Is Brexit a Step in De-Globalization?

BC

Britain started a period of globalization back in the 1870s; It sharply lowered its tariffs on imports, generating a great deal of world trade. Large numbers of population were on the move--not refugees but aspirational immigrants to the US, in particular, seeking opportunity. The "victorian internet -- the telegraph -- served sort of the same function then that the Internet does now--fast long-distance communication.

It wasn't all an unmixed blessing: The robber barons earned a highly disproportionate share of the wealth, not unlike the present time. The 40-odd years of prosperous market expansion, global trade, etc. came to a halt in 1914. Trade barriers went back up, trade began to shrink, markets got smaller, etc. This regime did not come to an end, effectively, until the middle of the 1970s.

1968 to 2008 (roughly) was another period of globalization. Increasing trade, lower tariffs, new markets, (think Nixon in China -- the pay off wasn't immediate, but when it came it was big) more democracy around the world, and much greater concentration of wealth.

Brexit might be a de-globalizing move. In exchange for less inward movement of population and less EU regulation, Britain takes a (big) step away from the integrated European market of nearly 1/2 billion people.

It isn't clear what actual policies President-elect Trump will follow. He might wish to see at least selective import tariffs to protect some industries. He might follow through on loosening ties with allies who have received America military protection. He almost certainly will attempt to reduce further immigration into the country. All these are de-globalizing actions. No country alone can deglobalize the global market.

For perhaps very good reasons of their own, China and India (1 billion + people each) will wish to engage in less world trade and engage in more internal trade. A billion people is roughly the world population in 1900. Most likely meeting their own needs largely internally will be good for them. It won't be good for the world economy or for world trade. It won't be good for the United States.

Since 2008 world trade and the volume of money flows around the world have shrunk, not unlike the time immediately before 1914. There are fewer 'democracies' now than 20 years ago, and more aggressively defensive militaries are defending more home land areas.

Does it seem likely to you that we will continue in the direction of de-gobaization or not?

VagabondSpectre

Does it seem likely to you that we will continue in the direction of de-gobalization or not? — Bitter Crank

Short of massive and prolonged global recession, I don't think the world will continue heading toward de-globalization or more isolationism.

One thing I recall about the brexit vote is that it was largely the older demographics that voted to leave the EU (something reflected in the demographics of Trump's voters). What this tells me is that the elders of the millennials have very different political/economic views, and also perhaps that they are more politically engaged (at least in their willingness to vote).

If Brexit and (the Trump presidency from the American perspective) goes very smoothly, perhaps the values which drove the older generations to get out and vote could be imprinted on the existing youth. If not, then I would predict that Britain will eventually seek to re-enter the EU with the hope of restoring economic growth.

schopenhauer1

↪Bitter Crank

You seem contradictory.. Acknowledging that trade barriers are good for developing countries but then saying it is bad because of its possible slower growth in first world countries. What is the goal here of trade barriers? It is to protect jobs for one's own country right? However, those jobs just aren't there anymore due to mechanization.

I guess my point is what is the goal of any economic policy? If it's just "growth for growth's sake" then it really doesn't say much. Growth without allocation to more than a small group of people might be really means nothing.. Put it this way, if people can get by making shit cheaper by ensuring people who make it get as little as possible, then they will do this. So all boats rise when there is free trade, but they rise because some people are able to live with less while others want to pay less.

It's kind of like a big game of tag "you're it". Once you move into the next rung in the ladder due to more education, the next group of people get to be on the bottom rung.. I guess the hope is everyone can step into the higher rungs while mechanization slowly takes over the lower paid jobs.

Of course the other problem is the profit motive is what keeps technology going. Free trade allows for ideas to have a smooth transition from one region to another. If technology cannot be created cheaply or there are barriers to collaborate and trade ideas, then trade barriers pose a problem here as well.

Buxtebuddha

Globalization is here to stay. Lessening it won't get rid of it.

wuliheron

Globalization will start to take on new meaning in the near future as environments around the world start to collapse. Already there has been a mass exodus from Africa into Europe and within twenty years northern China is expected to become the next great dust bowel.

BC

I am not in favor of de-globalization. Neither is Ruchir Sharma, author of “The Rise and Fall of Nations: Forces of Change in the Post-Crisis World." He is chief global strategist at Morgan Stanley Investment Management.

The point he was making in his NYT opinion piece is that "The global movement of goods, money and people is likely to continue slowing. The lesson of the past is that just as night follows day, de-globalization follows globalization — and can last just as long." The piece was much more a warning about de-globalization, than a welcome.

BC

↪wuliheron

I agree.

China faces grave environmental threats, some of its own making (dumping too many toxins in rivers) and some the consequence of Euro-American coal burning that took place well before China began industrializing.

China is drying up and it doesn't appear that the trend will change in the near future. India faces similar problems of demand for electricity, water, municipal services of several kinds, cleaner air, and so on -- and the necessity of burning more coal to produce power.

