Globalization needs champions to convince skeptics

By Amitendu Palit | chinadaily.com.cn | Updated: 2017-01-17 10:30

A Davos logo is seen before the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland January 15, 2017. [Photo/Agencies]

The year 2016 was notable for two 'black swan' events with far-reaching consequences. Election of Donald Trump as the next US president and the 'Brexit' referendum in the UK have produced significant challenges for globalization. Both developments are outcomes of strong anti-globalization political narratives. Popular endorsement of the narratives in the US and UK reflect deep-rooted resentment among many people in the Anglo-Saxon world towards globalization. Proponents of globalization face the challenge of politically legitimizing the process by highlighting its benefits. Rationalizing globalization would feature prominently in the deliberations of the forthcoming World Economic Forum (WEF) at Davos during January 17-19, 2017.

The fact that national leaders are being elected to top offices of their countries on the basis of their inward-looking political and economic campaigns shows that globalization has made many unhappy. More leaders are likely to exploit such unhappiness for their political goals. This can soon result in a situation where several major world leaders identify with anti-globalization outlooks. The world might get split between countries and leaders that support and oppose globalization. A polarized world of this kind is not conducive to expansion of global trade and growth of global business and production networks.

Globalization needs champions to convince skeptics about its benefits. The role of world leaders becomes extremely important in this regard. The anti-globalization narrative needs to be countered by a more objective and inclusive projection of globalization. Such a narrative must be pioneered by leaders of countries whose people have significantly benefitted from globalization. There is no better example than China in this respect.

Over the last three decades, China has successfully integrated with the world economy. The integration began with trade in goods and proceeded through trade in services. Over time, China has become one of the largest sources of foreign direct investment for the world. The yuan too has become one of the most traded currencies. By integrating deeper with the rest of the world, China has successfully created economic opportunities, jobs and new livelihoods that have lifted thousands from poverty. China's economic success is a continuation of the success achieved by several Asian economies after the World War II, such as Japan, Korea, Singapore and Malaysia, by responding positively globalization. However, China's successes from globalization appear more striking than the other countries given its large size and the remarkable transformation it has achieved in the living standards of many of its people.

The key message coming out of China's globalization experience is its inclusive and people-centric character. Globalization cannot bring same benefits to all people at all time. There would be some losers from the process. The losers need to be provided alternative opportunities primarily through state-supported initiatives such as redeployment and re-skilling programs. Globalization will hardly be as inclusive as it should unless and until states are careful in managing its downsides. This is precisely where the West has failed.

The financial crisis of 2008 highlights massive regulatory failures in many major Western economies. The failures occurred as states turned blind eyes to the unchecked expansion of bank credit and asset mortgage. The regulatory failures were accompanied by institutional failures as the inability of institutions to predict and control the crisis became clear once it hit. The ineffectiveness of institutions became more evident with perpetrators of the crisis going mostly unpunished. It is hardly surprising that those who were badly affected by the crisis due to no faults of their feel let down by the leaders and elites championing globalization, drafting regulations and running institutions. It is these affected people that are strong supporters of the anti-globalization narrative.

President Xi Jinping's presence at the WEF is expected to draw the world's attention to the importance of globalization proceeding at a calibrated pace by accommodating people's concerns. Businesses often get impatient and demand rapid change in policies. While globalization cannot advance without businesses, it cannot be inclusive and politically legitimate without effective participation of people. It is crucial for national leaderships to assess experiences of all sections influenced by globalization and respond appropriately. This might occasionally mean slowing the pace of global integration till people are more skilled and better equipped to adjust to globalization. Such policy foresight and wisdom are hallmarks of the 'responsive and responsible leadership' that the WEF would focus on.

The global business community is looking forward to China and President Xi Jinping for delivering a constructive message on globalization at Davos. China is the most prominent face of globalization at a time when a counter-narrative has become powerful in many parts of the world. China's ability to emphasize the inclusiveness of globalization and convincing skeptics about its benefits would go a long way in determining whether the world will continue to globally integrate in an unobstructed fashion.

The author is a senior research fellow and research lead (Trade and Economic Policy) in the Institute of South Asian Studies at the National University of Singapore.