What the Current Wave of Protectionism and Populism mean for the Future of Globalization and Free Trade

The Rise of Populism and Protectionism

The election of President Trump represents the cusp of the current wave of protectionism and populism that emerged in the aftermath of the Global Financial Crisis of 2008.

As the Brexit vote and the emergence of populist leaders such as Vladimir Putin in Russia showed, the disaffection and dissatisfaction among the masses against globalization and free trade as well as outsourcing have boiled over leading to the current wave of protectionism and populism in the United States and Europe.

Indeed, even the developing economies have been affected by nationalism and a revolt against the liberal order as can be seen in India and other Asian countries.

Revolt against the Establishment

The reasons for the emergence of these leaders and trends is that the average person viewed globalization and free trade as benefiting “a few instead and at the expense of many”.

Further, with the loss of manufacturing jobs due to outsourcing and the falling wages due to globalization which led to poor immigrants working for below the normal wages, the people who lost out in this process had every reason to be aggrieved and unhappy leading to them voting “with their feet”.

Retreat of Globalization? Not So Fast!

So, the slogans of America First, Make in India, and Take Back Control which are the campaign promises of Trump, Modi, and the Brexit proponents mean that globalization would take a back seat and instead, we would witness a closed-door West and a protectionist India?

The answer is not so easy or straightforward because globalization has progressed and evolved to such an extent that while it might have temporary setbacks, the intertwined and integrated global economy is resilient to withstand such shocks.

Moreover, given the fact that many globalized economies are still encouraging the financial aspects of globalization mean that the process is definitely not turned back.

Causes of People’s Anger must be Addressed

Having said that, one must also consider the fact that if the present wave of populism and protectionism continues and picks up speed, we would not be able to predict either the direction or the speed at which it would “collide” with the waves of globalization.

Indeed, the fact that there is much resentment against the bankers and globalists after the Great Recession of 2008 means that unless such grievances and anger are addressed, populism will gain strength and protectionism would gain support which can undermine free trade and globalization.

This is the crux of the matter and the fact that as of now, the revolt against the elites has not been addressed or the causes solved means that populist anger and protectionist rhetoric might well turn into a fully fledged war against the establishment.

Moreover, the fact that the White Working Class in the United States continues to suffer stagnant wages and loss of jobs due to automation means that it is indeed urgent to address and redress those concerns.

In other words, whether globalists or the populists abate such anger, the fact that such concerns have some basis to them means that time is running out before the situation gets ugly and there is an open revolt against free trade and globalization.

Need for Dialogue and Conversation

This can result in attacks on immigrants, mass uprisings, and public revolt and agitations that can implode the system.

Thus, we contend that both the proponents as well as opponents of globalization come to a common understanding of what needs to be done to not lose the gains that have accrued due to globalization.

Despite its many flaws and contradictions, globalization and free trade have indeed benefited large swathes of people worldwide, and hence, it is better if we improve globalization and address the imbalances in trade for mutual benefit.

Future of Globalization might lie in the East

Having said that, one must also consider the fact that while the United States and Europe are turning inwards, China is opening up to the world and gaining influence and prestige on the world stage by courting African and Latin American countries in need of assistance thereby opening a new front in the globalization process.

Indeed, it can be said that the future of globalization might very well lie in the East rather than in the West which taken together with a growing India that is also opening up to the world, means that there would be a rebalancing in the global economy.

Competing and Colliding Waves

Thus, what we have is the present process where financial globalization has gained strength and trade led globalization has weakened. This is again a recipe for disaster since it was precisely the former that led to the Global Financial Crisis.

Pay close attention to the above sentence, and you would realize that global finance is as strong or perhaps, stronger than before, whereas trade and outsourcing, as well as immigration, are being threatened.

So, the obvious inference here is that we are no better at solving the problems of speculation and excessive financialization that led to the Crisis and hence, we contend that the status quo is simply unsustainable.

Conclusion: Make Free Trade Fairer and Globalization More Equitable

Lastly, the point to be noted here that just as globalization became an elite-driven and elite benefiting process, protectionism and populism too can become mere slogans that do not benefit the victims of the former.

Thus, the urgent need is to make free trade fairer and globalization more equitable.

To conclude, while we cannot predict what happens next with all these competing waves crashing into each other, we can at least state that unless there are some dialogue and conversation about these aspects by the global policymakers and influencers, we might stumble into another crisis.