As the sun sets on globalization, what will a new day bring? The new era will face challenges of rampant parochialism, environmental destruction, inequality and greed.
The dawn of globalization was unremarkable. Yanis Varoufakis, professor economics and former finance minister of Greece gives the date:
“On Aug. 15, 1971, then-president Richard Nixon announced the ejection of Europe and Japan from the dollar zone. Unnoticed by almost everyone, globalization was born on that summer day (Globe and Mail).”
Before Globalization, it was the dawning of a New Deal (1944). A clever plan, it gave America’s former enemies the resources to rebuild through arrangements such as the Marshall Plan. As an industrial power, the U.S. had shiny new things to sell; now Germany and Japan had money to buy them.
The New Deal ushered in a Golden Age of prosperity. Well-paying jobs, unionization, opportunity grew. The middle class expanded and inequality shrank.
As a baby boomer, I remember that era. After I graduated from the Southern Alberta Institute of Technology in Electronics, I had a choice of well-paying secure, jobs. After I quit one job and traveled around the world, I easily found another.
The era of globalization in the 1970s promised to reduce global poverty. Before it began to rot at its core, it blushed with ambition.
“Mr. Nixon’s decision was founded on the refreshing lack of deficit phobia particular to American decision-makers,” says Varoufakis. “Unwilling to rein in deficits by imposing austerity . . . Washington stepped on the gas to boost them.”
World-wide prosperity also produced global industrialization. Americans went into debt to buy exports from Germany, Japan and later, China. The American administration didn’t seem to notice, or didn’t care, that cheap global labour was at the heart of industrial decay at home. Why should they care when money was pouring into the U.S. as well as cheap goods?
The flow of global money into the U.S. seems counterintuitive. If Americans were buying global goods, it would seem that the money should be flowing the other way. The magic of Wall Street made it happen.
The deregulation of banks was a catalyst for the financial wizardry of Wall Street. Global investors were attracted by higher interest rates generated by mystical, incomprehensible, investment devices such as derivatives. A lot of the investments went into loans to home-owners who had no way of repaying them.
Then, in 2008, the rabbit no longer emerged from the magician’s hat and the whole financial edifice fell apart.
All that remains of the sad tatters of globalization is massive inequality and loss of jobs in the Western world. Most money sits idle in the hands of the rich while the poor struggle without. Varoufakis characterizes it:
“Its crisis is due to too much money in the wrong hands. Humanity’s accumulated savings per capita are at the highest level in history.”
As globalization sinks below the horizon, two options emerge. One is the walled-state proposed by President Trump and the Brexiters in the U.K. The other is a Universal New Deal that redistributes global wealth, creates new jobs, and lifts the burden of consumer debt.
If such a new deal seems unlikely, it’s worth remembering that the first New Deal and globalization were as well. And if we need an issue to rally around and mobilize action, as World War II once was, we need look no further than the biggest threat to humanity: climate change.