A Revolt against Globalization? How Political Economies Change

Globalization has been one of the most significant economic and political trends of the past few decades. The increasing integration of economies and societies around the world has been driven by advances in technology, communication, and transportation. However, in recent years there has been a backlash against globalization in many countries, with a rise in nationalist and protectionist sentiments. This article will examine the key drivers of globalization, analyze the root causes behind the revolt against globalization, and assess the potential impacts on political economies.

Drivers of Globalization

There are several key factors that have enabled the process of globalization over the past century:

  • Technology – Advances in information technology, transportation, and communication have dramatically reduced the costs of transporting goods, services, capital, people and ideas across borders. The internet has been especially influential in connecting the world.
  • Trade Policy Liberalization – Many countries have moved away from protectionist policies towards free trade agreements, reduced tariffs and non-tariff barriers to trade. International institutions like the World Trade Organization have promoted trade liberalization.
  • Multinational Corporations – Companies that operate across multiple countries have been major drivers of global business. They take advantage of their international scale and resources to maximize efficiency and profits.
  • Financial Market Integration – Financial markets have become increasingly interconnected worldwide, enabled by policy reforms and new technologies. This facilitates cross-border capital flows.
  • Transportation Cost Declines – Especially in air and ocean shipping, transportation costs have fallen significantly, making international trade cheaper and more accessible.
  • Transnational Activism – Individuals and civil society organizations have increasingly coordinated activism across borders, enabled by communication technology. Examples include human rights campaigns and environmental activism.

These factors enabled an accelerated phase of globalization from the 1980s to 2007, characterized by the freer flow of goods, services, capital, people and ideas worldwide. Global foreign direct investment grew from $200 billion in 1990 to $1.9 trillion in 2007. The value of international trade expanded from around 25% of global GDP in 1970 to over 60% by 2008. This interconnectedness brought many benefits but also disruption and costs.

Causes of the Backlash Against Globalization

While globalization brought overall economic growth, the benefits have not been evenly distributed within and between countries. Significant economic, social and political dislocations provoked a backlash, including:

Job Losses and Wage Pressures – Import competition, offshoring production and technological change disrupted manufacturing and other sectors in developed countries. This contributed to job losses, wage stagnation and rising inequality, provoking anti-globalization views.

Financial Crises – Increased financial flows transmitted dislocations across borders, most prominently in the 1997 Asian financial crisis and the 2008 global financial crisis, leading governments to restrict capital flows.

Social and Cultural Disruption – Rapid influxes of goods, services, capital, people and ideas creates economic and social uncertainty and cultural displacement. This causes anxiety andidentity issues.

Environmental Degradation – Globalized production shifts energy and pollution intensive industries to developing countries with less regulation. International agreements have failed to fully address these externalities.

Reduced Policy Autonomy – Integration constrains the ability of national governments to independently pursue policy goals, leading to discontent with multilateral institutions and regional blocs.

Rise of Populism – Politicians and movements leveraged anti-elite and nationalist sentiments arising from these grievances. Populist leaders blamed globalization and governing elites for economic woes.

The global financial crisis of 2008 was an inflection point, spreading economic pain worldwide and undermining confidence in international financial institutions. While the backlash predated the crisis, it gathered momentum in its aftermath especially in Western democracies.

Impacts on Political Economies

The revolt against globalization has impacted political dynamics and government policies in many countries:

United States

  • The Trump administration pulled out of the Trans-Pacific Partnership (TPP) agreement in 2017 and initiated renegotiations of NAFTA and the US-Korea Free Trade Agreement. It also imposed tariffs on a range of imports, leading to trade disputes with China and others.
  • Restrictions were proposed on H1-B visas for high-skilled foreign workers along with reductions in the US refugee intake. The US withdrew from the UN Global Compact on Migration in 2017.
  • Trump questioned NATO commitments and international alliance relationships more broadly. A more unilateralist and nationalist stance was evident on security, economic and environmental issues.

United Kingdom

  • The 2016 Brexit referendum saw a backlash against the European Union and concerns over immigration leading to the UK leaving the regional bloc.
  • Following Brexit, the UK adopted a more restrictive immigration policy regime, ending free movement of EU nationals. It also aims to pursue independent trade agreements outside the EU common external tariff.
  • However, the UK has maintained a strong commitment to NATO amid the geopolitical turmoil. It is also advancing bilateral and minilateral trade negotiations to demonstrate an ability to thrive post-Brexit.

France

  • The 2017 presidential election saw the rise of nationalist politician Marine Le Pen and her National Rally party on an anti-EU and anti-immigration platform. However, centrist Emmanuel Macron prevailed over Le Pen.
  • As president, Macron implemented some pro-business economic reforms but largely maintained France’s social model. He asserts French interests within a reformed EU and multilateral frameworks.
  • France maintains commitments to EU unity, NATO security guarantees and existing alliances like the UN and WTO, constraining any radical policy shifts.

