When Larry Summers, one of Bill Clinton’s leading economic aides during the roaring 1990’s and a big cheerleader for globalization, is starting to sound like Pat Buchanan or Samuel Huntington, one needs to pay attention. In a recent piece in the FT he warns that:
…growth in the global economy encourages the development of stateless elites whose allegiance is to global economic success and their own prosperity rather than the interests of the nation where they are headquartered. As one prominent chief executive put it in Davos this year: “We will be fine however America does but I hope for its sake that it will cut taxes and reduce regulation and put more pressure on young people to study in the ways that are necessary for it to be able to keep competing successfully.”
But Summers is worried that in a “world where Americans can legitimately doubt whether the success of the global economy is good for them, it will be increasingly difficult to mobilise support for economic internationalism.”
Since the end of the second world war, American economic policy has supported an integrated global economy, stimulating development in poor countries, particularly in Asia, at unprecedented rates. Yet America’s commitment to internationalist economic policy is ever more in doubt. Even before the significant increases in unemployment likely in the months ahead, the indicators are all disturbing. Presidential candidates attack the North American Free Trade Agreement. The Colombian free trade agreement languishes. There are increasing attacks on foreign investment in the US, not to mention growing support for restrictive immigration policies.
Similar concerns about the way the “rise of nationalism” frays global economic ties, have been raised by Bob Davis in another anti-business daily, the Wall Street Journal on Monday:
During the long march toward globalization, international borders and trade barriers came down. Communism fell. Protectionist walls in Latin America and elsewhere were dismantled. Governments — long prone to meddling in trade — took a back seat to broader market forces.In a globalization manifesto, New York Times columnist Thomas Friedman declared that the Internet and other planet-spanning technologies were erasing national boundaries. The world, he said in a 2005 best seller, was flat.
No longer. The global economy appears to be entering an epoch in which governments are reasserting their role in the lives of individuals and businesses. Once again, barriers are rising. Call it the new nationalism.
“The era of easy globalization is certainly over,” says Pulitzer Prize-winning author Daniel Yergin, whose 1998 book, “The Commanding Heights,” detailed the triumph of markets over nations, starting with British deregulation under Margaret Thatcher. “The power of the state is reasserting itself.”
Just a decade ago, Asia, Latin America and Russia were on financial life support from the International Monetary Fund and World Bank. The U.S. was planning yet another round of global trade negotiations. The European Union was writing a constitution to shift power to Brussels from member nations.
Now borrowers shun the IMF and World Bank. Trade talks are shelved. Barriers to foreign investment are rising around the world. State-owned companies are expanding, particularly in oil and gas. Public support of immigration restrictions is growing in countries from the U.S. to India.
The rising influence of governments can be seen in massive state-funded investment pools, many backed by countries that were reeling financially a decade ago. Sovereign wealth funds from Asia and the Middle East are now propping up wobbly financial institutions in the U.S. and Europe, and may hunt next for real-estate bargains. The growth of state power may also serve to make dealing with global climate change — the most borderless of all issues — even more difficult.
Davis is basically bidding farewell to the era of globalization and points to rising pressure from the New Nationalism aimed at reversing many of the economic liberalization changes of the Reagan-Thatcher years:
The rising strength of national governments expresses itself in different ways. For rich countries, it generally means higher taxes and more regulation. In the 30 mostly rich countries of the Organization for Economic Cooperation and Development, tax revenue as a percentage of the local economy was higher in 2005, the latest year surveyed, than a decade earlier. That’s because of the rising cost to governments of health care and social security.In the U.S., the severity and scope of the current financial crisis has eroded the case for letting markets operate with ever-lower government guard rails. The current question is not whether regulation will increase, but by how much. All three presidential candidates say they would pass tougher financial-market regulation and would also boost government programs to retrain workers battered by the global economy.
In rich and poor countries alike, immigration has become a powerful political issue, as improved transportation makes it easier for people to move across borders and compete for jobs with locals. There are backlashes against Burmese in India, Haitians throughout the Caribbean, Bolivians in Argentina and Zimbabweans in South Africa. In 44 of 47 countries polled by Pew Research Center last fall, majorities supported further restrictions on immigration.
Reading these and other commentaries, tt seems to me that much of what has been written in TAC in recent years, on foreign policy and on globalization is gradually becoming the conventional wisdom.