Today’s rise in nationalism is a reaction by different nations in the world against the prevalent neo-liberal world order and the inequality it promotes.
The neoliberal world order the United States created and disseminated around the world after 1945 had globalisation as its hallmark. This globalisation would come to be defined through America’s increasingly prominent economic and military role in the globe. Today, however, this neoliberal system is facing unprecedented challenges, and the seemingly ubiquitous phenomenon of globalisation is under threat from the forces of nationalism not seen since the collapse of the Soviet Union in 1991.
The era of globalization was wild. It began in the late-1970s, picked up steam throughout the 1980s, then soared through the 1990s and beyond.
David M. Smick, a global macroeconomic adviser, is founder and editor of the International Economy magazine and author of “The World Is Curved: Hidden Dangers to the Global Economy.”
Lately, even China and India, which were thought able to decouple from the weakness of the industrialized world, have fallen victim to the seizing up of global trade. The World Trade Organization is slashing its estimates for trade growth. The U.N. Conference on Trade and Development reports that economic growth is weakening worldwide.
Financial liberalization, including the free flow of capital, is also under worldwide assault. Banks are rapidly becoming more nationalistic. This trend is heightened by regulatory barriers implemented in the wake of the global financial crisis and the subsequent euro-zone crisis. It is now more difficult for investment capital to move across borders.
The euro zone is at the heart of this deglobalization trend. European banks have traditionally been the source of roughly 80 percent of trade financing in emerging markets. Now these severely undercapitalized banks are forced to bring that capital home, and it is not clear that U.S., Japanese or Chinese banks are in a position to fill the gap. Capital scarcity combined with the need for banks to retain more capital are inhibiting global trade financing and ratcheting the deglobalization trend into higher gear..
The rise of geopolitical tensions from globalization’s collapse will increase U.S. investor nervousness, contributing to a debilitating risk-averse environment. To be sure, globalization’s benefits have been unequally distributed. Financial liberalization has also led to a frightening rollercoaster ride of financial terror and heartache.
No one can yet say what will replace this void in U.S. gross domestic product left by the shrinking of financial services. Many think the United States, with its ample natural gas supplies and new fracking energy retrieval techniques, can become an energy exporter. Yet reaching consensus on energy policy won’t be easy. Energy is a political battleground where the promise of energy independence has been elusive for decades.
So despite its flaws, globalization has been a wealth-creating machine. That is why the world’s governments spent $15 trillion and central banks increased their balance sheets by $5 trillion in response to the financial crisis, essentially to try to save that machine.
Yet the globalization model is cracking up anyway — and there’s no replacement in sight.
Populism has migrated towards Europe where it did not have much foothold in the past and it is much more widespread than the past. Populism is assuming international form. In the past the populism was more of a national character. Events like Brexit , President Trumps victory and the general rise of “Anti-establishment populist and extreme political parties in Western Europe is becoming cause for worry and it poses threat not only to Europe but to the Geo political equations and the future of global business as well.
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