Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Don’t Write the Obit on Globalization

Posted by hkarner - 7. Juli 2016

Date: 06-07-2016
Source: The Times of India

British voters decided to separate from the European Union, and many analysts afterward pronounced this to be indicative of globalization’s demise. “[G]lobal interdependence is far too advanced to be reversed without seriously harming the well-being of the entire nation,” writes Nayan Chanda, YaleGlobal’s founding editor, in a column for the Times of India. “When Britain begins the divorce proceedings it will uncover the massive tangle of subsidies and tariff benefits that course through the economy, the severing of which would impose painful costs.” Voters in a major democracy may have been scammed. Soon after the outcome was announced, Brexit leaders withdrew promises of diverting EU membership fees toward health care and urged ongoing participation in Europe’s single market with new rules. Efficient governance minimizes disruptions by introducing reforms rather than abruptly ending programs with no plan in place. Globalization is far from dead, Chanda concludes, as revealed by the global response to Brexit and more repercussions to come. – YaleGlobal

Globalization offers many benefits; peevish Brexiters should treat the ailments of globalization with efficient governance rather than plan its burial
Nayan ChandaFor the umpteenth time newspapers are full of obituaries of globalisation. As on many occasions in the recent past the British vote to exit the European Union, dubbed Brexit, is said to have sounded the death knell of globalisation. Indeed, the aspects of EU membership that the ‘Leavers’ resented – free movement of labour within Europe including asylum-seekers and common regulations – are associated with globalisation. Brexit thus throws the most serious state-level challenge to the process of growing interconnectedness of globalisation. But the dramatic financial impact of their petulant vote and swift backpedaling by Brexit leaders have underscored the reality: global interdependence is far too advanced to be reversed without seriously harming the well-being of the entire nation. Negative impacts of globalisation surely have to be addressed but the baby should not be thrown out with the bath water.

Within hours of the Brexit vote the leaders reversed their promise to transfer money given to the EU to the National Health Service. The main leader of Brexit, former London Mayor Boris Johnson reassured people of Britain’s interest in the single European market. Other leaders disappointed anti-immigrant supporters by saying their arrival cannot be turned off so fast. But the most stunning was the market reaction. Contrary to the Brexiters’ promise that market would be stable, the pound went into a nose dive losing 12% of its value, borrowing costs shot up and amid the hiring freeze by companies fear of recession took hold. The City of London which prospered as the financial capital of the EU and voted overwhelmingly against Brexit faces dire prospects. One million EU nationals who made London their home wonder about their future. In a charged xenophobic atmosphere (there is a 57% rise in hate incidents), millions of immigrants from different parts of the world, who once helped to create ‘cool Britannia’, feel unwelcome.

To put the British vote in context it is worth noting that although 52% voters decided for Brexit, the voter turnout was only 70%; the leave campaign thus won with the support of only 36% eligible voters. They represent only 36% of the electorate. That an issue of such capital importance – akin to amending the country’s constitution – was used for petty political gain highlights the necessity of good governance. Although referendum has only advisory role, given the political complications reversing the exit decision would be hard if not impossible. The British effort to cherry-pick conditions of membership – benefit from a unified market of 27 countries but bar free movement of labour – is certain to be rejected by the EU.

Huge markets, and good environmental and labour rules, even though complex, are the most visible part of EU membership benefits. When Britain begins the divorce proceedings it will uncover the massive tangle of subsidies and tariff benefits that course through the economy, the severing of which would impose painful costs. Prices of daily necessities – from Italian vegetables to French cheese (40% of UK’s fresh food comes from the EU) – will rise, the unemployed will lose subsidies paid for by the EU and deprived of funding received from Brussels universities will shrink. The crown jewel of globalised Britain, the City of London, which has been the bridgehead for the European financial market, and as such led China to make London their biggest offshore trading centre, will lose its lustre.

To emphasise the cost of delinking Britain from the global economy is not to minimise the anger and frustration of the mostly elderly, uneducated and unemployed Britons behind Brexit. Like everywhere else economic globalisation has created wealth – see glittering cosmopolitan London – but has also left many in rural and small-town England unwilling or unprepared to compete with new citizens from Eastern Europe. The open door announced by Germany and the arrival of large numbers of Muslim refugees have raised concerns about maintaining national identity and sovereignty. The fact that many Brexiters enjoy subsidies from the EU has not always helped to reduce their anger.

Britain’s membership in a globalised world clearly helped many (represented by 48% of voters) but more effective and sensitive local governance is essential to deal with the discontents of globalisation. The Brexiters’ peevish act has highlighted some of the problems wrought by global connections but the stunning market response has also shown globalisation as live and kicking. Need is to treat the ailments of globalisation rather than plan its burial.

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