Anti-globalization is not sustainable
Anti-globalization, by its definition, is anticapitalist, anti-growth. It basically opposes increase in the global power and influence of businesses, especially multinational corporations. The first objections to globalization started albeit slowly during the formation of European Union. In the lead-up to elections in India, the US, and some key European nations between 2013 and 2016, the antiglobalization decibel increased. While some economists and social organizations championed it in the early years, it is now at the core of every political debate across both sides of the Atlantic. Brexit is case in point followed by the [proposal to review] NAFTA by the US. The EU-Canada trade agreement was disbanded on similar grounds and as I write, there are ten world-class trade agreements that are being renegotiated. Unfortunate.
At the heart of the anti-globalization argument are three main areas of concerns:
01 Multinational corporations are using unregulated political clout by way of trade agreements and poorly regulated financial markets to expand their sphere of influence
02 Law of conservation of jobs is being challenged—jobs are getting created elsewhere and are being destroyed in some other place
03 Uncontrolled abuse of natural resources, labor, and human rights. Profiteering is seen as the only objective of multinationals
While these concerns are worthy of examination, the move to deglobalize is retrograde and unsustainable. There will be unimaginable consequences for developing and poor countries. Anti-globalization will result in a divisive and protectionist approach. Tariffs will shoot up and the commerce of doing business will swell disproportionately, cost of money will increase, availability of essentials will not be guaranteed, etc. The very people for whom the antiglobalization movement has been conceived will be the first to suffer.
Business models of multinationals around the world are now wound in a ‘spaghetti-like’ structure. For example, to make an iPhone affordable in developed markets, designs are being conceived in the US, components are manufactured in various countries, assembled in China, and shipped out of Hong Kong. If this is disentangled through an anti-globalization initiative the iPhone will be sold at two times its current price. The same would happen to medical equipment, energy products, etc.
Globalization allows for capital flows across nations. Large parts of these capital flows help in creating sustainable infrastructure, assets, local jobs, and an ecosystem for society. Multinationals stay compliant and pay taxes that are then used for local social development. Part of the profits that are repatriated funds social development programs around the world. Globalization is also a huge derisking lever for financial institutions that have faced the brunt of a massive credit overhang over the last fifteen years. Anti-globalization will destabilize both supply and demand side economics.
The future of globalization resides between capitalism and ‘turbo capitalism’. Governments can best address anti-globalization sentiments by encouraging local entrepreneurship, deploy moderate yet optimal regulation, architect policies that support trade, re-evaluate bankruptcy law and make it investor friendly, encourage corporate social responsibility programs, and make sustenance affordable. Reneging and scrapping well thought-out bilateral and multilateral trade agreements is not the way forward. Looking inward for social development and looking outward for economic development is the only way for nations to survive and build consistently acceptable societies for the future generations.
Bretton Woods did unite the world. The world did not suffer then and will not suffer in future. ■