The globalization backlash: A new world economic order? | Business Beyond

Summary

The video discusses the shifting global economic order, focusing on the decline of US-led globalization and the rise of China. It highlights recent challenges such as populism, the pandemic, and geopolitical conflicts. The relationship between the US and China is examined, noting China's ambitions in technology and global influence through initiatives like the Belt and Road program. The video also explores the complexities of BRICS, India's balancing act between allies, and the broader implications of these changes for global trade and economic stability.

Takeaways

• 🌍 The US-powered globalization era is being questioned due to recent events.
• 📉 Rising populism, a global pandemic, and the war in Ukraine have impacted globalization.
• ⚠️ The post-war economic order is currently unstable, with significant challenges like stagflation and trade autarchy.
• 🇨🇳 China aims to dominate future-proof industries like AI, semiconductor chips, and pharmaceuticals.
• 🤝 China's Belt and Road initiative represents a major global infrastructure investment drive.
• 🌐 The BRICS alliance (Brazil, Russia, India, China, and South Africa) symbolizes non-Western multilateralism but isn't an alternative to the global economy.
• 🇮🇳 India faces a balancing act in its relationships with both the US and China, especially in the context of energy reliance and trade.
• 🔄 The US and China's economies are deeply intertwined, making complete economic decoupling unrealistic.
• 🏦 The global financial crisis and recent geopolitical events have led to a reevaluation of the global economic order.
• 🚦 Experts believe we are at an inflection point in global economics, with potential for a major shift but no clear direction yet.

Q & A

What recent events have challenged the principle of US-powered globalization?

Rising populism, the global pandemic, and the war in Europe have all challenged the principle of US-powered globalization.

What economic issues have arisen due to these global challenges?

Stagflation, trade autarchy, and the war in Ukraine are significant economic issues that have emerged.

How has the global economic order been impacted by geopolitical conflicts and crises?

Geopolitical conflicts and crises have reforged alliances and created a tangled economic story, with countries balancing relationships between friends and foes.

What are China's long-term economic goals according to Claire Reade?

China aims to dominate future-proof industries such as Artificial Intelligence, semiconductor chips, and pharmaceuticals to set terms with their neighbors and trading partners.

What role does the BRICS alliance play in the global economic landscape?

The BRICS alliance, which includes Brazil, Russia, India, China, and South Africa, supports each other's economic interests and symbolically challenges US dominance, although it is not seen as an alternative to the global economy.

What is the current status of the relationship between China and India within the BRICS alliance?

The relationship between China and India is complicated due to a fractious border dispute, with tens of thousands of soldiers stationed along the border, leading to an armed stalemate.

How has India's relationship with the United States evolved recently?

India's relationship with the United States has warmed, with the US recently overtaking China as India's biggest trade partner and India being courted by the US as part of the Indo-Pacific Economic Framework.

What has been the impact of the war in Ukraine on Russia's global alignment?

The war in Ukraine has pressured countries ready to align with Russia, and although China and Russia declared a 'no limits' partnership, China has not broken Western sanctions on Russia.

Why is decoupling from China not seen as a viable option for the United States?

Decoupling would harm the US economy and innovation, and other economies would step in where the US stepped out, making it an ineffective strategy.

What are the differing economic systems of the US and China?

The US favors a market-led system with minimal government intervention, while China favors heavy state involvement, supporting state-owned enterprises and focusing on self-reliance and indigenous technology.

Outlines

00:00

🌍 Challenges to US-led Globalization

For decades, US-powered globalization has been the norm, but recent events have questioned this. Populism, a global pandemic, and the war in Ukraine have put the global economic order on shaky ground. The US-China relationship, geopolitical conflicts, and countries like India balancing relations between allies and adversaries are central to this evolving story.

05:02

🔄 China's Strategic Economic Moves

China aims to dominate future industries like AI and pharmaceuticals through its Belt and Road initiative. Despite China's growth, the US still holds structural power globally. The BRICS alliance symbolizes emerging economies' challenge to US dominance, but it isn't a substitute for the global economy. The US remains the world's largest economy, but BRICS members collectively match its economic output.