Mongrel

I am not in favor of de-globalization. — Bitter Crank

I guess I am (not in favor). Global trade actually started with the Atlantic slave trade and that event demonstrates one of the insidious aspects of globalization. The Portuguese and British (the two main participants) ended up supporting and benefiting from the Triangular Trade, but most citizens of those countries didn't understand what was happening in the New World.

The recent rash of police shootings in the US shows how proximity facilitates awareness. Where the wrong-doing is on another continent, the villains are a little more protected. Without a global government, it's really a pretty lawless world.

I'd put the emergence of a global government at a pretty low probability. Maybe if a new global religion sprouted.. maybe.

BC

You seem contradictory.. Acknowledging that trade barriers are good for developing countries but then saying it is bad because of its possible slower growth in first world countries. What is the goal here of trade barriers? It is to protect jobs for one's own country right? However, those jobs just aren't there anymore due to mechanization. — schopenhauer1

Whether and to whom tariffs are a useful tool would depend on the level of a country's economic development. Tariffs may result in retaliation; the barrier-erecting nation has to have something to bargain with, or it might get shout out of its export markets. Small weak developing nations generally have limited bargaining power. What works for the US or the EU won't work for Paraguay.

De-globalization isn't anyone's goal. It happens because conditions change and nations find that their self interests no longer appear to be linked to everyone else's. Trade is generally win-win, but it's not a guaranteed situation. If sellers of raw materials can't get enough for their ore, timber, fish, etc., then they can't buy as many finished goods from manufacturing countries. That hurts manufacturers in developed countries. If low-wage developing countries can undercut wages in developed countries, they can "steal" jobs. Over time this can impoverish a significant share of the developed nation's population. Economies start to shrink.

Severe economic contractions (like the one in 2008) aggravate the tendency to protect one's own national interests.

Buxtebuddha

Leonardo DiCaprio likes this discussion.

Hanover

↪Bitter Crank

The history of British trade you provide is helpful and brief, but I wonder about other issues not discussed. Britain has always had an independent streak, never considering itself European entirely. It never fully invested in the EU and always resented having its policy matters decided by others.

My estimation is that neither the US nor the UK cares about globalization per se but simply desires self promotion. As long as globalization leads to greater prosperity, then it will be in vogue. Otherwise, why allow it if it only makes others rich?

Thorongil

The robber barons earned — Bitter Crank

This is oxymoronic. If they earned their wealth, then they didn't steal it and so cannot be called robbers.

Brexit might be a de-globalizing move. — Bitter Crank

Not necessarily. It might shift where trade is being done a bit (more with the US, less with the EU), but Brexit was primarily about sovereignty, not trade.

All these are de-globalizing actions. — Bitter Crank

Well, globalism is a rather large umbrella. I would say that decreasing illegal immigration is not anti-globalist in terms of trade, but it is in the sense that it goes against the desire for open borders.

Global trade actually started with the Atlantic slave trade — Mongrel

No it didn't. Global trade has been around for a long time, going back to ancient times. Ever heard of the silk road? The only difference now is the speed and extent it is happening.

wuliheron

Global trade is at the point of a gun and an estimated 1,700 international conglomerates that essentially control the markets. He who dies with the most toys wins with the US having a military equal to the next six or seven largest combined to back up the value of the dollar and enforce globalization. Its empire baby and this train ain't stopping until she derails. The number one manufactured export of the world's largest exporter is weapons, while when money does all the driving nobody is steering because that kind of money takes on a life of its own.

BC

This is oxymoronic. If they earned their wealth, then they didn't steal it and so cannot be called robbers. — Thorongil

Don't be dull. "Earned" is a term of art, not a fact reflecting any actual work. Labor produces all wealth, the bourgeoisie "earn" it through theft.

Mongrel

No it didn't. Global trade has been around for a long time, going back to ancient times. Ever heard of the silk road? . — Thorongil

Yes. I have. By virtue of those routes Chinese silk was in Egypt around 1000 BC. I guess you could call that global trade. Boring.

Barry Etheridge

I think you could reasonably argue that Brexit is actually a step towards greater globalisation as UK seeks as a matter of necessity to improve and create trade links with a much wider community of partners. The EU has to a large extent been isolationist, punishing many American global interests like Google for largely imaginary sins against European interests and imposing stupid regulations on them..

Buxtebuddha

↪Mongrel

By virtue of those routes Chinese silk was in Egypt around 1000 BC. I guess you could call that global trade. — Mongrel

It's more than a guess, it's fact, :D

BC

↪Barry Etheridge

You could argue that Brexit is actually a pro-global move. I don't know. Time will tell.

But... One of the characteristics of the de-globalization was recession in many economies around the world. this fed upon itself. As countries economies shrunk (shrank?), they were less inclined to spend, thus shrinking trade. That had a lot to do with de-globalization. It wasn't all overt decisions by X to not trade A, B, and C.

If Britain's economy shrinks as a result of Brexit, that would be more a de-globalizing event.

Bear in mind, please -- I'm not arguing for de-globalization as a good thing.

