Why Globalism is Dying and Giving Way to Nationalism
The world is fragmenting and its fueled by zero-sum nationalism. State leaders adopt protectionist policies to benefit their countries and extract value from the global community. In this new political era, there is such a thing as a greatest nation status. And you achieve that status by beating out other nations to the “top”.
This shift from globalism to nationalism has taken place over the past 15 years.
In the backdrop of this policy shift, new integrative and digital technologies bring global communities closer together. These technologies create a melting pot of culture and mutually beneficial commerce, all while populist movements sweep the globe. And while technology brings people together, these movements advocate for policies that promote global disintegration. They attack many of the factors that benefit the world population.
It’s a confounding phenomenon and creates a societal level mixed message. But the bottom line is that globalism is dying.
In place of a globally connected world we are seeing the emergence of isolationist philosophies. Inclusive of these philosophies is the growing sense of an “us vs the world” nationalism. In this new world, we experience trade wars and territorial bickering characteristic of the imperial age. And if we look back to historical examples, rising nationalism has consistently caused major global conflicts. As we see more instances of nationalistic aggression, their is a growing risk of conflict.
How exactly did we get here?
Events That Pushed the World Towards Nationalism
Nationalism is the concept of putting one nations interests above all others. As a common example, American protectionist policies impose tariffs on foreign imported cars. This is an effort to make domestic cars more attractive to consumers. The tariffs support vibrant American companies which in turn, create many American jobs.
But protectionist trade policies is a small part of the story. Nationalism is becoming the antithesis of globalism.
There are several defining moments over the past decade that moved major populations towards nationalism. On their own, they are themselves massive historic moments. Taken together and they begin to show what precipitated globalisms decline.
The 2008 Financial Crisis
In 2008, the American financial system experienced a collapse of the banking system. This lead many people to lose their homes, their jobs, and their lifetime savings. And although this crisis may have started in the US, the interconnected nature of the global financial system spread the crisis around the world.
The reason for the shared pain was that global financial institutions held considerable amounts of bad US mortgage securities. Holding these securities put significant strain on European banks (and others). Making matters worse, the securities were denominated in dollars which challenged national governments ability to support their financial institutions. Why? Because some nations held a limited amount of foreign dollar reserves.
The 2008 Global Financial Crisis was the first major catalyst for modern nationalist movements around the world.
Euro Zone Crisis 2010–2012
The Euro Zone Debt Crisis of 2010 was a direct result of the global financial crisis wrecking foreign reserves used in support of national banking systems.
As members of the euro zone economic integration, many of these nations had severely limited tools to manage their debt crisis. Ie: they couldn’t print money and devalue their currencies to manage their sovereign debt. Ultimately, several eurozone countries failed to service their sovereign debt obligations.
These countries were forced to implement national austerity measures in exchange for eurozone central banking support, representing a lose of national sovereignty.
This financial bailout had 2 main populist backlashes.
It angered financially solvent euro zone nations by burdening them with the cost of supporting struggling nations. While simultaneously, the austerity measures angered the nations in crisis because it reduced their personal sovereignty and restricted many public goods. This crisis resulted in populist movements throughout Europe, promoting nationalist agendas and placing further strain on the globally integrated financial systems.
Brexit — 2016
In 2016 the UK withdrew from the European Union in a vote known as Brexit. Although there were many underlying reasons, a major contributing factor for withdrawal was the eurozone crisis.
In an analysis of the Brexit voter demographics, “we find that areas with deprivation in terms of education, income and employment were more likely to vote Leave.” This is in line with the demographics that are most effected by the global financial crisis and the eurozone crisis. Massive economic integration can harm these demographics in developed countries as economic opportunity migrates to locations with cheaper labor and costs of living.
The UK’s decision to leave the eurozone in 2016 was the first major blow to the zones integrity at the hands of a nationalist movement. The UK is still in negotiation with the Eurozone on the terms of their withdrawal so it’s not possible to know the full extent of the consequences.
But it is clear that the UK regained more sovereign control at the expense of economic integration. Other nations are watching and a smooth transition away from the eurozone could lead other nations to follow.
