Dismantling Globalisation?

The recent trade war between the USA and China, phenomena like Brexit and other incidents like various economic sanctions by one big power against others, e.g. US sanctions against Iran have raised legitimate doubts as to whether they conform to the notion of globalisation. It is easy to remember that since the late eighties of the last century, the globalisation became a vague idea and in 1995, the World Trade Organisation was formed. The formation of the WTO was taken to be a major victory of the advocates of globalisation. Gradually the concept of the nation state as an economic entity seemed to be getting obliterated. Globalisation was projected as a new order with free trade of goods and free capital inflow across nations. Although there was considerable opposition to the theory of globalisation, its defenders were able to create an at least partial consensus that globalisation would help relatively backward nations overcome the problem of poverty.

As a matter of fact, there was no globalisation in the sense of free trade in modern times. What the British achieved in India and other colonies was not the result of free trade in the classical Ricardian sense. Britain did not, however impose tariffs, because colonial markets became integrated with her own interests. This integration was achieved through coercion of various forms. Later, Germany and the USA became strong contenders, and they introduced their own brand of protectionism. In the aftermath of the Second World War, the USA came to be the central star of world capitalism, and the dollar came to be regarded as good as gold through the Bretton Woods conference. In the wake of the mounting trade deficits of the USA, in which the Vietnam War was a major factor, the hegemony of the dollar was weakened and the US gold reserves were continuously depleted, because there was increasing tendency to demand gold and not dollar in international trade. Finally, dollar was devalued, and the Bretton Woods system collapsed. In the nineties, however, the acceptability of dollar as the common international currency was somewhat restored, because the USA emerged as the lone superpower after the collapse of the Soviet Union. This was the background against which concepts of globalisation and liberalisation gained currency, although movement of labour across nations was much less free and intellectual property rights were introduced. These were directly contradictory to the notions of globalisation and liberalisation. Yet these notions continued to rule.

The global melt-down of 2008 dealt a deadly blow. The US government was forced to bail out large companies and firms that had gone bankupt; similar practices were followed by other governments of the western world. This was sharply in contradistinction with liberalisation. Now one sees a trade war, with the USA imposing tariffs on Chinese goods, and China retaliating in a similar fashion. If India can attain an export surplus vis-a-vis the USA, similar tariffs may be imposed on Indian goods and services as well. In that case, the advocates e.g. Jagdish Bhagwati, of a 'forward looking policy' on India's part will have no ground to stand on. So, what stands out is that globalisation was just a cliche meant to consolidate western hegemony for the time being. That home of globalisation is now dismantling it in an open, naked manner because of her internal crisis.

Frontier
Vol. 51, No.5, Aug 5 - 11, 2018