Opinion Circles on the globe
Globalisation was made possible by three premises.
Globalisation was made possible by three premises. Countries would foster globalisation to the extent that it served the objectives of their national power. Globalisation grew out of a sophisticated nationalism; it did not in any way negate it. Second,globalisation depended heavily upon the ability of elites to manage domestic politics. Finally,globalisation also required a broad ideological consensus,a compact among global elites in favour of certain modes of regulation.
The recent meeting of the G-20 finance ministers once again highlighted how all three of these assumptions are unravelling,creating immense uncertainty. The G-20 agreed on certain steps,including restructuring of power within institutions like the IMF. They also agreed on broad objectives,like avoiding protectionism and rebalancing the global economy. But these are articulated at a high level of abstraction,more in the nature of we agree on the need for agreement. There is not yet a clear path on how to get there. Charging the IMF to study what might be done to rebalance the economy is to paper over existing contradictions,and to euphemistically acknowledge that there is not even intellectual clarity over the path out,let alone political agreement.
Economists can better debate the policy prescriptions appropriate for a healthy balancing of the global economy. But it is worth thinking about how specific policy constraints have come to be even more explicitly re-embedded in politics,and larger nationalist frames. This is so in several respects.
It has sardonically been pointed out that the shifting balance of power under globalisation means simply one thing: the domestic politics of more countries have potential veto over the terms of global cooperation. Globalisation is the linking of different forms of local politics,it is not transcending them. And these local politics now are going in different directions,giving international negotiations more of a political zero sum character. Whatever the appropriateness of the Chinese currency regime,Chinese discourse is at least more candid in making a direct link between its domestic concerns and its international stance. The regime seems to be unrelenting in its commitment that in the short to medium term employment policies require keeping the Chinese export machine going. The argument has a ping pong quality to it: the rest of the world seems to be saying to China,that if the global economy is not in order,the Chinese will also suffer. The Chinese in turn seem to be saying,if the process of adjustment creates a legitimacy crisis in China,the global economy will suffer. And so the argument goes in circles.
The second striking thing about the current conjuncture is the weight of history on economics. This is manifested in two ways. First,it is proving incredibly difficult to fundamentally change economic models; there is a great deal of path dependence to what countries feel comfortable doing. The Chinese cannot alter the dominance of exports; the US cannot alter the dominance of finance and so forth. In short,structural change is proving difficult.
The second sense in which history matters is that,along with these structures,each nation has an internalised narrative over what economic structures have legitimacy. It is proving ideologically difficult to domestically counter the weight of these inherited narratives. One can quibble with President Obamas policy decisions. But it is hard not to think that the resulting politics that has ensued,from the Tea Party movement to the defensive waffling of the Democratic Party,has a lot to do with the voters inability to come out of their comfort zones of ideological imagination,even in a time of crisis. It may be just a conjecture. But there is something to the thought that the British are able to push through austerity measures (whatever their desirability),while the French struggle,because of Britains memory and experience of a certain kind of Thatcherism,which makes the experience of rolling back the state more within the horizons of possibility. In short,not just structures,but even ideological narratives have a kind of stickiness that comes in the way of economics.
The third striking thing,which is never explicitly articulated but not concealed either,is this. The ideological articulations of countries are not just catering to their national interests and domestic concerns. It is also that their specific models and choices are wearing the garb of global virtue. Part of the Chinese case is not just that their actions benefit the Chinese,but that Chinese policies and growth strategy have literally lifted the fortunes of dozens of countries,particularly raw material exporters. The Germans in turn are convinced of not just the virtue of their model,but the authority it gives them to pronounce on the inappropriateness of US action. The US,having lost a little bit of authority to tell the world what the best prescriptions are,is now subtly playing the victim card: victim of Chinese intransigence,victim of generous tax breaks that benefit Bangalore and so forth. These are inevitable arguments in a global negotiation. But they also point to how the world will have to cut through the fog of self-righteousness that is again re-building in the global economy.
So globalisation is threatening to move to a different phase. Instead of a non-zero sum game,in which elites of the world had congruent interests and could collude in the production of some kind of global consensus,we are moving to a world where different countries are trying to shape globalisation in their own image,where elites in different countries see greater domestic costs in colluding with terms being set by the global economy,and where ideological consensus is being replaced by genuine uncertainty over the consequences of different courses of action. All kinds of unlikely alliances are also possible. At one simple characterisation,the new cold war is between countries that are running surpluses versus countries that are running deficits. But this is upsetting standard alliances. Germany and China are closer on their assessment of the US. Brazil is taking interesting positions of its own,basking in the glory both of its recent economic success and the example of its social programmes.
The sheer fact of global interdependence should help mitigate these emerging contradictions. But there is one more complication: even if there is a commitment to cooperate,all transition paths will require both delicate economic juggling and some domestic political risk. This is an environment where distinction between the poison and the cure for the global economy is looking very thin indeed. Perhaps even more so than ever,economic logic now depends on an even more mercurial art: politics and leadership.
The writer is president,Centre for Policy Research,Delhi express@expressindia.com
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