Is the waning of globalisation giving way to sovereign nationalism?

However, the pace of globalisation was especially accelerated throughout the 20th century, especially towards its end, with the financialisation of the global economy in the 1970s. This financialisation imparted a major impetus to globalisation – an impetus that, paradoxically, has contributed to a growing backlash against it over the last decade. 

Financial impetus to globalisation and India’s economic reforms 

This financial impetus to globalisation was in the form of enhanced flows of trade and investment across the borders of nation-states. However, when it comes to the movement of labour and migration, there can be noticed a contrast in terms of resistance to such flows. 

As far as the enhanced flow of trade and investment was concerned, this was evident in the lowering of tariff barriers and the vast increase in cross-border financial transactions. Meanwhile, the revolution in communications technology through satellite links and the internet further accelerated the process of globalisation.

The sheer magnitude of these flows led many people to believe that nation-states, with their well-defined boundaries, would become obsolete. The fall of the Berlin Wall and the end of the Cold War in the late 1980s and early 1990s further fuelled this belief. 

An indicator of this confidence was found in a popular book by the New York Times columnist Thomas Friedman, The Lexus and the Olive Tree (1999), which seemed to interpret globalisation as an irreversible and unstoppable force.

At the same time, the 1991 economic reforms under Prime Minister PV Narasimha Rao, with Manmohan Singh as the Finance Minister, represented India’s adoption of and adaptation to globalisation. These reforms brought an end to the infamous ‘license permit raj’ that tended to stifle entrepreneurship. Rates of direct taxation were lowered as they were perceived to act as a disincentive to individual initiative.

The economic reforms entailed a combination of liberalisation, privatisation, and globalisation, summed up by the acronym LPG. As the reforms continued throughout the decade of the 1990s and into the early and mid-2000s, the Indian economy gained remarkable momentum and achieved growth rates close to 10 per cent.

The 2008 financial crisis sounded the alarm on globalisation 

But the troubling signs for globalisation became evident with the 2008 financial crisis. It all began with the sub-prime mortgage crisis in the US, when banks started giving housing loans to borrowers who lacked the capacity to repay them. The adverse effects rapidly spread to the Eurozone. The 2008 financial crisis was not just a failure of the banking system but also of the unregulated free market thinking closely linked to globalisation. 

Responses to these failures – from governments of major countries in North America and Western Europe, as well as those of international institutions such as the International Monetary Fund (IMF), the World Bank, and the European Central Bank (ECB) – tended to be on the lines of adjusting the distortions of the free market, rather than questioning the free market model itself. In other words, the solution to market failure was more free markets. This approach was captured in the famous rationale behind bailing out banks – they were ‘too big to fail’.

One of the major fallouts of the accelerated globalisation since the 1980s was the deindustrialisation of hitherto industrialised areas in many parts of countries like the US and the UK. Many of the manufacturing jobs that were created by an earlier phase of industrialisation vanished as deindustrialisation set in. In this way, deindustrialisation appears to be a negative side-effect of globalisation in the first world.

This led to resentment among the working class of advanced capitalist economies of the West. The unemployment accompanying globalisation was seen as denying the working class the very essential activity that defines the class itself – work and employment. Jobs that have been created to replace these earlier manufacturing jobs are often far more precarious and contractual, forming part of what is called the ‘gig economy’, marked by long working hours and lack of social security.

The Brexit referendum in the UK in 2016 and the election of Trump as the President of the US in the same year are seen as manifestations of the discontent against globalisation and its perceived failures.

Globalisation’s fallout and growing assertion of nationalism

What we are witnessing today is greater trade protectionism, especially in the world’s largest economy, the US, which has recently slapped 50 per cent tariffs against Indian goods. Protectionism represents a reaction against globalisation, often in the form of high tariff barriers. This is just one instance of the return with strength and vengeance of the nation-state.

The reaction to globalisation has also manifested as a reassertion of the sovereignty of the nation-state. During the prolonged Brexit process – Britain’s withdrawal from the European Union, considered to be the largest and most successful trading block created in the 20th century – we could see reassertion of the UK’s sovereignty, captured in the slogan, ‘Let’s take back control’.

The revival and reassertion of the nation-state’s sovereignty in the wake of the decline and rolling back of globalisation has also taken the form of opposition to refugees and economic migrants. There is an attempt to close and tightly regulate borders to prevent the infiltration of foreigners, who take away jobs and other opportunities from citizens who are said to have first claim over them.

Hence, Trump has talked about building a wall across the US-Mexico border. In Europe, immigration is such a major issue that it tends to dominate elections. Overall, the revolt against globalisation can be seen in the growing assertion of nationalism across nation-states – an assertion that is seen as an antidote to the perceived failures of globalisation.

Post read questions

With the waning of globalisation, the post-Cold War world is becoming a site of sovereign nationalism. Elucidate. 

The financialisation of the global economy in the 1970s imparted a major impetus to globalisation – an impetus that, paradoxically, has contributed to a growing backlash against it over the last decade. Evaluate. 

Post-liberalisation, what structural changes enabled the Indian economy to achieve near double-digit growth rates? 

Has globalisation led to the reduction of employment in the formal sector of the Indian economy? Do you see increased informalisation as detrimental to the development of the country?

The 2008 financial crisis was not just a failure of the banking system but also of the unregulated free market thinking closely linked to globalisation. Comment. 

(Amir Ali is an Assistant Professor at the Centre for Political Studies, Jawaharlal Nehru University, New Delhi)

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