Reflections On The “Deeply Troubling” End Of Globalization

So, how many times in the past month have I written something about the possible demise of globalization and a politics-driven retrenchment in global trade?

A lot, right?

That’s because it’s one of the most important geopolitical and economic themes hanging over markets in the new year. As I’ve outlined exhaustively, rolling back globalization is a step backwards in time – a move away from modernization and societal advancement. It threatens multiculturalism and promises to undercut a progressive agenda that’s helped make the world a more civilized place.

Proponents of the anti-globalization push (e.g. populist politicians, nationalist political movements, and the dreaded alt-right blogosphere) will argue that the opposite is true – that the rise of terrorism and spread of Wahhabist ideals proves that a globalized world is a dangerous world.

Whatever you believe, think critically. Ask yourself if the policy proposals espoused by the fringe politicians whose popularity grows by the day truly represent a viable long-term strategy or whether disintegration will simply serve to exacerbate the divisions that populist movements blame for society’s ills.

And with that I’ve done it again: I’ve written an intro that’s longer than the excerpt it sets up. Oh well. Here’s the latest from FT on Trump and the threat to global trade and integration:

Like cats in popular folk wisdom, globalisation appears to have many lives. The integration of markets in goods, services and capital that accelerated in the 1990s with the fall of communism and the rise of China has been written off many times, notably during the global financial crisis. Yet it has survived.

This past year, its obituarists have had more material to work with than usual. The stalling of a number of high-profile trade deals has had the pre-emptive mourners out in force arguing that the engine of liberalisation has failed. Feeble growth in worldwide goods trade relative to the expansion of the global economy has raised fears that protectionism has taken its toll. And the election of Donald Trump, with his tirades against Chinese imports stealing jobs, and the appointment of China trade hawks like Peter Navarro to his administration, suggests that the era of liberalised trade is over.

Of these worries, only the last is convincing. Even allowing for the fact that rhetoric on the US presidential campaign trail tends to be far more blood-curdling than subsequent actions when in office, Mr Trump’s zero-sum worldview is deeply troubling.

Here are some recent charts from Deutsche Bank that illustrate the fact that even before the rise of populist politicians and propaganda, trade was already stumbling (note the chart on the bottom right which illustrates the point FT makes above):

(Charts: Deutsche)

And finally, for those who missed it:

(Charts: Citi)

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Also see “A Trade War With China Will Plunge The World Into Recession — But This Idiot Doesn’t Care,” one of the more popular posts from December.