10:05

💼 Complex Global Relationships

China and India, both BRICS members, face a tense border dispute, complicating their economic ties. India's growing trade relationship with the US contrasts with its cautious stance on the war in Ukraine and increased Russian energy purchases. Global energy reliance has shifted since the Ukraine invasion, with Putin promoting an alternative global order.

15:09

🌐 The Future of Global Economic Order

The relationship between China and Russia is marked by mutual opposition to US leadership. Despite tensions, the US and China remain major trading partners, making full decoupling unrealistic. Experts agree we are at a turning point in the global economic order, with significant differences between US and Chinese systems. China's authoritarian actions and protectionist policies face global resistance, potentially leading to a 'backlash to the backlash.' The future of globalization is uncertain, influenced by recent crises and geopolitical shifts.

Keywords

💡Globalization

Globalization refers to the process of increased interconnectedness and interdependence among countries, primarily through trade, investment, and technology. In the video, globalization is depicted as having been led by the US, facilitating economic growth and consumerism. However, recent events such as populism, the pandemic, and geopolitical conflicts have challenged this model.

💡Populism

Populism is a political approach that seeks to represent the interests of ordinary people, often against the established elite. The video highlights how the rise of populism has contributed to a backlash against globalization, disrupting the previous economic order and contributing to economic autarky and protectionism.

💡BRICS

BRICS is an acronym for an association of five major emerging economies: Brazil, Russia, India, China, and South Africa. The video discusses how BRICS countries collaborate to support each other's economic interests and symbolize an alternative to the Western-led global economy, though the group faces internal challenges and is not a full-fledged alternative.

💡Belt and Road Initiative

The Belt and Road Initiative (BRI) is China's global development strategy involving infrastructure development and investments in nearly 70 countries. The video mentions BRI as a key component of China's strategy to expand its economic influence globally, positioning itself as a central economic power.

💡Trade Autarky

Trade autarky refers to a policy of economic independence and self-sufficiency, minimizing trade with other countries. The video discusses how the backlash against globalization has led to increased interest in trade autarky as nations seek to reduce dependence on international markets amidst geopolitical tensions.

💡Stagflation

Stagflation is an economic condition characterized by stagnant economic growth, high unemployment, and high inflation. The video highlights stagflation as one of the adverse economic consequences of recent global disruptions, indicating the precarious state of the global economic order.

💡US-China Economic Relations

US-China economic relations refer to the complex and interdependent trade and investment relationships between the United States and China. The video explores how these relations have become strained, with significant trade imbalances and geopolitical rivalry, yet both economies remain deeply intertwined.

💡Indo-Pacific Economic Framework

The Indo-Pacific Economic Framework is a US-led initiative aimed at strengthening economic ties and promoting trade among 14 Asian nations, excluding China. The video describes this framework as part of the US strategy to counter China's influence in the region and reinforce alliances with other Asian economies.

💡Global Financial Crisis

The Global Financial Crisis refers to the severe worldwide economic crisis that occurred in 2008-2009, precipitated by the collapse of major financial institutions and downturns in stock markets. The video suggests that the crisis exposed vulnerabilities in the Western-led economic model and contributed to the rise of populism and skepticism towards globalization.

💡Economic Sovereignty

Economic sovereignty is the ability of a country to control its own economic policy and resources without external influence. The video discusses how countries like Russia and China emphasize economic sovereignty to protect their national interests and resist Western economic pressures, particularly in the context of sanctions and geopolitical rivalry.

Highlights

Recent events have called the principle of US-powered globalization into question, with a significant backlash against globalization.

Rising populism, a global pandemic, and war in Europe are contributing to economic challenges such as stagflation and trade autarchy.

The post-war economic order is on shaky ground, with notable geopolitical conflicts and crises impacting global trade and alliances.

The relationship between the United States and China is central to the shifting global economic dynamics, with China aiming to dominate future-proof industries.

China's Belt and Road program represents a significant global infrastructure investment drive, influencing international economic strategies.

The BRICS alliance, although symbolically significant, is not a viable alternative to the global economy or the Western-dominated global trading system.

