Reconsidering globalisation: How social and political trends are challenging economy

Over the past few decades, globalisation has become such an intrinsic part of our lives that it is difficult to imagine any other professional and economic climate. Younger generations take it for granted, enjoying clothes and high-tech appliances made overseas, knowing they can choose where to study, travel or live. Older generations appreciate that business transactions have replaced belligerent exchanges. Better international transportation links, more open borders and technological progress, have all contributed to globalisation. These evolutions have shrunk time and space throughout the world and within international and financial trade.

Benefits are visible: there is globally more wealth, more economic growth in poor and developing countries as well as in developed countries. For businesses, the choice is wider with regards to capital flows, labour, suppliers and tax laws. It brings greater economies of scale, investment opportunities alongside increased competition.

But several forces are pushing the world towards more protectionism. The strength and power of economy has taken precedence over politics and thus somehow weakened democracies. International tensions are dealt with through economic sanctions rather than diplomatic discussions. Yet not every Western country has benefited equally. Southern European countries have lost many industrial sectors and seen many businesses relocate in developing countries with a cheaper workforce and lighter taxes.

This empowerment of money and unequal distribution of riches to the detriment of political and social standards has recently led to a questioning of globalisation, and a rise of nationalism and protectionism in the West: Trump and his proclaimed “America first”, whose first tasks include renegotiating trade agreements, Wallonia quibbling over the terms of an EU trade deal with Canada. The dichotomy was, and is clear to see in the programme of opposing candidates running for top level elections in America and European nations etc., and in talks of dropping the Euro, restoring borders or building walls.

Indeed globalisation also brings controversial issues: the free movement of labour has put an extra pressure in some countries (particularly in the areas of housing or public services) whilst depriving emerging countries of their workforce (brain drain). The increased movement of goods and people has a damaging, long-term effect on climate change and environment (strong increase in carbon footprint and industrialisation of countries lacking environmental laws). The free movement of people has also gone hand in hand with some level of cultural uprooting and dilution of collective values and reference points especially amongst the working classes who live daily with the pressure on jobs and wages and have neither the education, nor the means to travel and benefit from the new economic framework, and whose ballot seems to weigh less and less.

Some multinational companies can set up their headquarters in countries with low rates of corporate tax causing a shortfall in revenue in the countries where they are actually active. And the global links and interdependency implies that when one area sneezes, the rest of the world catches a cold. Politicians and “populist” movements cannot stop technological change and ubiquity.

At the World Economic Forum Annual Meeting 2017 in Davos, Switzerland, the issue of globalisation was the main topic. Christine Lagarde, Managing Director of the IMF, said she had warned about inequality as early as 2013 and agreed that in order to survive, the fruits of globalisation should be redistributed more evenly – but by all means the response should not be to backtrack.  “There are 3.6 billion people around the world aspiring to better income, to put food on the table twice a day, once a day. To turn our back on globalisation, to turn our back on helping development, is exactly the wrong approach. To say that globalisation is bad because it destroys jobs is a very short cut for something that needs far more analytical work and understanding”, says Lagarde.*

However, according to research led by Credit Suisse (“Globalisation Report”) published at the beginning of the year, globalisation as we know it is changing and is slowly being replaced by a multipolar world, i.e. a focus on various regions with different cultures, social models, laws, economic templates and security network. The scenario identifies three main regional poles: the Americas, Europe and Asia led by China that will compete with one another in terms of economical or political influence and success.

Source: www.weforum.org

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