Is de-globalization imminent?
There is a popular saying that when America sneezes, the world catches a cold. In terms of global economy, the world appears to have been infected with cold. And one wonders if globalization is no more the prescription for relieving the world of “economic cold”. Whether we like it or not, the world is now more connected or integrated than ever before. Thanks to globalization. Globalization is a choice and it’s under attack these days from several quarters. Globalization has left majority of the world’s population behind. According to UNICEF, the richest 20 percent of the world’s population gets 83 percent of the global income while the poorest quantile has just one percent. The trend is getting worse as reflected in a new UNDP report titled “Humanity Divided: Confronting Inequality in Developing Countries.” The report makes it clear that despite impressive progress made by humanity in many areas over the decades, it still remain deeply divided. The vital message of the report is that:
“During the last two decades, income inequality has significantly increased in many countries. On average- and taking into account population size-income inequality increased by 11 percent in developing countries between 1990 and 2010. A significant majority of households in developing countries- more than 75 percent of the population- are living today in societies where income is more unequally distributed than it was in the 1990s. Increases in income inequality over the last 20 years have been largely driven by broad globalization processes but domestic policy choices have played an important role, too. Evidence show that increases in inequality over the last two decades were mainly on account of trade and financial globalization processes that weakened the bargaining position of relatively immobile labour vis-a-vis fully mobile capital. Trade and financial globalization were also accompanied by skill-based technical change that further increased wage inequality by driving up wage skill premiums. Moreover, national policy choices have exacerbated the adverse effects of globalization on income distribution.”
Inequality has emerged as a major source of concern for people all over the world who find it unacceptable that poverty should persist in a world of plenty. Undoubtedly, reducing inequality is needed – first and foremost – in order to fulfill people’s universal aspiration to dignity and respect. But despite these statistics, the UNDP report states that global GDP has increased from US$ 22 trillion in the last two decades to US$ 72 trillion.
The trend observed today is the reduction in global trade, flow of capital, and movement of people. With respect to trade, scholars have argued that global demand is weak and that many nations are erecting import barriers. The flow of capital from bank loans has also dropped to about 2 percent of world’s GDP from a peak of 16 percent in 2007. Despite the movement of refugees into Europe, net migration from poor to rich countries decreased to 12 million between 2011 and 2015, down by 4 million in the previous 5 years.
What are the reasons for this new trend? Unequal distribution of benefits of globalization, rising inequalities, job loss especially in developed countries are responsible for this new trend. There is equally a perception issue that workers from developing countries have stolen jobs from developed countries. This is one of the reasons behind the current trade war between the USA and China. It is this perception issue that has also given birth to Britain’s divorce from the EU (BREXIT). One other reason is the increased instances of terrorist attacks and emerging security challenges across the globe. And lastly, the rise of populist leaders across the globe which, according to some experts, reinforces the trend.
Accordingly, the world is experiencing a decline in economic trade and investment between countries. So, economic and market analysts are saying that there is “de-globalization of the world’s economy. These analysts have now observed a trend in which several countries want to go back to economic and trade policies that put their national interests first. One may recall the “America first” slogan of the US President, Donald Trump, and perhaps ask: If de-globalization is imminent?
The objective of de-globalization is “not to withdraw from global economy but rather to trigger a process of restructuring the world economic and political systems in order to strengthen local and national economies instead of weakening them.” If it was true that the world is going back to protectionism, I pity Africa. Why, you may ask? Protectionism may take Africa back in terms of development by about half a century. Africa hasn’t been able to strike a balance between the forces of globalization and the demands of sustainable development. Globalization which is characterized by liberalization, competition, and free market policies undermined Africa’s political systems and economies for decades such that phenomenal developmental challenges have been created within the continent. Driven by rapid changes in technology, globalization presents risks and opportunities not only for Africa but the entire world. Keeping pace with the processes of globalization demands a high degree of literacy and technical ability- skills which many Africans don’t yet possess.
So, if the world goes back to protectionism which is production for the domestic market rather than provide for export markets, will this be the policy direction of most economies? Will most economies in Africa cope with protectionism? The idea behind protectionism is to shield local manufacturing by making imports costlier. How will Nigeria key into a de-globalized world with increased population but slow economic growth? Even if the government comes up with a philosophy of “be Nigerian, buy Nigerian made goods,” it’s going to be a herculean task to achieve because of infrastructure challenge in Nigeria coupled with inadequate human capacity. With protectionism, developed nations will not buy most products from developing nations. Rather, developed nations will be selling their products to developing nations. If Nigeria cannot develop in a globalized world, what will happen in a de-globalized market environment? Your guess is as good as mine.
MA Johnson