Globalisation: R.I.P.

August 10, 2016 0 By Michel Santi

Globalisation is dead: long live deglobalisation! While Brexit has (fortunately) not been the cataclysm that analysts had so predicted, it is nonetheless the most spectacular manifestation of the end of the reign of globalisation. A revolt against the elites has indeed been brewing – across Western countries – since the crises of the years 2007 and 2008, which was faint to begin with, but has gradually become more and more visible. Whereas the teams in power in democratic countries had been winning elections most often, when they decided to represent themselves, they have now been losing elections almost routinely since 2008.

This democratic rebellion against the establishment is in no way ideological since it treats the right and the left with equal indifference in its affairs. It is the outcome of famished global growth, and it is the residue of the secular stagnation that has constricted global economic activity by a figure of 3.5% before the crisis and by 2% today. Moreover, the only country that seems to be getting out alive with an unemployment rate of less than 5% – the United States – is also suffering from this erosion of income since its workforce is not seeing its wages progress. As for Germany, it finds itself in an obvious position of unfair competition since the improvement in its economic fundamentals could not have been built on the shroud of the other European economies.

In short, a general feeling of recession looms over the West, whose weak link is the European Union which has suffered two of them since 2008! Faced with this fiasco of executives wielding power and growth at half-mast, the central banks have had to encroach further and further into economic terrain in order to try to soften a crisis that is likely to degenerate on both the political and social playing fields. Their monetary creation, however, has more greatly benefitted the rich – who have filled their pockets even more through the increased valuation of stock market, bond and property assets – than those who really needed it. Since it is the wealthy and the super-rich who are the merry owners of these assets, it is they who profit from their take-off, a take-off that owes to the cash injections made by central banks which have had as an (involuntary) effect the widening of inequalities. Whereas, on a global level, the number of billionaires has doubled since 2008, and while stock market capitalisation has also increased by more than 100% in many places, the progress of the middle class and the poor’s wages has been merely symbolic, when it has occurred at all!

It is by this yardstick that we must analyse Brexit, which was nothing but a plebiscite against the elites, against the urbanites, against the educated classes, basically against everyone who has benefitted from globalisation, the opening up of borders and the free circulation of goods and capital…For the last few years we have therefore been seeing the reverse phenomenon which consists of States, banks and a number of until-recently global institutions withdrawing back into the confines of their national borders. The most obvious sign of this global cautiousness resides in the collapse in cross-border capital flows, from 16% of global GDP in 2007 to just 1.7% today (according to a report from the Bank of England). It spells a return to the 1980s, and obviously proportionately affects globalised growth since this is directly related to international capital flows. This globalisation that derived from the poverty of emerging countries has therefore at the same time impoverished the middle classes of Western nations.

Why, us – French, Italian or Greek –, would we favour a globalisation that has pulled our social fabric apart and provoked a decline in our standard of living? Brexit comes to us out of the 2008 crisis, which itself was a poison fruit of globalisation. As for the message that emanates from Brexit, it is crystal clear: the political leaders of tomorrow will have to first and foremost deal with comforting those who have been left high and dry by globalisation.