8/5/2020 It’s the end of globalism as we know it (and I feel fine) | Financial Times

FT Swamp Notes Global Economy

It’s the end of globalism as we know it (and I feel fine)
For the most part, its unravelling ought to be of deep concern. But we need a new
social compact

© Dreamstime.com

Edward Luce 5 HOURS AGO

FT subscribers can click here to receive Swamp Notes by email.

It has become increasingly obvious that 2006 was the peak year of globalisation. At
the time it didn’t feel that way. But the story since then has been of a downward
tilted plateau after the 2007-08 financial crisis, followed by a steeper downturn
after Donald Trump’s election, cascading into a far sharper one now in the midst of
the first truly modern pandemic. For the most part, the unravelling of globalism
ought to be a source of deep concern. If you want to know what’s good about
globalism, you should measure it by its enemies: men such as Trump, Viktor Orban
and Jair Bolsonaro. They want a world of zero-sum nationalisms that will leave
everyone worse off and less secure but their own domestic powers enhanced.
America First stokes China First and vice versa. Swampians do not need me to
spell out the consequences of a 21st-century conflict between the world’s foremost
powers.

https://www.ft.com/content/3b64a08a-7d91-4f09-9a31-0157fa9192cf 1/5
8/5/2020 It’s the end of globalism as we know it (and I feel fine) | Financial Times

Global dis-integration (emphasis on the hyphen) was already under way. It was
sufficiently obvious for me to write this six years ago. Trump and now Covid-19
have dramatically accelerated the journey. Here are the downsides. First, it will
make the world less safe. As Kevin Rudd, Australia’s former prime minister, argues
in Foreign Affairs magazine, we are entering an age of anarchy. Nobody is winning
the pandemic. Both China and the US will emerge from it weaker than where they
started. Not to mention the EU.

© Dreamstime.com
For all his “face mask diplomacy”, Xi Jinping’s legitimacy is increasingly being
called into question. China’s suppression of information about the early outbreak
and censoring and jailing of whistleblowers has created fissures at home. But the
collapse of China’s economic growth poses a far greater threat to the regime. Since
the cultural revolution, China’s unwritten social compact has been that its people
will tolerate autocracy as long as the autocrats deliver ever-rising standards of
living. In a world of non-existent demand and retreating global supply chains,
China’s era of export-led growth is over.

https://www.ft.com/content/3b64a08a-7d91-4f09-9a31-0157fa9192cf 2/5
8/5/2020 It’s the end of globalism as we know it (and I feel fine) | Financial Times

America’s failures have been even greater both at home and globally. As Rudd puts
it: “Don’t look to the United States for help during a genuine global crisis because it
can’t even look after itself.” Instead of shoring up global institutions, such as the
World Health Organization, the US has been undermining them. In the absence of
US leadership — whether through the G20, the G7 or informally — it is every
country for itself. China is rushing to fill the vacuum at the WHO and elsewhere.
But Beijing is incapable of forging a global consensus. The result, as Arvind
Subramanian puts it in an excellent analysis for Project Syndicate, is a world of “G
minus two”. We are on board a rudderless ship. The damage America is doing to
itself is incalculable. As Rudd puts it, Trump is playing the role of “quack
apothecary”. During the 2016 election Trump kept saying, “the world is laughing at
us”. He has made that wish come true. Even now, more than three months after
America’s first death from Covid-19, the US learning curve is flatter than its
infection rate. It will be very hard for the US to rebuild its legitimacy after this.
Should Trump be re-elected, there will be no going back.

The second force behind deglobalism is the push for economic security. Nobody
wants to live in a world where China controls 90 per cent of the active ingredients
for our antibiotics and dominates medical equipment. Supply chains will pull back.
Costs will rise and, as Stephen Roach wrote in the Financial Times this week,
stagflation will eventually beckon. The era of easy money will be replaced by one of
more difficult money. All of us will be massively more indebted than before. So
why, to follow the headline on this Swamp Note, do I feel fine?