India's relationship with both China and the United States presents a complex balancing act, influenced by trade dynamics and geopolitical tensions.

The war in Ukraine has put pressure on global alliances, with countries like China navigating their positions between Russia and Western sanctions.

Despite calls for decoupling, the US and China remain deeply economically intertwined, making complete economic separation unrealistic and harmful.

The global economic order may be at an inflection point, but the emergence of one system over another is not guaranteed.

The US-led market system favors a lack of government intervention, while China's state-led system focuses on self-reliance and state-owned enterprises.

China's actions in Xinjiang and Hong Kong demonstrate a political stance that is not appealing to many liberal market economies.

There is hope that a backlash to nationalism and protectionism could lead to a renewed engagement with global trade and cooperation.

The turmoil from the global financial crisis, pandemic, and war in Ukraine has shown that blind faith in globalization is no longer viable.

The need to listen to calls for changing the global order, particularly from Russia and China, is critical in navigating the future of global economics.

Transcripts

A world of free-flowing trade, with America at the helm.

For decades, we have taken the principle of US-powered globalization as a given.

But recent events have called that into question.

"It is striking not only how much has happened over the last five, six years, but also how

much of it has been directed against the globalization of the economy."

From rising populism to a global pandemic and war in Europe.

The consequences are already biting.

"We've got stagflation, trade autarchy, war in Ukraine.

It's a difficult Never before has the post-war economic order

been on such shaky ground.

"Putin, he wants to get rid of the status quo."

In this video, we'll unravel some of the threads of what is an increasingly tangled story.

We'll look at the complicated relationship between the United States and China:

When China says win-win, it often means China wants to win twice."

How geopolitical conflicts and crises are reforging alliances…

"Beijing, under Xi Jinping, has seen Putin as allied in their common resentment of the

United States" And how some countries are finding themselves

in a tricky balancing act between friends and foes.

"This is a big, big issue for India.

It's a survival issue."

That's all coming up on Business Beyond.

So if we are on the brink of a major shift in the global economic order, it's worth taking

a look at the system many want to leave behind: For the best part of a century, the United

States has been the world's undisputed economic superpower.

After World War 2, it experienced enormous growth - driven by rampant consumerism and

a growing faith in free enterprise.

The fall of communism in 1989 further solidified faith in a western-led system.

Economic barriers fell as countries rushed to fill demand in an ever-more connected global

marketplace.

The effect on world trade was dramatic.

In 1950 it stood at 63 billion dollars.

Within ten years that figure had more than doubled.

And by 1990, it had multiplied thirtyfold to 3.5 trillion dollars.

In 2020, it stood at more than 17 trillion.

But in recent years, we've seen a backlash against globalization.

And many economists think the global financial crisis set the stage for the shift we're seeing

today.

"The whole model, our capitalist model, maybe with more social characteristics in Europe,

but still was tested.

And the reading of this global south, certainly China, but even Russia, was that our model

was fragile, very fragile.

The financial crisis was followed a few years later by a rise in both populism and authoritarianism

around the world: "When you look at Trump especially, and not

only the rise of China, but China under Xi being more aggressive abroad and aggressive

internally, you've got a very different context now than we had even ten years ago.

When it comes to shifting power dynamics on the global economic stage, no story can rival

that of the United States and China.

In 1980, China's GDP accounted for less than three percent of total global output, with

the US accounting for more than a third.

Since then, it's played an extraordinary game of catchup.

The US share of global GDP has fallen to less than 25%, with China now accounting for over

18 %. With the gap between China and the United

States getting ever smaller, it's worth asking: what does Beijing actually want?

"China would like to be in the position that it has been historically, way back in the

day, where it was the center of the world, and others interacted with China in a way

that gave China deference, and China could keep everything under control and have it

go their way."

Claire Reade negotiated for the US on trade with China from 2006 to 2014.

She says China's long term goal is to dominate future-proof industries like Artificial Intelligence,

semiconductor chips and pharmaceuticals.

"All of those sectors have been flagged as critical priorities for the Chinese, where

they would like to become globally dominant.

And if they have dominance in a number of industries so that they can set the terms

with their neighbors and trading partners, that's perfect."

