Globalisation slows down amid national concerns

By Aftab Ahmad

During the last few decades, the world had moved towards growing global economic integration that served to bring different countries closer to one another. In 1944, Bretton Woods Conference resulted in the creation of International Monetary Fund (IMF), World Bank (WB) and predecessor to World Trade Organisation (WTO). In 1989, World Wide Web was created, integrating the whole world into one single unit, through the Internet. During the same year, the Berlin Wall fell and socialist countries started switching over to market economy. The decade of 1990's brought with it policies of deregulation, liberalisation and privatisation and economic reforms were launched in many countries including Pakistan and India, to open up the economy and boost foreign investment. In 1995, the WTO was formed and subsequent years have witnessed increase in world trade and abolition of the textile quota.

Although the world is still a global village, governments have resorted to regulations in recent years to safeguard their national interests against the undesirable effects of globalisation. According to a report appearing in the US Press recently, the barriers among different nations had risen in recent years, as governments had moved to re-assert their role in the lives of individuals and businesses.

According to the aforesaid report, the energy sector had been among the first to witness the effect of nationalistic forces. Since oil prices started rising in 2004, Russia, Venezuela and some other countries had nationalised their foreign-owned oil assets. Due to the aforesaid situation, the giant oil company Royal Dutch Shell is now reported to be investing heavily in unconventional oil sources, which have little chance of nationalisation. For instance, the company had recently announced a $10 billion expansion plan in the oil sands in Canada. Besides, it is concentrating on biofuels made from algae and wood chips.

Similarly, liberal immigration policy – followed earlier – was now being viewed with concern from the United States to India. U.S. and Europe had become cautious and selective in obliging immigrants, after the terrorist attacks on their soil in recent years. Liberal immigration policy was opposed, also, on other grounds. Due to improved transportation in recent years, it has become easier for people to move across borders and compete for jobs with locals. This creates resentment among the local population. In 44 out of 47 countries polled by the Pew Research centre recently, majority had supported further restrictions on immigration.

Investment by foreign companies, in certain cases, is now also being resisted since it is suspected to be a part of the political agenda of some countries. According to a recent study by the Council of Foreign Relations, many national governments including the US, Canada, Germany, France, Japan, South Korea and Australia etc. have decided in favour of imposing restrictions on investment by state-owned firms of foreign origin in the strategic sectors of their respective countries. Lately, the Japanese companies have been reported to be building defences against takeovers by foreign firms. The initiative marks a departure from the past decade when Japan was moving forward to open up its economy to foreign investors.

Even the worldwide web is likely to lose its global character, as claimed in the aforesaid report. The Internet had been designed as a symbol for the border-less world. Individuals and private organisations could approach any website of their choice anywhere in the world. However, in compliance with the demand from a number of countries such as Russia, China, India and Saudi Arabia etc., the website addresses are now to be redesigned in the home languages of these countries. While this would no doubt be of help to the locals in using the web, the step would also change the global character of the world-wide web, since the redesigning of the website addresses in the home languages of nations would put many websites behind the curtain for users from abroad.

What had caused the change in the attitude of nations within only 1-2 decades of globalisation? There could be many reasons, as explained in the report. In the first instance, the terrorist attacks of 9/11 had shaken the world and national Governments had realised their responsibility to take appropriate measures to protect their people as well as their economy against any possible terrorist threats.

Secondly, countries enriched by the commodity boom had taken necessary steps to ensure that they fully benefited from it and that no share of their national asset went to any one else. For instance, Russia, Venezuela and some other countries had nationalised their foreign-owned oil assets, as already explained in the preceding paragraphs.

Thirdly, the sub-prime mortgage crisis had not remained confined to the US only. Some countries in Europe also were adversely affected, since in a globalised world the economies and banking in various countries are inter-connected. However, the crisis would now certainly put the national governments on their guard and they would consider measures to protect their economy against any such catastrophe in future.

Last but not the least; the soaring global food prices were forcing the poorer nations in Asia and Africa to erect new export barriers. This had become necessary for them in order to protect a significant percentage of their population, belonging to the lower income categories, from starvation. Moreover, shortage and high prices of food items may also lead to social unrest and political instability. Therefore, national governments must do whatever is in their power, to avert such a situation.

So, what is going to be the fate of globalisation in the coming years and decades? Certainly, global ties would continue to play their role in the event of natural calamities and disasters, as they did in tsunami or when the north-western part of Pakistan was struck by a devastating earthquake. Similarly, the United Nations, World Bank, IMF and other global institutions would continue to work for the world peace and prosperity, despite the restraints and bottlenecks that have, at times, made their job so difficult. For instance, the World Food Program is presently busy in mobilising resources, in order to be able to help the increasing number of the world's poor and hungry in the coming weeks and months, in the wake of the looming global food crisis, while the US has also pledged an amount of $770 million in emergency food aid.

However, in view of the experience gained during the last 1-2 decades of globalisation, the nations would like to make suitable adjustments in their immigration, foreign trade, investment and other policies, in order to fully protect their national interests against the hazards explained in the preceding paragraphs. Nevertheless, they would like to benefit, at the same time, from globalisation, in so far as it does not pose any threat to their national interests. No one can deny the usefulness of global ties. As a matter of fact, trade and economic cooperation among nations are helpful and necessary for economic growth and prosperity. But, the gain to one nation should not mean a loss to the other nation. The foundation of globalisation should be laid on this principle, in future.

So far as Pakistan is concerned, it passed through a difficult period in the initial years of globalisation, when downsizing and right-sizing, aimed at improving efficiency and productivity, had resulted in a surge in unemployment. Lowering of import tariffs left some of the local industries without protection, thus threatening their very existence. However, abolition of textile quota and greater market access had inter-alia led to the doubling of the country's exports from $8.5 billion to $17 billion within less than a decade. If the local textile exporters could not take full advantage of the situation, as they could not compete with China and India in the international market, the blame should be put on our own inefficiency rather than globalisation. It is a fact that the main culprit behind all our economic woes namely the ballooning trade and current account deficit, deteriorating exchange rate and double-digit inflation etc. had been our own poor governance and mismanagement of the economy. We can overcome our difficulties, to a great extent, by formulating the correct policies and setting our house in order.

What happens in globalisation is only that a crisis in any one country can quickly spread to other countries and assume a global proportion, as happened in case of the sub-prime mortgage crisis or the global food crisis. However, through vigilance and correct policies, nations can at least reduce the severity of a problem, as they are trying to do at present.