Why globalisation isn't a win-win situation

The 'win-win' theory of globalisation is in real trouble. Tensions are building up between the US and China, as middle-class Americans see their incomes squeezed as low-cost workers on the other side of the world threaten their white collar jobs. Stephen Roach of Morgan Stanley warns that a slide into protectionism is a strong possibility, unless something can be done to resolve the problem. But what?

The ebb and flow of protectionism has always lurked in the continuum of world economic history. It is not hard to understand why. Like military security, nation-states take matters of economic security very seriously. When either appear threatened - for whatever the reason - countries feel compelled to defend themselves. But the analogy quickly breaks down.

While military success might be necessary to guarantee political freedom, cross-border economic battles are complicated by the co-dependencies of international trade and capital flows. One party's defensive action can easily be viewed as an offensive threat by another - triggering a sequence of responses and counter-responses that can lead to trade wars and protectionism. Such is the case today, with the mounting tensions of globalization pushing the world uncomfortably close to the slippery slope of protectionism. What can be done to arrest this dangerous trend?

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Contributor

Stephen Samuel Roach is an American economist. He serves as a senior fellow at Yale University’s Jackson Institute for Global Affairs and a senior lecturer at the Yale School of Management. He was formerly chairman of Morgan Stanley Asia, and chief economist at Morgan Stanley, the New York City-based investment bank. He is the author of several books including Accidental Conflict: America, China, and the Clash of False Narratives and Unbalanced: The Codependency of America and China.