Globalisation can retreat as well as advance

An awful lot of people think globalisation can only go in one direction – forwards. They're wrong, says Merryn Somerset Webb.

922_MW_P05_Merryn

Just another blip on the road to a global economy
(Image credit: WARNING: Use of this copyright image is subject to the terms of use of BBC Pictures' Digital Picture Service (BBC Pictures) as set out at www.bbcpictures.co.uk. In particular, this image may)

Has globalisation gone too far? That was the question asked at a recent Bloomberg debate in Singapore. The very idea seemed to upset the faithful. The first speaker, Parag Khanna of FutureMap, said he felt he must not just defeat the motion, but "destroy its very premise". Yikes. Khanna's key point was simple. It isn't possible for globalisation to have gone too far, he said, because whatever anyone wants or says, it can only advance.

All of history has been about this about more people being openly connected to each other in more ways. There might have been a blip or two along the way (World War I, the plague, that kind of thing) but with the entry of China to world markets, and the march of the technological and financial integration that is making the world economy one entity, globalisation is "just getting warmed up". You shouldn't try and hold it back (it makes us all so much richer). But try to interrupt its inevitability (because of what he sees as a backlash against a political failure to manage it to perfection) and you guarantee failure.

The audience agreed (all of them but one, anyway). I am not sure I do. Globalisation might be good in aggregate; but it isn't a given that it is a good for everyone and it certainly isn't a given that it can't be reversed for a good few decades (think the end of the Roman Empire for starters).

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

The key issue, said Diana Choyleva of Enodo Economics, is that the world has been running two different types of globalisation. When China entered the World Trade Organisation in 2001, the assumption was that it would become more like the rest of us the western world would export its values into a China that was becoming gradually more free. That hasn't happened. The last 17 years have instead seen two versions of globalisation; the US has been running an outward-looking market economy; the Chinese a mercantilist command economy. These clash as the financial crisis (a result in part of the low interest rates caused by China's export of cheap goods and surplus savings) and today's trade wars show.

They also distribute the spoils unevenly. You can argue that globalisation has pulled millions out of poverty. But that, notes Choyleva, is meaningless within the (rich) nations where inequality has risen, wages stagnated, and too many have been left behind. People see things through "the lens of their own nationality", however much international bodies would rather they did not. The low-to-middle earners getting irritated within nations far outnumber the high earners who are not. They also have the vote and they tend to use it.

These things matter to politics and to economics. Somewhere in the midst of his evangelising, Khanna said you should instantly fire any fund manager who doesn't believe in globalisation. He is wrong. You should instantly fire any fund manager who is fool enough to believe it can only advance.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.