An alternative perspective

25 November 2016

The Globalisation Backlash

Ian Bremmer, President, Eurasia Group

Globalisation has become a hotly debated subject in recent years. No longer widely accepted either as a force for good or an inevitability, the digital-age movement of people, money, ideas, information, goods and services has become a lightning-rod political issue in dozens of countries around the world. There is no question that large numbers of people have benefited from its effects. It has lifted more than one billion people from poverty around the world and created the foundation for the world’s first global middle class. Huge numbers of people in every region have moved beyond a survival existence to enjoy unprecedented education and work opportunities – and social safety net protections – for the first time.

But globalisation’s other great beneficiary is the wealthiest one per cent of those who live in advanced industrial democracies. The communications revolution of the past two decades has hastened the transition from manufacturing- to services-based economies, favouring highly educated, technologically sophisticated workers. 
In many Western countries, the gap between rich and poor has grown considerably, fuelling public anger at perceived injustices and pushing opportunistic politicians towards new forms of firebrand populism. The result is a surge of both country-first nationalist rhetoric and rising demand for protectionism.

The West and Protest

In Europe, nationalist and anti-establishment political parties of both the left and right have transformed the political lives of country after country. France’s Front National, Italy’s Five Star Movement, Germany’s Alternative für Deutschland, Spain’s Podemos, the Sweden Democrat Party, the Danish People’s Party, The Finns Party, Greece’s Syriza, Hungary’s Jobbik, and others have challenged Europe’s commitment to the four freedoms of people, services, goods and capital, the European project’s explicit embrace of globalisation. Financial weakness in Greece, Spain, Italy and Portugal continues to feed European fear about the transfer of wealth across borders. The migrant crisis produced by turmoil in the Middle East has created intense anxiety within the EU about the free movement of people. Large numbers of European voters fear that jobs, personal security and national identity are at risk as never before.

We saw a particularly dramatic demonstration of these anxieties when Britons voted earlier this year to exit the EU. This is as clear a rejection of globalisation as we’ve yet witnessed. The percentage of UK residents born outside the UK has doubled since 2000, a direct result of EU rules on freedom of movement within the EU. In June, a majority of voters made clear that control of borders has become a central concern in Britain. As Prime Minister Theresa May prepares a negotiating strategy to set the terms of the UK’s post-exit relationship with the EU, she has discovered that she lacks support within the Conservative Party for any compromise on the question of borders.

There are similar political trends at work in the US, particularly on the question of trade. President-Elect Donald Trump and Vermont Senator Bernie Sanders made headlines over the past year with angry verbal assaults on recent US trade deals they say have cheated American workers of their jobs. The Democrat Sanders insists that US dealmakers are working on behalf of elites who want to make deals with other elites that benefit elites. The Republican Trump says that weak-kneed US negotiators have made bad deals that allowed China, Mexico, Japan and other countries to steal US jobs and growth, a charge he rode to the White House. Trump has also made an issue of US immigration problems with promises to build a wall along the US border with Mexico and to bar Muslims, Syrian refugees in particular, from entering the country.

The Globalisation Backlash Hits the Emerging Market World

In the developing world, globalisation fallout takes different forms. So far, the negative side of this trend has been most obvious in the Middle East, where pent-up demand for less-oppressive governance and a fairer distribution of wealth, the inability of economies to generate jobs for swelling populations of young people, and the economic impact of lower oil prices have triggered widespread public anger.  Greater awareness of the outside world and the enhanced ability to communicate and to coordinate protest that has been created by mobile phones, Internet access, and social media have radicalised millions and generated historic levels of political turmoil. These are the opening chapters of a broader story of regional upheaval.

Far more worrisome is the spread of rich-world-style anti-globalisation sentiment to the broader emerging market world. We saw startling surges of public anger in Brazil and Turkey in June 2013. In São Paulo, the trigger was rising public bus fares. In Istanbul, it was anger at a government plan to level a grove of sycamore trees to build a shopping mall. In both cases, citizens erupted over the inability or unwillingness of government to address public concerns, to meet the perceived needs of citizens, and to tolerate protest. Since then, pressure for better governance has risen across the emerging market world.

The developed world’s response to similar pressures adds to the developing world’s woes. A lurch towards protectionism in the US and Europe will weigh on their growth prospects, and it certainly won’t help emerging market economies that profit from access to their consumers. The sharp drop in commodity prices in the last 30 months has already damaged emerging market exporters from Russia to Nigeria and Venezuela to South Africa. In addition, new restrictions on immigration have slowed the flow of remittances that boost many developing economies.

Finally, the cross-border flow of new technologies that enables the automation of production and the introduction of artificial intelligence into the workplace will also have a significant long-term impact on emerging market economies. By increasing efficiency, they may well boost growth. But as politically and socially destabilising as the long-term loss of jobs may be in advanced economies, it will be far more disruptive in poorer countries, where large numbers of suddenly displaced workers will have greater political effect. These are countries that lack the extensive social safety nets provided in Europe and the US and the political legitimacy that comes with mature governing institutions.  In short, populism in poorer countries poses a much more serious and immediate threat to political stability.  

The greatest concern should be for the future of China. That country’s leaders have proven remarkably adept over the past 35 years at managing complex reforms while keeping the public peace. The drama of 1989 aside, China has proven an historic reform success story. The world’s leading importer of many commodities and raw materials, China has benefited from the fall in  energy, metal and mineral prices. Given its shrinking population of working-age citizens, it may also manage to avoid the worst effects of the automation of manufacturing and the advent of new technologies that displace workers even from the knowledge economy. But there is no guarantee that China’s leaders can adapt their country’s economy to these changes quickly enough to avoid serious turmoil. That is a question that matters for us all, because China will one day soon become the world’s largest economy.

Ian Bremmer is president of Eurasia Group, the world’s largest political risk consultancy. He is also a columnist for Slate, a contributing editor at The National Interest, and a political commentator on CNN, Fox News and CNBC.

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