Articles

Increasing Anti-Globalisation Sentiment in Larger Economies of the World

By: Shweta Sachdeva and Baibhav Kumar Singh

Everything in economics is cyclic in nature, be it inflation, unemployment rate or interest rate; they all have varying frequency and wavelength. When we discuss globalization the first phase was between 1870-1914, second between 1944-1971, the third era started in 1989 and continues to date, fortunately. And, history depicts how we have experienced extensive benefits during these periods.
Now, at the time when we are discussing the eventuality of a globally connected society and the concept of global citizen, a trend of anti-globalization is in motion specifically in larger economies. In the following segments, we will discuss on different effects of such protectionist arguments on different factors of the macroeconomic condition of a country such as Trade, Monitory and Human Capital.

Anti-globalisation protesters in Seattle, 1999. Photograph: Eric Draper/AP

From an economic perspective, this sentiment will have an adverse effect on the trade viz-a-viz nation’s GDP growth. Adam Smith, The Father of Economics in his 1776 classic argument mentioned the following and we quote
” What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage.”1
So, a free economy is essential for a nation’s growth both in goods and services market and in the technological sphere as it makes them wary of being obsolete in the near future. By opening its trade, a nation can achieve production efficiency and a higher standard of living with its product having competitive advantages. We have historical data to support the theory also: Japan during the 1850s, South Korea in the 1970s, Vietnam and India in the 1990s. The impact of liberalisation on India which was basically intended to finish the licence raj but had manifold benefits. Let’s look at some statistics, Indian GDP in 1974-75 was 74930 crores (current prices, 2004-05 series) which rises to 613528 crores in 40 years i.e. in 1990-91 which is 718.80 % growth in 15 years but after liberalization from 1990-91 to 2013-14 it is grown to 10472807 crores (same parameters as previous) which are 1606.98 % in same 15 years.

Now if we examine the monitory capital of a country, one of the critical criteria is its foreign reserve, and protectionist approach is bound to hamper the net export, and net import quantity of a country be it goods or services, which ultimately projects as a below per exchange rate and downward pressure on foreign reserve. For larger consumption-driven economies it can create havoc due to supply demand mismatch resulting in an upward spike in inflation and real interest rate. In the Indian context, forex reserves in India post liberalisation grew to $398.12 bn in 2019 from mare $5.8 bn dollars in 1991, (6764.13%). The equity market tells the same story as the 30-share index was around 1000 level, but in the following year, it touches 4000 marks and currently it is 36671.43 which in turns is a growth of 3567.14%. In 1991 the service sector was contributing 42.6% to GDP, and currently, it is 31% at the same time an agricultural contribution has taken a dip from 27.6% to 17.32 %.
The third component of the economy is its human capital. By reducing the injection of foreign human resource, one can plan to achieve more employment in the country, but if we dig deep, we will, in fact, observe a completely different scenario. Many developing countries can benefit from the adverse selection of large developed economies as it can help them tackle the so-called ‘Brain-drain’ issue, improving their overall quality of human capital. Adversely it depletes the human resource of the developed countries which till now enjoyed a large concentration of global intelligence at their disposal.
With all this economic adversity attached to it, it is quite fascinating that how leaders of world power house like the US, Russia, Turkey are blaming foreign forces for a national crisis. To cite the reasons behind such a decision can be credited to the mainstream ascent of imbalance, the strength of dictatorship, the diligence of prejudice and xenophobia, the decay of the open circle in the computerized period, and the long haul decrease in trust in governments and elites. They have reasoned that more globalization has resulted in complex issues in domestic societies pertaining to an interlinked system with international governance. This, in turn, has given rise to institutional stagnation and global management gridlock. 2008 worldwide financial meltdown and its aftershock in the large economies has been cited as one of the many examples of such gridlocks.

Source: Weforum

Another factor that must be considered is the global political turmoil that has ravaged the middle east and African countries creating millions of homeless refugees. Large economies are bearing the pressure for that. Thus, we see events like Brexit, ban on visas of many middle eastern countries by the USA and sealing of international borders by different European countries. These altogether have affected global trade.

Image Source : Reuters

These political unrests have also contributed to the gridlock by creating fear across the minds of citizens who in turn seek to reassert indigenous authority. Thus, handing over the mantle to the populist and nationalist leaders with propaganda to lead their respective countries to previous high’s by taking back the “control” from foreign forces and consequences are tragically adverse. By denying the international collaboration and global acceptance, they are aggravating the very problem which they are supposed to find constructive and refined solutions.
To conclude, we would like to emphasize the fact that in today’s connected world it is virtually impossible for a nation, let alone an economy, to grow in segregation or desolation. But, it is also apparent that we can’t judge the depth of the globalization problem by based on a few countries. So, as the mutual dependency between the nations has prevailed from time immemorial and will continue to do so, it is not the isolation, but the proper administration of globalization in a comprehensive facet will guide the large economies to cover the lost grounds and claim its past glory.

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