In truth, I don’t. I just couldn’t resist playing on the REM hit. But I have two
caveats to the thrust of this note. The first is that democracies need to regain
control over their economies. As Dani Rodrik put it in his “global trilemma”, you
must choose two of three of the following: democracy, sovereignty and
globalisation. You cannot have all three at the same time. In the last generation we
have given too much to globalisation, at the expense of democracy and sovereignty.
The resulting frustration generated Trump, Brexit and other gross distempers. We
need a new social compact and a new global deal. The second caveat is the end of
the chorus in the REM song: “It’s the end of the world as we know it and I feel fine
(time I had some time alone).” I am rather enjoying this time alone to reflect and
reappraise.

Rana, do you share my sentiments? I see you’ve been doing some spring cleaning.

Recommended reading

https://www.ft.com/content/3b64a08a-7d91-4f09-9a31-0157fa9192cf 3/5
8/5/2020 It’s the end of globalism as we know it (and I feel fine) | Financial Times

• My FT column this week looks at the risks posed to America’s

workforce by a premature reopening of the economy. “The US entered
the pandemic in a rousing spirit of equality,” I write. “It is gradually
exiting the lockdown more unequal than it began.”

• Do take the time to read Kim Stanley Robinson’s New Yorker essay
about how coronavirus is rewriting our imaginations. As a science
fiction author, Robinson says our dystopian future is already here:
“The sense that we are all now stuck in a science-fiction novel that
we’re writing together — that’s another sign of the emerging structure
of feeling.”

• Finally, my colleague Pilita Clark wrote amusingly about why she

won’t miss the era of splurge shopping. She quotes the British
ecological economist Tim Jackson about how we spend “money we
don’t have, on things we don’t need, to create impressions that won’t
last, on people we don’t care about”. My sentiments entirely (although
I will continue to spend some of my earnings on high-quality cabernet
sauvignon).

Rana Foroohar responds

Ed, I’ve always loved that Rodrik quote, and agree that we need more democracy
and sovereignty at the moment to balance the past four decades of globalisation.
But like you, I’m unclear about what the new global economic paradigm should look
like to facilitate this in a benign way. We don’t want to go back to the 1930s. And
we don’t want to trigger a sudden bout of inflation.

But even beyond this, there are bigger systemic questions — can we, for example,
have some localisation of supply chains without localisation of capital flows? And
can we have the latter if the dollar remains the global reserve currency? The past
40 years have been predicated on a complex system of neoliberalism that is slowly
but surely coming undone, but as of yet, we don’t have any global replacement.

Until we do, it seems very likely that we will get more of the downside than the
upside of deglobalisation. In that world, to quote another REM tune, “everybody
hurts”.

Your feedback
And now a word from our Swampians...

https://www.ft.com/content/3b64a08a-7d91-4f09-9a31-0157fa9192cf 4/5
8/5/2020 It’s the end of globalism as we know it (and I feel fine) | Financial Times

In response to From ‘just in time’ to ‘just in case’:

“The American economy needs to be more resilient. But why should companies
make any big changes when the Treasury and Fed are so quick to deploy trillions of
dollars to protect them? I would not suggest government should have allowed the
economy to collapse, but when the crisis is past, the beneficiaries of public support
should step up and accept responsibility to repay the costs incurred. Our
lawmakers should be making that clear now.” — Paul O’Brien, founder, The Global
Fox, Wilson, Wyoming

“There is a frequently articulated fundamental weakness in stock markets: short-

term profit maximisation to the detriment of strategic positioning and
resilience. Resilience requires buffers, and strategic positioning often requires the
short-term sacrifice of profit maximisation. The stock market model also
exacerbated the financial crash as the fastest growing institutions (with deeply
flawed risk-pricing models) were handsomely rewarded by the market and also
fatally forced those institutions, of a more cautious disposition, to face being
abandoned by investors or get on board. I fear once again the stock market will be
very poor at rewarding those who manage resilience well.” — Denis Culligan,
property manager, St Remy de Provence, France

We’d love to hear from you. You can email the team on swampnotes@ft.com,
contact Ed on edward.luce@ft.com and Rana on rana.foroohar@ft.com, and
follow them on Twitter at @RanaForoohar and @EdwardGLuce. We may feature
an excerpt of your response in the next newsletter.

Copyright The Financial Times Limited 2020. All rights reserved.

https://www.ft.com/content/3b64a08a-7d91-4f09-9a31-0157fa9192cf 5/5