For decades, financial and political leaders have preached the inevitability of globalization, promising nations that by sacrificing some of their sovereignty and breaking down national barriers, they could reap far greater benefits through integration. and economic cooperation. And that turned out to be largely true.
But Britain’s surprise vote to leave the European Union signals a new era for post-World War II globalisation, exposing deep populist anger and leaving open the question of how best to rein in a global economy. increasingly connected and interdependent.
The vote was perhaps the biggest public referendum to date on globalisation, and it yielded a far different result than in 2014, when Scots voted to stay in Britain.
Today, Britain and other Western democracies are likely to face growing pressure to rein in the open trade and immigration policies that have been hallmarks of global growth.
Few are predicting a scenario in which major borders are closed and protectionism reigns. But the sentiments underlying the British public’s rebellion are widely shared by many others in the EU as well as the US.
Policymakers and investors are particularly concerned that Britain’s move could be a catalyst for a reinvigorated effort by Scots – who overwhelmingly preferred to stay in the EU – to break with Britain. It could also encourage further secession movements in the EU, which could fundamentally change the political and economic structure that has been in place for decades.
“All of a sudden, the world order has been turned upside down overnight, and where the chaos ends, 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 from 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 countries have instead struggled with stagnant wages, job losses and huge debt. Income inequality has worsened in many of the same countries that have embraced globalization.
A UK departure will make the EU as a whole more inward looking, more defensive in the face of globalization and less confident about its success on the back of the world.
— Fredrik Erixon, Director of the European Center for International Political Economy
At the same time, the forces that once propelled globalization – advanced technologies, lower barriers and the rise of China and other developing economies – have diminished. Global trade and economic growth have also slowed in recent years.
With the so-called Brexit vote, the European Union, itself arguably the most ambitious post-World War II experiment in globalization, seems threatened with collapse.
“In the post-war period, with the shadow of the world wars and the shadow of the USSR no longer hanging over Europe, countries are more and more ready to return to nationalism,” said On Friday a European diplomat told reporters in Washington, speaking anonymously to comment on other countries’ policies.
In the United States, the anti-globalization wave 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. , including Hillary Clinton and Donald Trump, the presumptive presidential candidates, oppose it.
Obama called on business leaders to redouble their efforts to make the benefits of globalization more accessible to more 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 worries and fears.
At the heart of Britain’s ‘Leave’ campaign was a desire to reduce immigration and claim the full sovereignty of Parliament.
“Both are incompatible with an increasingly globalized world,” said Erixon, the think tank’s director. He added that “a UK departure will make the whole EU inward-looking, more defensive of globalization and less confident about its success at the back of the world”.
The EU rose from the ashes of two world wars that had divided the continent, and the single market and political union had grown to 28 members as European leaders saw stronger economic and social integration as a way to compete in a world increasingly orbiting around the United States and China, the two largest economies.
It is surprising that one of the most sophisticated countries falls into the trap.
— Robert Shapiro, former economic adviser to President Clinton
But anti-EU sentiments have intensified following its failure to respond effectively to the global slowdown and the eurozone crisis, as well as to manage the high migration from Eastern Europe and, more recently, waves of refugees from the Middle East.
Moreover, as in the United States, the economic recovery has left behind large segments of the population in Britain and elsewhere in the EU. And they are increasingly frustrated with what they see as a lack of government action to meet their needs.
“The really, really surprising part of the Brexit referendum and the rebellion against globalization is that it’s held back by the group of baby boomers who have benefited enormously from open societies,” Erixon said. “Now they are rebelling against their own economic history.”
In Europe and the United States, complaints have been particularly strong from older, less-educated citizens who have struggled with job loss or stagnating incomes. Many of their livelihoods have been undermined by automation and cheaper foreign labor – two important features of globalization – even as corporations and wealthy individuals have grown wealthier.
The decline of globalization also raises a new question: what is the alternative? So far, there is far more agreement on the problems that globalization has created than on any solution or answer.
The direct and immediate economic pain will be felt hardest in Britain. The nation’s economy had outperformed most others in Western Europe in recent years, but is now likely to tip into recession in the coming months.
The world has long regarded London as the financial capital of Europe, but one of the things that gave it that imprimatur was the city’s cosmopolitan culture and the free movement of workers. Now it may end up falling victim to the backlash of globalization.
“Clearly there’s a lot of dissatisfaction out there,” said Clyde Prestowitz, president of the Institute for Economic Strategy and a former top trade negotiator under 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 tend to do well whether the economy is up or down. .
“What they ignored,” he added, “is that for a large part of the population, globalization has not been such a good thing.”
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