The worldwide trend towards the market, which can be called globalisation, combined with new technologies, is providing the most dramatic economic transformation seen in generations. With analysts indicating that these shifts mean a four-fold increase in the number of workers available to the world economy, massive structural change is taking place.
Pendulum swings
But just as the strength of China, India and others becomes apparent, fear is beginning to grip a number of developed countries and, for some, the pendulum is starting to swing away from globalisation towards its polar opposite: protectionism.
And in a deal that was initially approved by President Bush, in early March the US Congress effectively stopped the sale of five US port terminal facilities to Dubai Ports World. Congress’s message to the world is that it would not only over-rule its president, it was happy to slap a close ally in the face and threaten its own supposed open investment culture – all in the name of spurious domestic security considerations.
The Dubai ports disaster shows that the world’s largest economy was prepared to change the rules, undermining its investment credibility and signalling to others that this type of parochial behaviour is acceptable.
Given the US faces huge deficits that need to be funded, largely from abroad, and also needs foreign investment, it, like others, can ill afford to shun the outside world and take an isolationist stance.
In France, protectionism is also rearing its head with discussion of national champions in the energy area and opposition to cross-border mergers in the steel sector, based on nationalistic issues. Nevertheless, BNP Paribas’ recent acquisition of Italy’s BNL suggests some in France can think beyond their own borders.
Wrong way to go
In this period of radical economic transformation, globalisation presents real challenges for both developed and emerging economies and the answers are not easy. But protectionism and trying to maintain the status quo are not the way forward.
Those in Washington, Paris and elsewhere who believe that power can be maintained through isolationism and nationalism are in for a rude shock. The US is likely to pay heavily for its mistaken decision on the Dubai ports issue.
