Succeeding in de-globalization | The Press

The first meeting of the World Economic Forum in over two years was markedly different from the many previous Davos conferences I have attended since 1995. It is not just that the crisp snow and clear skies of January have been replaced by bare ski slopes and a dismal drizzle in May. Rather, it was that a forum traditionally committed to defending globalization was this time primarily concerned with the failures of that globalization: broken supply chains, inflation of food and energy prices , an intellectual property (IP) regime that has left billions of people without COVID-19 vaccines just so a few pharmaceutical companies can reap billions in extra profits.

Joseph E. Stiglitz
Professor at Columbia University*

No more unfettered globalization

Among the proposed responses to these problems are “relocation” or “localization in friendly territory (friend shoring)” of production, as well as the adoption of “industrial policies aimed at increasing the production capacities of countries”. The days when everyone seemed to be working for a borderless world are over; suddenly everyone recognizes that at least some national borders are essential to economic development and security.

For those who once advocated unfettered globalization, this about-face has brought cognitive dissonance, as the new set of policy proposals imply that the long-established rules of the international trading system will be bent or broken.

unable to reconcile the friend shoring with the principle of free and non-discriminatory trade, most of the business and political leaders present in Davos resorted to platitudes. They have made little attempt to understand how and why things went so wrong, or to question the flawed and hyperoptimistic thinking that prevailed during the heyday of globalization.

Of course, the problem is not limited to globalization. Our entire market economy has shown a lack of resilience. We’ve essentially built cars with no spare tires – looking to shave a few dollars off the price today while ignoring future demands. Just-in-time inventory systems were wonderful innovations as long as the economy faced only minor disruptions; but they are a disaster in the face of production shutdowns like those caused by COVID-19, creating cascades of supply shortages (like when a shortage of electronic chips led to a shortage of new cars).

Western advocacy discredited

As I pointed out in my 2006 book, Making Globalization Work, markets fail to properly “price” risk (for the same reason that they fail to price carbon dioxide emissions). Take the example of Germany, which has chosen to make its economy dependent on gas supplies from Russia, a patently unreliable trading partner. Today, she faces consequences that were both foreseeable and predicted.

As Adam Smith already recognized in the XVIII^e century, capitalism is not a self-sufficient system, because there is a natural tendency to monopoly.

However, since US President Ronald Reagan and British Prime Minister Margaret Thatcher ushered in the era of “deregulation”, increasing market concentration has become the norm, and not just in high-profile sectors like e-commerce and social media. The disastrous formula shortage in the United States this spring was itself the result of monopolization. When Abbott was forced to suspend production for safety reasons, the Americans quickly realized that a single company accounted for almost half of the American supply.

The political ramifications of the failures of globalization were also on full display at Davos this year. When Russia invaded Ukraine, the Kremlin was immediately and almost universally condemned. But, three months later, emerging markets and developing countries have adopted more ambiguous positions. Many point to the hypocrisy of the United States in demanding accountability for Russia’s aggression when it invaded Iraq under false pretenses in 2003.

Economically more developed countries also point to the more recent history of vaccine nationalism from Europe and the United States, backed by World Trade Organization intellectual property provisions imposed on them 30 years ago. year. Moreover, it is the developing countries that are now bearing the brunt of the brunt of rising food and energy prices. Combined with historical injustices, these recent developments have discredited Western advocacy for democracy and the international rule of law.

Certainly, many countries that refuse to support the United States’ commitment to democracy are not themselves democratic anyway. Nevertheless, other countries are, and the United States’ position to lead this fight has been undermined by its own failures — from systemic racism and the Trump administration’s flirtation with authoritarians to the Republican Party’s persistent attempts to limit the opportunity for voters to speak out and distract from the January 6, 2021, uprising on the U.S. Capitol.

A missed opportunity

The best way forward for the United States would be to show greater solidarity with developing countries by helping them manage soaring food and energy costs. This could be done by reallocating the special drawing rights of rich countries (the reserve asset of the International Monetary Fund), and supporting a strong waiver of intellectual property protection in the context of COVID-19 vaccines before the Organization. world trade.

In addition, high food and energy prices risk triggering debt crises in many poor countries, further exacerbating the tragic inequalities associated with the pandemic. If the United States and Europe are to show true global leadership, they must stop siding with the big banks and creditors who have pushed countries into more debt than they can afford.

After four decades of promoting globalization, it is clear that the leaders assembled in Davos have mishandled things.

They promised prosperity for both developed and developing countries. However, while Western multinationals were getting richer, the processes that could have improved everyone’s situation have, on the contrary, made enemies everywhere. The concept of leverage or trickle downthat is, the claim that getting richer people will automatically benefit everyone, was a scam – an idea that was not based on any theory or evidence.

This year’s Davos meeting was a missed opportunity. It could have been an opportunity for serious reflection on the decisions and policies that have brought the world to where it is today. Now that globalization has reached its peak, we can only hope that we can manage its decline better than we managed its rise.

* Nobel Laureate in Economics and member of the Independent Commission for the Reform of International Corporate Taxation

Translated from English by Timothée Demont

Copyright: Project Syndicate, 2022