By Inês Linhares Dias
Globalization is dead. I know it doesn’t feel like it, but it is. Its death has been announced by all sorts of people and all over the world, which is ironic, since nothing could run the world so fast if it weren’t for globalization.
But how did that happen? How can the thing that has shaped modern society the most be declared dead and life just goes on as if nothing ever happened?
Well, for starters it should be clarified that global trade didn’t end, nor is it going to end anytime soon, it is just growing at a slower pace. So, perhaps, death is too strong of a word to describe it. The more accurate way to describe it would probably be ‘severely ill’.
We are now at a time when there is less economic growth, global trade is deteriorating and the levels of inflation are rising.
Still, globalization’s condition is a matter of concern and it shouldn’t be taken lightly. It indicates that we are entering a new economic age, one that we weren’t necessarily ready for, despite all of the warnings made by economists and social studies academics. It is essential, thus, that we not only understand why and how these events have come about, but also what we can do next.
All of those who don’t suffer from social anxiety will probably say that this is just an economic cycle and, therefore, that it is perfectly natural. We have seen a lot of these throughout History and will probably see many more. But its’ _inevitability should not distract us from realizing what led us here and what we can do to minimize its damages.
To do so, it is important to look back at History and understand how we have got to this point.
The early examples of globalization date from as far as the 1820’s, when the Industrial Revolution took place and European countries held colonial empires. This age would become known as Proto-Globalization and lasted until 1870. From then until the beginning of the First World War, the world witnessed the Globalization 1.0. The rapid and unprecedented growth in global economy led to a period of instability which culminated in a crisis known as Deglobalization 1.0, which started in 1913 and lasted until 1950. The slow rate of growth, the rise in inequalities and the increase in debt led to the adoption of protectionist policies by governments, which contributed to the decrease in international trade.
But it was after the 1950’s that globalization reached its peak, when both the global GDP and global trade had an unprecedented increase. The rich and powerful countries got back on track and were able to trade again. But, this time, they had a competition. This new era saw the rise of the developing countries, some of which became very important players in the international scene. This changed the dynamics of trade.
Trade is supposed to create a win-win situation for the involved parties. A country produces and sells what is more profitable and buys the products and services that are more expensive for it to produce, but that are cheaper to produce somewhere else. The producers focus on what will give them better profit margins and the consumers get lower prices, so that they can buy more. It works for everybody.
Or it worked until the developing countries came along into the big boys’ _league.
Before this happened, the developing countries main exports were raw materials, which were then transformed by the very powerful industries of the developed countries, that would later on sell the final products with highly profitable margins.
When countries like China, and later India, entered the global market as strong exporters, the impact on the market was huge. The worlds’ _population was rising and mainly due to these countries. They had plenty more workers and for the lowest prices. There is no competing with that.
Naturally, that destabilized the very solid industries of the developed countries. And because globalization lives of a liberalized market, companies are free to look for the conditions that allow them to maximize their profits. This meant that all labour-intense stages of production were allocated to places with very low wages.
No pain, all gain…
It is easy to understand the social implications that came along with it. The poor working class people from developed countries have lost their jobs when their workplaces were allocated somewhere else, in places where companies get away with wages so low that they borderline slavery, and with working conditions so poor that they are, indeed, slavery. So not only do the people who lost their jobs suffer, but also the people who got them. The men, women and children who go to work under conditions that harm their health, and for so little money that they can barely eat, they all suffer from it. This happens because there is no regulation in place, which protects the workers and forbids companies to sell their products whenever they disrespect human fundamental rights in any form.
The question is complex and difficult to address, as globalization concerns the whole planet, with its diversity of political, social and cultural systems. In the occidental developed countries democracy and human rights are interconnected, and, therefore, so are the labour laws’ principles. However, it is not possible to enforce such principles to all states. And perhaps it is not even desirable, as the result is cheap labour and that hugely benefits big companies.
On the other hand, globalization raised expectations of a better life to everyone all around the planet, and, therefore, the creation and exploitation of poor living conditions generated anger and increased frustration, not only among the exploited ones, but further more among all of those who grew aware of such unbalanced and unjust situations.
