Nationalist rivalries are a real and rising threat to prosperity

 
Stephen King
Donald Trump Holds Campaign Rally In Las Vegas, Day Ahead Of State's GOP Caucus
Donald Trump has introduced protectionist policies as part of his "America First" approach (Source: Getty)

Today, the West looks at globalisation with increased suspicion. We are witnessing the emergence of new political narratives that both celebrate the supremacy of the nation state and criticise those who dare to think otherwise.

Brexit wasn’t just a story about “taking back control”. It was also, in effect, an attempt to re-establish a British identity. As Prime Minister Theresa May memorably – and controversially – put it at the Conservative party conference last year, we could no longer claim to be “citizens of the world”.

This new nationalism represents a remarkable shift in western political attitudes. In 1989, as the Berlin Wall came down, the West emerged from the Cold War seemingly triumphant. Francis Fukuyama, the American political scientist, proclaimed the “end of history”. Autocracy was over. Western liberal democratic values and free market capitalism were about to spread around the world. Economic progress was guaranteed. And we could all be rich.

It didn’t work out like that. Autocratic leaders – in Russia, Turkey, the Philippines and Eastern Europe – have attracted widespread domestic popular support. The West’s free market ethos received an almighty battering thanks to the global financial crisis, both at home and throughout the world.

Read more: Biggest US trade deficit since 2012 fans the flames of Donald Trump's economic nationalism

And with its diminished share of global economic output, the US could no longer so easily claim to be “first among equals”. 21st Century international institutions that dance to Beijing’s, not Washington’s, tune are emerging: the Asian Infrastructure Investment Bank rivals the World Bank; the Regional Comprehensive Economic Partnership fills the vacuum left following Donald Trump’s decision to withdraw from the Trans-Pacific Partnership; and the Shanghai Cooperation Organization ties China, Russia and Central Asian Republics together in a security and energy partnership that carries echoes of a pre-Columbus past.

Western economic growth was fading even before the onset of the crisis in 2007-08. The absence of a significant recovery in its aftermath has only made things worse. Income inequality has risen: between the rich and the rest in the US, where the top 0.0001 per cent of income earners have ended up with a big chunk of the spoils of economic success; between regions in the UK, where London has made staggering progress even as, for example, Wales has languished; and between countries in the Eurozone, where the gap in living standards between Germany and Italy has widened alarmingly since the euro was established in 1999.

Read more: 25 years later: Remembering the fall of the Berlin Wall

The reasons behind these disappointments include educational failures, constraints on social mobility, ageing populations, incomplete monetary systems (at least in the Eurozone), technology’s disruptive impact on labour markets and an excessive dependency on debt to fund economic expansion. Too easily, however, the West’s problems have, instead, been blamed on “the other”, the foreigner in our midst or, perhaps, the worker in some distant low-wage economy. As a result, the real and metaphorical borders that seemed to dissolve in front of our eyes following the end of the Cold War are in danger of being rebuilt.

There is nothing unusual about this. Since the late-19th century, political attitudes to openness in Europe have waxed and waned depending on the economic backdrop. Notably, periods following financial crises have typically been associated with a desire to retreat into the perceived safety and sanctity of the nation state. Yet the rivalries that subsequently ensued too often led not to peace and prosperity but, instead, to terrible economic, social and military upheaval.

Some argue that, today, such rivalries simply cannot happen. Technology supposedly removes borders. Yet technology can also help re-build borders both between and, more controversially, within nations. The spread of robotics may eventually lead to massive re-shoring, undermining the global supply chains that have been pivotal in spreading economic opportunity across the world. And, as social media expands, people with similar beliefs and illusions are increasingly able to connect with each other, leaving truth abandoned along the way. Such “herding” leads to increased political polarisation and foments the spread of populism.

Read more: China's President Xi Jinping says effort to build a new Silk Road will reject protectionism

Ultimately, globalisation depends not on technology but, instead, on ideas and the institutions within which those ideas are embedded. If nations opt for a game of blame and counter-blame, globalisation will end up in serious trouble. And if the US continues to retreat into its isolationist past, we’re likely to find ourselves returning to the superpower rivalries that had seemingly been abandoned with the fall of the Berlin Wall.

Put another way, and contrary to the optimism associated with the end of the Cold War, we are witnessing the return of history, warts and all. And it’s difficult to avoid the conclusion that the world could end up poorer as a result.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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