GLOBALISM OR NATIONALISM?

1. Sovereign Wealth Funds.  There are now state-funded investment pools from Asia and the Middle East that are shaping the future of international finance and propping up wobbly financial institutions in the United States and Europe.  These have the interests of the sovereign state at heart, not global finance.
2. Since 9/11, the world has been focused on security concerns that can only be addressed by national governments.  And certain states are asserting their national power, arguing that it is in the interest of national security.  Consider Venezuela nationalizing oil fields and Russia cutting off natural gas supplies to Western Europe. 
3. National boundaries and regulations are going up over the Internet.  Pressured by Russia, China, India and Saudi Arabia, the US company that assigns Internet addresses is working on ways for countries to use characters from their home languages.  Although it will aid these countries in navigating the Web, it will also place many sites behind curtains to users from abroad.  Davis writes:  “That would spell the end of the days when anyone with a keyboard that produces Latin letters can see sites in any land—essentially taking the ‘world-wide’ out of the World Wide Web.”
4. Immigration is causing a severe backlash in some countries.  Consider Burmese in India, Haitians throughout the Caribbean, Bolivians in Argentina and Zimbabweans in South Africa.  This is to say nothing of Hispanics in the US.
5. High food prices are prompting governments to erect new export barriers where none had existed.  Davis writes:  “In the past, developing nations essentially ratified global trade deals negotiated by the US and Europe.  But Brazil, India and China are no longer following that script.”  Protectionism is back!
6. Under most global trade deals, developing countries have the right to override patents in emergencies, but few have ever done so.  Pharmaceutical companies such as Merck are finding that some countries (e.g., Brazil) are now doing just that.  Some drugs can be made more cheaply within the borders of a nation and do not need to be imported.  Although technically a violation of a patent, national self-interest is dictating such actions.
7. Energy companies are feeling the effects of the new nationalism.  Consider that since 2004, Russia, Venezuela, Bolivia and Ecuador have nationalized foreign-owned oil assets. 
8. Many national governments are raising barriers against foreign investment of many types.  China and Russia are staking out “strategic sectors” where foreign investment would be restricted.
9. Many nations are now questioning the wisdom of the Kyoto Protocols, which supposedly are to reduce greenhouse gases from polluting the atmosphere.  But with the US not signing the Protocols and with China and India exempt, national governments are questioning the wisdom of adhering to this agreement.

The end result of all these trends is that we will probably see greater immigration restriction, more difficulty reaching global accords of any kind and increased protectionism when it comes to international trade.  Was Tom Friedman wrong?  No, not necessarily.  But the vision of a global, well-integrated economic engine will need some refining.  Strong nationalism is in clear resurgence and the benefits of globalization are being questioned.  Raw provincialism is trumping the benefits of internationalism—at least for the short term.

See Bob Davis, “Global Ties under Stress as Nations Grab Power” in the Wall Street Journal (28 April 2008).

Print