Even before the global financial crisis, I’d been pointing out the various possibilities for a globalization backlash. It seemed pretty likely that opposition to the enormous transfer of wealth from developed to developing countries would eventually be couched in regulatory concerns, whether social or environmental. The global downturn is likely to accelerate that process, and spread it to emerging-emerging commerce as well. As an illustration, India just relaxed a recent outright ban on Chinese toys, limiting it instead to products not covered by global certification agencies. That provides the necessary cover for now.
But while all economists are voters, not all voters are economists. Which means that eventually, political necessity is likely to make for bad economics, and that, in the words of AFCEA’s John McCreary, “globalization has reached its high-water mark in this lifetime.” Using Latin America and Russia as illustrations, McCreary predicts four major consequences: decline in world trade; increased isolationism, protectionionism and economic self-sufficiency; more nationalizations; and a rise of authoritarian governments.
It’s also remarkable how the very language of globalization has rapidly changed in the aftermath of the crisis: “networked” and “connectivity” have been replaced almost overnight by “exposed” and “contagion.” In ways both symbolic and literal, the credit crisis is the economic equivalent of avian flu. In fact, it wouldn’t surprise me if there were some politico-economic lessons to be learned about the spread of the subprime virus from the politico-medical responses to the spread of the H5N1 virus.