The same goes for environmental rights or even for tax accountability. Governments are aware of all of this and they still side with big corporations. They do so by giving them fiscal advantages (even though they acknowledge that companies will still evade taxes), by passing laws which benefit them or investing in infrastructures that support their activities. This means that they have to tax elsewhere, and it is usually the middle-class who pays the most of it.
These policies were all made in the name of neoliberalism, a model that has been popular worldwide since the 80’s and that found its way even to the countries that resisted it, through the IMF, that was particularly good at shoving it down countries’ _throats. The backbone of neoliberalism is that markets work perfectly on their own and should go unregulated and that privatisations lead to optimal performance. Thus, the state should not interfere and let the private sector operate and trade freely in the market for better economic growth.
Well, it is now clear, and it was even admitted by some of the IMF’s economists, that neoliberalism creates inequality and that inequality hurts growth.
This explains why so many people feel betrayed by the system and feel like globalization has let them down.
The general feeling is that no matter what one does, the richest people at the top of the biggest corporations will always get away from it with flying colours, while others are left to pay for it. And I mean literally pay for it. Because companies never settle for anything less than the ideal deal, so they will get their tax exemptions, their infrastructures, they will pay low wages, cut down jobs whenever they feel like it and leave whenever a better opportunity comes along, without even considering twice. And it is the citizens who lost their jobs and the ones who have paid their taxes so that the big companies wouldn’t have to pay theirs that will be supporting the state that those businessmen will benefit from.
The urge for a political response
It is impossible to dissociate the economy and the politics and this explains the political shifts that we are now seeing, which were motivated by a large sense of discontent propelled by the effects of the economic recession and, of course, the politicians’ _role in it.
The right-wing parties gained momentum by running on a nationalist and protectionist platform that claims to protect those who have suffered the most from globalization, even though their policies tend to benefit private companies and their profits over the peoples’ _interests. They are in favour of privatisations and the type of deregulation that allows private interests to act in function of higher profit. On the economical field, their answer is to keep adopting neoliberal policies disguised as nationalist and protectionist measures. This means that these countries will tighten controls at their external borders and inflict a severe control over immigrants, propagating a hate speech that divides the community, but all for the sake of protecting jobs from the threat of foreigners. But at the same time, they will incentivise investment by lowering taxes to big companies and giving them benefits and will perpetuate the market deregulation that created the situation they claim to be addressing.
Meanwhile, the voices on the left are trying to say that this can only be solved through regulation of the market, but they are losing the fight against right-wing populism.
Although we have been here before, this time people on all sides of the political spectrum are calling for the end of capitalism and are starting to wonder what comes next. We have come to a point when most people are losing their ties with the current model.
And they will lose increasingly more. We are walking on a path towards automation and artificial intelligence, so if companies keep looking solely at their profit margins and the better way to increase their productivity, it is very likely that there will be even less jobs in the future.
This will generate a very big crisis, because it not only impacts peoples’ _ability to provide for themselves and their families, but it also produces a major impact on matters of personal and collective dignity and identity. People have always identified themselves with the work they do. Losing a job or working in poor conditions has consequences that go far beyond the aspects of subsistence or survival. It even goes beyond the macroeconomic crisis.
The impacts of globalization and capitalism have left a deep impact on the people who feel its consequences daily, and that is the vast majority of the world’s population. People feel betrayed and they have had enough. They are now searching for change anywhere they see someone willing to fight for them. They feel like they have been forgotten. And they are right. Something is very wrong when most people feel like this.
We have now reached a turning point and something has to change. There is no coming back from globalization. It is too far entrenched in the way we live and we couldn’t go back, nor should we.
Globalization is much more than an economic phenomenon. It is also a social and cultural one. It has allowed for the greatest advancements and innovations at an unparalleled speed. And it made people dream, even if just for a brief moment. We shouldn’t walk away from that.
People have been trading since the ancient civilizations. Trading allowed us to survive, to improve, taught us to connect, to negotiate, to better know each other. That is part of who we are.
So, yes, globalization is severely ill. It has a disease called neoliberalism. But it can still make a recovery. Nevertheless, it will not happen without a global politic response. So, the answer is once again on our hands and on those of the ones we choose to lead us.