Will Brexit mark end of globalization age?
WASHINGTON — For decades, financial and political leaders have preached the inevitability of globalization, promising nations that by sacrificing some of their sovereignty and dropping national barriers they could reap far greater rewards through economic integration and cooperation. And that turned out to be largely true.
But Britain’s surprise vote to leave the European Union signals a new era for the post-World War II globalization drive, exposing deep populist anger and leaving open the question of how best to rein in an increasingly connected and interdependent world economy.
The vote was perhaps the biggest public referendum to date on globalization, and it yielded a far different outcome than in 2014, when Scots voted to stay part of Britain. Now Britain and other Western democracies are likely to face pressure to put the brakes on open trade and immigration policies that have been hallmarks of world growth.
“The age of globalization has certainly ended,” said Fredrik Erixon, director of the European Center for International Political Economy, an independent think tank in Brussels.
Few are predicting a scenario in which major borders are closed and protectionism rules the day.
But the sentiments underlying the British public’s rebellion are broadly shared by many others in the EU as well as the United States.
Policymakers and investors are particularly worried that Britain’s move will be a catalyst for a reenergized effort by Scots to break away from Britain. It may also encourage other secession movements in the EU.
“With one fell swoop, the world order has been turned upside down overnight, and where the chaos stops no one knows,” said Chris Rupkey, chief financial economist for Mitsubishi UFG Financial Group.
The backlash stems from a growing realization that the biggest winners of globalization have been international corporations, wealthy families, skilled and educated workers and those with easy access to capital. Older, working-class families in many Western nations have instead struggled with stagnant wages, job losses and staggering debt. Income inequality has grown worse in many of the same countries that have embraced globalization.
A U.K. departure is going to make the entire EU inward-looking and more defensive on globalization.
At the same time, forces that once propelled globalization — advanced technologies, reduction of barriers and the rise of China and other developing economies — have diminished. World trade and economic growth have also slowed in recent years.
With the Brexit vote, the EU, itself arguably the most ambitious post-World War II experiment in globalization, appears at risk of unraveling.
In the U.S., the antiglobalization tide has led to public opposition to sweeping trade deals, such as the North American Free Trade Agreement and the proposed 12-nation trade pact known as the Trans-Pacific Partnership.
President Barack Obama, speaking at the Global Entrepreneurship Summit on the Stanford University campus, acknowledged Friday that Britain’s vote “speaks to the ongoing changes and challenges that are raised by globalization.”
Obama urged business leaders to work harder to make the benefits of globalization more accessible to a greater number of people.
“The world has shrunk,’’ he said. “It is interconnected . ... It promises to bring extraordinary benefits. But it also has challenges. And it also evokes concerns and fears.”
The pushback against globalization, meanwhile, raises a new question: What’s the alternative?
“It’s clear that there’s a lot of dissatisfaction out there,” said Clyde Prestowitz, president of the Economic Strategy Institute and a former top trade negotiator in the Reagan administration. The problem has been building for years, he said, but the political and business elite in urban centers such as London, New York and Washington have tended to do fine whether the economy is up or down.
“What they have ignored,” he added, “is that for much of the population, globalization hasn’t been such a great thing.”