by Umar Farooq
Are we going to see an end to the globalization phenomenon or will it persist for the next few years? Credit Suisse Research Institute has tried to answer this question in their report “Getting over Globalization”. The year 2017 seems to open a new era in the history of globalization. The long phase of globalization driven largely by western multinationals, markets and laws, combined with the startling rise in wealth in emerging economies seem to have come to the end.
Much to the desperation of globalists’, Trump won the elections and he seems to be keep his anti-globalist promises he made during his campaign. Mr Trump clearly rejects the view of a global economy: “We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs. Protection will lead to great prosperity and strength.” Moreover: “We will follow two simple rules: buy American and hire American.”
Taking into account flows of trade, people, finance and media, the Credit Suisse Research Institute’s “Getting over Globalization” report analyzes three potential routes:
- Globalization continues along its well-trodden path;
- The world becomes multipolar;
- We witness the end of globalization.
The Credit Suisse Research Institute is Credit Suisse’s in-house think tank. The Institute was established in the aftermath of the 2008 financial crisis with the objective to study long-term economic developments, which have – or promise to have – a global impact within and beyond the financial services.
Globalization seems to be running out of steam: economic growth is slow, protectionism is spreading, and new regional powers are rising, undermining the existence of the unipolar world. Two events of the past year which happened against the general opinion – Brexit and the election of Donald Trump – have taught us to expect the unexpected.
“The multipolarity scenario would mean the end of the unipolar world and the rise of regions: parallel economy centers would expand across the globe. What stimulated the birth of multipolarity was globalization itself, as one of its undoubtedly positive side effects has been a better distribution of wealth. Alongwith this, the end of globalization is not expected worldwide and would come as a shock. This third scenario painted by the Credit Suisse Research Institute is the darkest and most negative. It is fueled by a slowdown in economic growth and trade, the possibility of a macro shock (e.g. indebtedness, inequality, immigration), or a rise in protectionism, to name just a few factors. The results could be very damaging, and reversing them could take a lot of time and effort. According to the Institute’s researchers, we could expect the domination of “national champions” and a consolidation of power among some of them, fragmentation of global financial markets, currency wars, or even open military conflicts.” cnbc
In short, it might be better to focus on creating a multipolar system that works well. The transition to a multipolar world, a scenario that appears preferable to an “end of globalization” outcome, seems to be underway already. Multipolarity, especially in its juvenile phase, is likely to be prone to policy errors, rivalries and geopolitical tensions. It might be worthwhile to attempt to establish a set of rules and appropriate institutions now, in order to frame multipolar stability.