The "D" Word: Deglobalization

Once described as inevitable, unstoppable, and irreversible, the great economic experiment with global integration is faltering.

Before we go any further, let's be clear about something. Globalization has been declared dead before. But in the past, those peddling reports of its demise seemed just a little too eager, barely able to conceal their glee. And, of course, they were never quite able to produce the body.

This time, things are different. There are bodies everywhere. This time nobody's smiling.

Financial Times editor Martin Wolf described the mood at January's meeting of the World Economic Forum in Davos, Switzerland as "gloom verging on despair." British Prime Minister Gordon Brown warned recently that the global economy was in a "downward spiral."

These are not the voices of protest. Wolf is the author of a 2004 book titled Why Globalization Works. Brown has called globalization "a force for good." This is about as far away as you get from the anti-globalization crowd that regularly shows up to demonstrate at meetings of international financial institutions such as the World Bank, the IMF, and the WTO.

In normal times, these are voices that exemplify sobriety. These are not normal times. Brown even uttered the "D" word – depression – a word placed off limits by economists long ago out of fear that its mere use would spread unnecessary fear and minimize the collective global misery of the 1930s.

There is, however, another "D" word looming out there, one so clunky and unappealing that it is unlikely ever to end up in the title of a best-seller: Deglobalization.

When people think of globalization, they often think in terms of "flows" – trade flows, investment flows, immigration flows. This is a useful way of looking at it, because it provides an easy measure of globalization's progress at any given time. The greater the flows the more integrated the global economy has become. Over the last few decades the progress has all been in one direction.

Those days are gone. Trade flows have begun to drop off. Foreign direct investment has been declining for the last two years and is projected to dip even further in 2009.

But deglobalization, like globalization, will not merely be limited to flows of financial capital and manufactured good. It will affect people as well.

In the United Kingdom, a French-owned company's plan to hire Portuguese and Italian contractors rather than British workers recently resulted in a nationwide string of work stoppages. In South Africa, immigrants and refugees from neighboring Zimbabwe have been targets of xenophobic violence.

Economic pain has led members of both U.S. political parties to support "Buy American" and "Hire American" provisions as part of federal stimulus spending.

"The purpose of this program, asking taxpayers to sacrifice, is really not to create jobs in the European Union," Illinois Democrat Dick Durbin, the second highest ranking member of the Senate, told French news agency AFP. "I want to create jobs in Illinois."

“With the unemployment rate at 7.2 percent, there is no need for companies to hire foreign workers … when there are plenty of qualified Americans looking for jobs," added Iowa Republican Chuck Grassley.

With friends suddenly in short supply and serious talk of protectionism in the air, globalization is clearly on the run. But could the American credit and mortgage crises actually force the mighty wave of globalization into reverse?

Why not? It's happened before.

The collapse of the Byzantine Empire destroyed the 2,000 year-old Silk Road and plunged the rich world into a mercantilist scramble for colonies. The global integration of the late 19th century – a time economist John Maynard Keynes called an "extraordinary episode in the economic progress of man" – was undone by the horrors of World War I, resulting in nearly 40 years of beggar-thy-neighbor trade policies and anemic worldwide economic growth rates.

Over the last half century, globalization has had salutary effects on governance, innovation, and prosperity. It is a controversial process, to be sure, but a return to mercantilism seems certain to prolong the current crisis.

The challenge for policy makers will be to resist political pressure to de-globalize. The temptation will be strong, but giving in will not be de-lovely.

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Photo Credit: Buy American! by Photo Mojo

The Perils of International Travel

Going along with the theme of travel warnings, another unfortunate quote from a tourist information guide to Japan caught my eye: “The Ministry of Justice of Japan amended the 'Law on immigration control and refugee status' to prevent terrorist threat. All foreigners will have to leave their fingerprints and be shot (full face) while passing immigration control… Entry to Japan for foreigners who refuse passing the above mentioned procedures will be prohibited.” Some relief will be felt by parents that “kids younger [than] 16” will be spared this feature of Japan’s war on terror.

While the above may be a slight misapplication of the English language, it does bring up the question of just how much of the security regime introduced in our post-9/11 world is actually meant to increase the safety of the traveling public. Are we any safer now that our flip-flops go through x-ray and all piercings are removed before boarding? Are we reassured to see Arabic-looking men pulled aside for further scrutiny? A Quinnipiac University National Poll says we are.

In public the TSA assures us all precautions necessary are being taken, yet new ones keep being introduced. The most recent addition to a long and growing list of prohibited items are spare lithium rechargeable batteries. Over a year ago we were told deodorants and mascara are a threat to national security. I am waiting for the day my glasses are taken away for their potential to become “weaponized” as sharp, compact projectiles (let us hope TSA is not reading).

The inconvenience to the public is of course not a loss to all. Since the ban on liquids, airport concessions have been doing brisk business in bottled water and toiletries. Mailing companies, seeing great potential in the oops factor, have installed self-service mail-back kiosks at some airports that allow those without enough foresight to mail their nail clippers and skin creams just before going through security. Some companies have even started re-selling the confiscated items on eBay.

That, however, is America. Once abroad, rules seem to change dramatically. Japan, of all places, introduced a regulation banning all sharp objects on their planes over a year before 9/11. Back in 2000, having just arrived in Tokyo, I was surprised when the Swiss Army knife I was able to bring with me from Seattle was taken away before boarding my connecting flight. The difference between that experience and the one thousands of people go through every day in the US is that that knife was handed back to me in a sealed envelope upon arrival in Sapporo. My shoes, rather bulky-looking things, were also x-rayed. I was given slippers to wear through the ordeal.

On a recent trip to China I realized only too late that a bottle of water remained in my carryon. The Chinese, not fooled by such subversive behavior, recovered the bottle from my bag. Apologies, in this case, did not suffice. On the spot, and in public view, I was subjected to beverage consumption. After two or three sips, the bottle was again taken away, to undergo a sniff test by one of the security personnel. Satisfied that I was not smuggling some potent baijiu on board, I was sent away – with the bottle.

Of course not all airports are so easy. Leaving Moscow’s Sheremetyevo Airport I, and many of those before me, breezed through security with my shoes on, and a mostly symbolic pat-down. The Indian gentleman behind me, however, was not so lucky. Reminiscent of a scene from ”Airplane II,” the cleanest-looking fellow got the not-so-clean treatment.

Which bring back the notice on Japan first mentioned. Much has been written on Japanese xenophobia, and the country’s reluctance to accept immigration to bolster its falling working population. The reaction of the expat community in Japan upon the introduction of this new law was highly critical, blaming said xenophobia as the main driver behind the initiative. In an increasingly globalized world, in which the traveling public has choices about where to travel, will countries such as Japan succumb to self-isolation? One can imagine travelers to Asia flying over the archipelago and looking down, curious about the culture and the sights, yet highly reluctant to experience a shot to the face.

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photo by thepartycow (CC)