Donald Trump’s 2016 Election
Donald Trump’s 2016 Presidential election in many ways was similar to the Brexit withdrawal campaign. It was divisive and driven by nationalists seeking to elect a leader that cared about economic hardships created by globalization. His slogan, “Make America Great Again” in many ways resonated with a populist movement that felt disenfranchised since the 2008 financial crisis. The demographics of this movement were very similar to those of the Brexit campaign.
Trump’s election mandate was overwhelmingly anti-globalist.
- Initiating a trade war with China to rebalance the cost of the integrated economies
- Antagonizing NATO to pay it’s fair share of mutual defense
- Withdrawal from the Paris Climate Accord to drop anticompetitive business practices over the divisive issue of climate science
- Building significantly more robust boarders to constrain illegal immigration in support of domestic labor
- Repatriation tax holiday to bring capital back to America
The common thread of these activities is to bring money home from overseas projects, renegotiate international deals to favor America, and protect domestic jobs from the impact of globalization.
Pandemic — 2020
In 2020, the response to the COVID-19 pandemic has overwhelmingly challenged globalization. In the absence of a vaccine and effective treatments, lockdown measures have been the primary method of stoping the outbreak.
Lockdowns and social isolation are the antithesis of globalization. The outbreak has reinforced growing xenophobia and placed pressure on nations to secure more localized supply chains and a sense of self reliance.
We are still in the midst of the pandemic but early signs point to nations looking to construct localized and resilient supply chains. In doing so, the hope is to rely less on a globally integrated supply chain and more on national production capabilities.
The Global Trilemma — Pulling Back From Integration
These events and their subsequent populist movements tell us that full global integration under a federated systems is unrealistic in the near future. Different cultures, power dynamics, and histories make it difficult to create mutually beneficial and lasting policies. Historical rivals have a hard time carrying water for one another when bad blood runs deep.
But digging a little deeper, why is global federalism unlikely? Dani Rodrik provides a good explanation with his Global Trilemma theory.
He states, “In effect, globalization becomes an instrument for narrowing the scope of what governments can do (in taxation, spending, and regulation)”
Meaning that international economic integration can function as a golden straitjacket because of the restrictive nature of globalization on policy choice.
“democracy, national sovereignty, and global economic integration are mutually incompatible: we can combine any two of the three, but never have all three simultaneously and in full.”
This trilemma help explain why we’ve the past global events have led to a shift towards nationalism.
In short, the crises events have lasting themes. Financial hardship has pushed national interests to the forefront, causing strain on global financial integration. The growing impotence of global institutions combined with financial integration hardships creates pressure to shift policy within the global trilemma.
These events are leading indicators that nations are beginning to take back sovereignty over financial decisions. The shift to nationalism is fueled by hope that replacing globalized systems with national sovereignty will return economic prosperity to pre-crises levels.
The ultimate consequence of these critical events is that we are seeing the death of globalization. In the place of integrated financial systems, we get zero sum competitive games between nations.
What Nationalism Means for Globalists?
“Suppose, as seems likely, that the successful economies of the EU core recover from the crisis (COVID-19) while those on the bloc’s periphery falter. No political integration project can survive a narrative featuring a permanent underclass of countries that do not share their neighbors’ prosperity in good times and are left to their own devices when calamity strikes.” Arvind Subramanian, Project Syndicate
All the events of the past decade fit a nice neat narrative. Several global economic shocks have created a fertile breading ground for nationalism to thrive on a global scale. The rise of nationalist ideologies across the US, Europe, Brazil, China, and Russia make it exceedingly unlikely that we see further global integration. At least anytime soon.
Nationalism will segregate ideologies and cultures, while pitting nations against each other. In times of nationalism and disintegration, global wars transpire. History is littered with examples.
I have yet to see any concrete data, but I believe that technologists and digital oriented workers are the minority that makes up the remaining globalist community. The rest of the world population seems to take on various forms of nationalism that seek support for domestic agendas at the expense of anyone other than themselves.
It seems exceedingly likely that it will be a long and tough road ahead for anyone that promotes globalism as the ideal path forward.
Originally published at https://dougantin.com on October 1, 2020.