : UK wished to control their trade policies , manage its own borders and charge requisite tariffs and taxes on goods which come into Britain. Levy taxes as outlined by the British government on these goods. Above all, control and curb immigration into UK. Britain felt that they were given a ‘raw deal’ in the EU policies on trade and immigration much as it was a founder member of European Economic Union when it was established in the 1950’s and officially inaugurated in 1957. The EEC morphed into EU after signing the Maastricht Treaty on Nov. 1, 1993 ( Colantone and Stanig, 2016 ).
At the onset of globalization 1.0 (Harold J., 2017), trade has been the cornerstone of globalization. The two periods which mark globalization (1815 to 1914 was ‘dubbed’ the era of free trade. This was under British hegemony. Globalization 2.0 was from 1980 to 2008. This was also the neoliberal era was under the American hegemony. International trade was at the core of these two periods ( Baylis et al, 2017). In the recent times it has been noted by economists, politicians, academicians and policy makers in general (Polanyi K, 1957; Fukuyama F., 1992; Faiola A, 2008; Milanovic B., 2016) have noted that globalization has paused and the robust international trade is on its lowest ebb as the trade tide is slowly systematically taking a regional version and fashion. Barriers to international trade are being ‘erected’. The free movement of goods, services and people is no longer as robust as when globalization 2.0 was at its peak especially between 1980 and 2008.
Nation states and governments having embedded and applied the Westphalian order and principles( sovereignty, state authority and territoriality), pick and select whom to trade with, what sort of capital they welcome and how much autonomy they allow for transacting business abroad and within their territories ( Baylis et al., 2017; Gilpin R.,1987). This is largely ironical because Nations would wish to embrace the principles of international trade and investment and at the same time or in the same breath they would wish to insulate and protect volatile capital flows and surging imports.
Robert Wade (2009) observes that world trade is on a nose dive and it is sliding into the abyss at a much faster rate than was projected and anticipated. Wade gives an example of some 740 large commercial ships which carry goods lied idle at the Singapore habour. This was in mid-2009. To date most of these vessels are still not engaged. This is almost 10 years ago. Most nations have not created domestic demand for foreign products. Nations with large populations like China, India, Nigeria, Indonesia, European Union and even the African Union (which transacts international business on behalf of the African continent) could have been enticed to consume the foreign products to create global trade balance which would make some countries to encounter trade surplus. This illustration demonstrates that global imbalance will intensify and this aspect of deglobalization will make international trade recovery to be elusive and untenable.
The vicious trade wars have motivated deglobalization to take root. Apart from the US-China vicious trade war and competition which has been well documented by various writers ( Wang Z. and Sun Z, 2020; Strange S., 1987) the anglo-saxon ‘siblings’ USA and UK have been at loggerheads on the fossil fuel trade. The ‘battlefield ‘ was in Iran. There was a display of overt power on who should have an upper hand on oil trade. During the reign of Shah’s leadership the USA used the local political leadership in Iran to help Amazon Oil companies from America to take over the processing of crude oil from British Petroleum which belonged to the UK ( Gill s., and Law D., 1988). There was no consensus building and agreement among these two nations who share historical roots about their origins. They could not pool their oil processing resources for them to enjoy the economies of scale and share their profits from the international oil market.
The arms trade is a convoluted and quite an intricate affair. The nations which should control the proliferation of military infrastructure are the ones who would wish to maximize profits by selling arms to the third world countries. The funds used to purchase these arms are sometimes borrowed from the IMF. 20% of the Third world debt is on arms purchase. Between 1972 and 1982 USA and Russia made brisk business by selling arms to the developing nations in Africa and Latin America.
The funds used to purchase these arms were from IMF. Ironically IMF could not probe or advice since the selling nations are part of the G5 and by default they are the two nations which make key decisions on the IMF Executive board ( Susan G,1988, pp. 24- 27). This is proof that globalization which espouses equality, fairness and peaceful co-existence of the world citizens is purely empty rhetoric when some rich nations in the global north nations would wish to amass wealth and profit. This egocentric trade on arms displays that deglobalization is inexistence amongst the nations of the world.
The emerging market economies which would have been boosted by globalization are on the verge of financial crisis. These emerging economies have an estimated population of about 750 million people. This in economic terms is a large market with a good purchasing power no matter how minimal the purchases can be for the goods and services. These emerging markets are located in the following regions: Largely Eastern Europe ( Latvia, Estonia, Lithuania, Hungary, Bulgaria, Romania, Turkey and Ukraine , Armenia, Azerbaijan, Belarus, Georgia, Moldova ), South East Asia ( Pakistan, Indonesia, South Korea), Latin America ( Ecuador, Argentina and Venezuela . The African continent has not been classified as an emerging market yet it has a sizeable population which can also claim a stake as an emerging market in its own right. It has been noted that monetary policies and financial regulations by renowned economists and planners will not sort out global economic imbalances. Regionalization and localization tweaked with some creativity will provide impetus and positive gain to the emerging market economies (Wade R., 2009; Polanyi, 1957).
Capital investment is what produces the goods and services which end up being traded locally, regionally or internationally. Capital is hard and challenging to police or to tax. It is this fluid nature of capital which attests that deglobalization is real and makes globalization not to be 100% feasible (Milanovic B., 2016, p.218). The investors with capital always call shots and they not are not easily ‘tamed’. They would always wish to move their capital where they are convinced that they will make profits. This capital mobility has made it difficult for nation states to stabilize exchange rates and pursue focused monetary and fiscal policies ( Pauly L.W., 2000).
National governments had to give the Central Banks a laissez-faire policy to entice the investors with high interest rates to ‘entice’ them not to move the funds to other lucrative nations where their capital would fetch them high interest . This retention helps the Nations to boost their investment portfolio . In an environment where there is extreme capital flight because of poor retention policies and the nation chooses to control its own interest rates basing it purely on domestic economy the exchange rate fluctuates and this hardly attracts FDI. ( O’Brien and William, 2020).
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