Globalisation can retreat as well as advance

Still from Peter Jackson's They Shall Not Grow Old © BBC
Just another blip on the road to a global economy

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).

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.