Altman - Globalization in Retreat
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Created: November 05 2014, 23:46:10 Modified: November 06 2014, 00:23:03
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Summary: The popularity of the U.S. economic model is waning. To put globalization back on track, President Barack Obama must articulate the benefits of
open markets and free trade.
The long movement toward market liberalization has stopped, and a new period of state intervention, reregulation, and creeping
protectionism has begun.
Global trade, capital flows, and immigration are declining
China and india have suffered the least economic damage.
Less global leadership and less coordinated between nations.
Movement away from a unipolar world
United States focused inward and constrained by unemployment and fiscal pressures.
Crisis has exposed weaknesses within the European Union
Economic divergence is rising as the three strongest EU nations — have disagreed on a response to the crisis and refused
pleas for emergency assistance from eastern Europe.
Iran and Russia
countries that rose with oil and commodity boom will now come under great economic pressure.
Unstable Nations
could disintegrate
poverty will rise sharply in a number of African countries
Less coherent world.
China comes out as winner
measured by financial reserves, it is the world’s wealthiest country.
Electricity consumption, freight shipments, and car sales have all increased
US - Chinese relationship will emerge as the most important bilateral one in the world.
Anatomy of a Crisis
It is rooted in the financial damage to households and banks from the housing- and credit-market collapse.
Debt surged because Americans spent beyond their means.
Financial sector
global financial institutions have reported trillions of losses.
A Painful Recovery
Europe entered the recession later than the United States did and, logically, will emerge later.
The housing and credit markets imploded in the US.
Europe’s banking system is proportionately larger than the US’, and its banks were more exposed to weakening emerging
markets in eastern Europe and Latin America.
Developing world
hit the hardest
inflows of investment and financing have plunged, exports are very weak, and commodity prices are way down.
Africa has seen capital inflows nearly come to a halt.
After Globalization
1. Era of Laissez-Faire economics has ended
Role of state was diminishing, and deregulation, privatization, and the openness of borders to capital and trade were
rising.
Role of state is expanding, together with a reregulation of markets.
more activist and bigger government.
2. Globalization is in retreat
Much of world sees globalization as harmful
Especially developing ones that embraced increased capital flows and open trade have been particularly injured.
Insulated countries, such as India have been less scarred.
Financial and trade protectionism are spreading.
World Bank and WTO recently reported a movement toward higher tariffs, higher nontariff barriers, and an
increase in antidumping actions, designed to protect domestic jobs.
3. World may be entering a new global phase marked by less leadership, less coordination, and less coherence.
Attention has been reserved for domestic issues
stabilizing banking industry, handling the budget, and reforming health care.
None of rising powers is capable of full leadership
4. Crisis will likely increase geopolitical instability.
Countries in Africa have been hit the hardest
Fragile states
Republic of Congo / Central African Republic — problems exacerbated by crisis.
Free-market capitalism, globalization, and deregulation have been rising across the globe for 30 years; that era has now ended
and a new one is at hand.
Role of state with financial and trade protectionism is increasing.
Keys
1. Promote aggressive stimulus measures to shorten their own countries’ recessions and restart world growth.
2. Financial deregulation went too far, and so moderate reform is now needed to prevent a recurrence of abuses and regulatory
failures that resulted.
3. Obama and global goodwill — use power to espouse benefits of globalization and market liberalization.