Mongrel

↪Heister Eggcart

It is? Awesome. Then you should be able to tell us what the Chinese received in exchange for the silk. Otherwise, you're just speculating that it was trade (you piler-onner.) X-)

BC

Then you should be able to tell us what the Chinese received in exchange for the silk. — Mongrel

Gold? Incense? Left over Jews? Don't know, but I do know that Egyptian women wove cotton and linen cloth that was of very high quality (high thread count). Maybe they traded plant-fiber fabric?

Mongrel

↪Bitter Crank

Everybody loves left-over Jews.

Buxtebuddha

↪Mongrel

Yes, yes, my mistake. The Chinese simply came with their silk, gave it all away, then left again. (Y)

Thorongil

Boring. — Mongrel

You're boring!

Thorongil

Don't be dull. "Earned" is a term of art, not a fact reflecting any actual work. Labor produces all wealth, the bourgeoisie "earn" it through theft. — Bitter Crank

You goddamn communist. I knew it.

Mongrel

Yes, yes, my mistake. The Chinese simply came with their silk, gave it all away, then left again. — Heister Eggcart

Most historians are convinced that the Chinese never traveled the so-called silk road.

Buxtebuddha

↪Mongrel

And most scientists disbelieve in human's aiding of climate change.

Am I doing this right..?

Cavacava

↪Bitter Crank

Since 2008 world trade and the volume of money flows around the world have shrunk, not unlike the time immediately before 1914. There are fewer 'democracies' now than 20 years ago, and more aggressively defensive militaries are defending more home land areas.

Do you have references for either of your assertions:
a) That there are less democracies today than in 1996
b) That money flows have shrunk

I doubt both of them, especially b, which I think is improbable to say the least, my guess is that it some multiple of money in circulation (i.e. like 5xs)...I mean look at the size of the stock market in 2008 and compare it to now.

In regards to globalization/deglobalization, structurally whatever maximizers capitalism will dominate. I don't think the EU can stay the way it is currently constituted, but some sort of looser association of states is necessary for trade, for capital pursuits. If anything sovereignty is more important, that's what Brexit demonstrated, and that is what I think the upcoming Italian referendum will show. I noticed that Renzi took down the EU flag at his latest press conference, he needs to distance himself from the EU if he is going to have any chance at political survival. His political adversaries have transformed the upcoming referendum (Dec 4th) on the restructuring of the Italian Parliament into a quick way to have a regime change by forcing Renzi out, by targeting the EU as the cause of all Italy's problems and identifying it with Renzi.

BC

Do you have references for either of your assertions: — Cavacava

I am going by the article in the New York Times referenced in about the 3rd post: The author was Ruchir Sharma, author of “The Rise and Fall of Nations: Forces of Change in the Post-Crisis World,” is chief global strategist at Morgan Stanley Investment Management.

Does Sharma know shit from shinola? I don't know; I'm supposing that the New York Times editors judged him worthy of an opinion piece (which the piece in the NYT was). Of course, the NYT editors also thought that Hilary Clinton was certain to win the election. One may want to have a grain of salt on hand.

It seemed to me he had a plausible theory. Paul Krugman noted today that major changes aren't always obvious. For instance, it's quite possible that the economy during the Trump administration will be robust. That this may also contribute to bringing about uncontrolled global warming is also a possibility but won't be clearly obvious in of 2017 or 2018.

I thought De-globalization made the Great Depression more understandable. We couldn't produce or sell our way back into prosperity because nobody was growing (except the 2 main fascist states). Japan depended on global trade, and one of their motivations in WWII was gaining control of vital resources that they wouldn't have to then trade for with the British, Americans, et al. At some point in the 30s we cut off shipments of scrap iron, for instance. Germany also wanted to control more resources -- like oil.

If China decides to produce and consume much more product internally, that is by no means a hostile action, but it has the effect of reducing trade. Ditto for India, or any other large country, including the US or EU.

BC

You goddamn communist. I knew it. — Thorongil

Bingo. The veil has been ripped away. I'm exposed.

Cavacava

↪Bitter Crank

Thanks for the reference. No, I don't agree with Mr. Sharma's agenda. His use of statistic regarding world trade is as suspect as his information regarding immigration. This is not to say that he could not be right, but rather that I don't think he has shown his case. Talking about percentage increases or decreases when you are describing a 70 trillion dollar plus world economy is daunting especially when discussing long term trends, because it disregards the absolute numbers involved.

In regards to immigration, he does not specify if he is talking about legal or illegal immigration or both. Pew Researh in October said: (http://www.pewresearch.org/fact-tank/2016/10/05/key-facts-about-the-worlds-refugees/)

Nearly 1 in 100 people worldwide are now displaced from their homes, the highest share of the world’s population that has been forcibly displaced since the United Nations High Commissioner for Refugees began collecting data on displaced persons in 1951.

I don't think using short term time intervals (<10 yrs) to project long term trends is realistic when you are describing world economy.

Mongrel

Am I doing this right..? — Heister Eggcart

Yep. You're doing great. Keep going.

Is Brexit a Step in De-Globalization?

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