Germany

  • The rise of far-right party Alternative for Germany (AfD) was partly fuelled by anti-immigration sentiment, winning it seats in parliament. But mainstream parties held an internationalist stance.
  • As a leading EU member, Germany supported efforts to strengthen the bloc amid rising Euroscepticism. It backed sanctions on Russia despite economic costs.
  • Strong business community support for open markets constrained Germany’s trade policy responses. But Merkel’s government did back WTO reforms and liberalizing EU-Japan and EU-Canada deals.

China

  • President Xi asserted China’s interests more forcefully amid perceived US relative decline. However, China remains highly integrated in the global economy with a stake in stability.
  • China expedited trade negotiations with Asia-Pacific and European nations to cement ties as US withdrew from deals. It is also advancing the Belt and Road initiative and overseas infrastructure investment.
  • Nonetheless, China faces economic challenges and slowing growth. Its policymakers are torn between nationalist pressures and business community preferences for further reform.

India

  • Under Prime Minister Modi, Hindu nationalism has been more influential alongside distrust of global elites. But pragmatism largely prevails.
  • India integrates further into rules-based trading system via deals with ASEAN, Japan, Australia. But with higher tariffs than major trading peers.
  • Strong services sector and diaspora networks underpin continued international integration. Movement towards manufacturing self-sufficiency in flagship ‘Make in India’ initiative.

Russia

  • Strident nationalism under Putin’s leadership alongside geopolitical assertiveness, invading Ukraine. But Russia remains significantly globalized economically.
  • Moscow harbors deep suspicions of Western institutions. But joins Chinese-led SCO bloc and EEU to offset isolation. Seeks to pivot economic ties eastwards.
  • Economy still dependent on energy exports to Europe. Yet, Russia reluctant to fully disengage given oligarchic interests and reliance on imported technology.

Prospects Ahead

The revolt against globalization faces constraints from economic realities and entrenched international systems. However, the grievances that fuelled the backlash remain largely unaddressed. Several future scenarios are plausible:

Incremental Reform Scenario

Globalization remains expansive but is modified at the margin to be more inclusive – the most likely near-term outcome with minimal disruption. Potential incremental steps include:

  • Expanding social safety nets, retraining and progressive redistribution policies in developed states to spread gains more equally.
  • International cooperation to strengthen intellectual property protections, curb tax evasion, harmonize regulatory standards across jurisdictions.
  • Labor, environmental and consumer protections added to trade pacts; greater emphasis on transition assistance programs.
  • Reforms to the WTO, IMF, World Bank and other institutions to give emerging economies fuller voice and participation.

Status Quo Scenario

Intensifying zero-sum nationalism and polarization prevent substantial reforms. The underlying socioeconomic grievances grow while the economic benefits wane. However, major powers have incentives to avoid implosion of current trading system. Risk of fragmented economic blocs.

Retrenchment Scenario

Widespread economic crisis or conflict triggers disorderly unraveling of globalization. Reversion towards autarky with attempts to re-shore production via subsidies and national industrial policies. Rise of explicit barriers to trade, capital flows and immigration. Hardening ‘spheres of influence’ mindset in security domain.

Reframing Scenario

Elites recast globalization in nationalist terms to build societal support. Greater policy space for industrial development in the global south. Focus shifts from neoliberal market integration to issues like climate change, pandemic preparedness, terrorism and trade in advanced technologies.

The most likely trajectory is incremental and uneven reform efforts by major powers culminating in a partially reshaped world order. However, absent substantial realignment towards addressing underlying economic and social costs, globalization will remain contested and conflictual. Both radical retrenchment and deepened integration face considerable hurdles. Hence a delicate balance amidst competing forces may persist in the long run.

Conclusion

Globalization has been deeply disruptive economically, socially and politically within and between countries. This has provoked a multi-dimensional backlash and rise of nationalist populism across much of the world. However, due to the entrenched technological and economic drivers, retrenchment towards closed autarky appears very difficult. Similarly,CLS absent pervasive reform, substantially deepened global integration is politically untenable.

Navigating the tensions around globalization will require pragmatic adjustment by policymakers to spread gains more inclusively. There is also a need for vigilant international cooperation to tackle shared threats like climate change. Vision and leadership will be essential to reframe globalization so it aligns with – rather than incites backlash from – nationalist sentiments. This uneasy balance between managing interdependence and defending national interests may underpin the emerging world order.

References

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Fukuyama, F. (2018). Identity: The Demand for Dignity and the Politics of Resentment. Farrar, Straus and Giroux.

Krugman, P. (2019). Arguing With Zombies: Economics, Politics, and the Fight for a Better Future. WW Norton & Company.

Stiglitz, J. E. (2019). People, Power and Profits: Progressive Capitalism for an Age of Discontent. Allen Lane.

Irwin, D. A. (2019). Free Trade under Fire. Princeton University Press.

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Baldwin, R., & Evenett, S. (2020). COVID-19 and Trade Policy: Why Turning Inward Won’t Work. CEPR Press.

SAKHRI Mohamed
SAKHRI Mohamed

I hold a bachelor's degree in political science and international relations as well as a Master's degree in international security studies, alongside a passion for web development. During my studies, I gained a strong understanding of key political concepts, theories in international relations, security and strategic studies, as well as the tools and research methods used in these fields.

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