The flag waving on Wall Street may have failed to rally the market initially, but the massive layoffs may just produce a sufficient backlash to set back globalization for a while. Even the IMF is urging emergent economies to stop looking at the major economies for their markets, as if we have a viable alternative choice.
More and more I see articles on the Internet that call on American consumers to start buying as a patriotic duty. And while they are at it, they are urged to buy American to save jobs in the 50 states. Buying goods made in China may save the consumer money, but it isn’t going to help the American industry save jobs. And Americans are being told to look beyond themselves as their contribution to the war against terrorism.
Other countries, feeling the pinch of slowing economies, are telling their citizens to buy local as well. Keeping jobs, creating jobs, that’s what survival is all about. The Americans didn’t think twice about bailing out their ailing airline industry even if a subsidy of that magnitude amounts to unfair competition for airlines of countries that are unable to help their flag carriers in similar fashion. America and the rest of the G7 nations will not feel guilty resorting to subsidies and non-tariff barriers as normal strategies for survival. Old fashioned protectionism is upon us, no matter how they might disguise it.
The movement towards globalization is by no means over. But its pace will be slowed down. And it just might as well be the case. Many countries, ours included, are finding it difficult to catch up. Rich countries are able to maximize their advantage over everyone else. Poor countries are seen as nothing more than consumers except that no one seems to have thought about giving them purchasing power.
Stephen Roach of Morgan Stanley in New York says this is not the first time globalization faces the possibility of being stopped in its tracks. In an article going around the Plaridel newsgroup, he is quoted as saying that there is "an inherent instability in the current wave of globalization that is strikingly reminiscent of forces that led to the demise of earlier efforts."
"Ever-widening income disparities underscore the plight of those who do not benefit from globalization," Mr Roach observes. "Periodic financial crises put pressure on a similar disenfranchised segment of the world. These mounting economic tensions between the ‘haves’ and the ‘have-nots’ are a breeding ground for the social and geopolitical instability that always seems to have the final say on globalization." In other words, there is nothing new with our globalization pains and the reasons why globalization is in danger of failing again.
Roach observes that historically, "this wouldn’t be the first setback for globalization… The integration of the Atlantic economy in the 19th century held out the promise of powerful convergence within Europe and between Europe and the United States. Yet this seemingly unstoppable trend ultimately sowed the seeds of its own demise, leading to a geopolitical backlash that culminated in the Great War of the early 20th century.
"Yet another wave of globalization occurred in the inter-war period of the 1920s, only to be brought to an abrupt end by the Great Depression and a renewed outbreak of worldwide war." He cited a study that identified three key characteristics of the globalization of the Atlantic economy in the 19th century that led to a backlash – ever-widening cross-border income inequalities, unstable trade and capital flows, and mounting geopolitical tensions.
Still another study noted "systemic problems in the banking system and a reaction against international migration. Both studies end with the warning that there is nothing inevitable about globalization. In the initial rush to convergence, the trend almost always seems unstoppable. But then it invariably succumbs to the unintended consequences it has spawned." All these sound eerily familiar to us, even before September 11 came upon us.
He concludes that "the shocking events of September 11 could well bring those lessons of history to a head. If that history is at all relevant – and I suspect it is – there’s understandably a new sense of urgency to the survival of globalization."
As for us in this beautiful country of 7,000 islands, we just might get a second chance of doing it right. We should use the time off, if indeed we will get one, to prepare for the return of globalization. It is not just a question of Buying Philippine-made, even if that’s a start. We should choose our champion industries, nurture them and make them world class competitors ready to do battle when the world economy turns.
I am dreaming, of course.
Mr. Aniag also raises a good point: "Can you imagine the macroeconomic effect if all the banks would just relax in collecting past-due loans?" Indeed, the official non-performing loan levels of banks seem to be understated as it is. Banks, like the entrepreneurs who are their clients, also feel the pain of wrong decisions made in the past. But we do need a strong banking system if our economy is to recover and thereafter, move on.
Never test the depth of the water with both feet.
(Boo Chanco’s e-mail address is bchanco@bayantel.com.ph)