China's economic strategy has also become global through its Belt and Road program,

a major infrastructure investment drive worth several trillion dollars.

But economic influence is about more than raw numbers:

"China has not acquired the structural power.

United States still has the structural power across the globe.

And I'm not very sure whether China is crossing the Rubicon on this front."

For China to acquire the kind of international influence the US has had for decades, it will

need to deepen its relationships.

Although not a formal alliance, the BRICS - that's Brazil, Russia, India, China and

South Africa - has attracted some attention.

The group brings together five emerging economies that team up to support each other's economic

interests.

And when it comes to challenging US dominance, clubbing together does make a difference - symbolically

at least: "Well, it's a marriage of convenience.

It's a useful alternative body.

All the individual countries have got their own kind of problems.

The Bricks is a good forum to talk about stuff, but in the end it's not, I think, an alternative

to the global economy, the global trading system.

It's not an alternative to trading and doing business with developed Western markets, really."

While the United States alone is still the world's largest economy with 24% of global

GDP, China, India, Brazil, Russia and South Africa now together account for about the

same share.

In China, the state-run media has praised the BRICS alliance for boosting what it calls

"non-Western" styles of multilateralism.

At the group's most recent meeting in Beijing in June 2022, President Xi Jinping talked

up its collective strength: "Human history, like a river, will keep surging

forward, with moments of both calm waters and huge waves.

Despite changes in an evolving global environment, the historical trend of openness and development

will not reverse course, and our shared desire to meet challenges together through cooperation

will remain as strong as ever."

But alliances don't guarantee harmony.

The relationship between China and India - both BRICS members - is a good case in point.

Home to 1.4 billion people, India is the world's fastest growing big economy.

But its relationship with China is currently overshadowed by a fractious border dispute.

Tens of thousands of soldiers from both sides are stationed on the more than 3,000 kilometer-long

border: hardly a solid foundation for an ever deepening economic union:

So we should say that this is actually an armed stalemate at the moment, and this is

also spilling over in political, economic, strategic issues as well."

To make things even more complicated, India's relationship with the United States has warmed

considerably in recent years.

The US recently overtook China as India's biggest trade partner.

It also buys more from the country than it sells - a rare example of a trade surplus

for India.

No surprise then that India has been courted by the US as part of its own trade standoff

with China.

It is part of the new US led Indo-Pacific Economic Framework, a free trade pact of 14

mostly Asian nations which excludes China.

The Indian-Chinese relationship isn't the only complicated BRICS relationship.

India is also facing a tricky balancing act when it comes to its ties with Russia.

Its failure to take a clear stance on the war in Ukraine, and its decision to buy more

Russian energy have raised eyebrows.

But commentators point out that historically, sales of Russian gas to Europe have been far

more significant.

And that criticism of India's purchases this year are being taken out of context.

"This year is an exception.

But if you look at the last 70 years, the total imports is no more than a billion or

two at the most, while India imports something like $100 billion from the Middle East.

So nowhere in proportion as when we say the Russian energy component in the Indian energy

basket.

So I think it is an exaggeration, probably lack of information."

Questions of energy reliance have come to the fore for many countries since Russia's

invasion of Ukraine.

As European countries rush to lessen their dependence on Russian gas and Western sanctions

aim to exclude Moscow from the financial system, it's no wonder that Vladmir Putin has talked

up the potential of an alternative global order.

"Over the past decades, new powerful centers have been formed on the planet and are declaring

themselves louder and louder.

Each of them develops its own political systems and public institutions, implements its own

models of economic growth and of course has the right to protect them, to ensure national

sovereignty."

But the war in Ukraine has put pressure on countries that may have been ready to align

themselves with Russia.

Shortly before the war, China and Russia declared that there were "no limits" to their strategic

partnership.

But so far, there is little evidence that China is willing to break western sanctions

on Russia.

"The Chinese are an interesting one.

Russia made a lot about that relationship.

They're continuing to buy energy and commodities and where they can negotiate a good deal from

the Russians that are doing it, but they're not going out of the way to help the Russians

through financing or provision of arms, et cetera."

But Russia and China's growing bond under the leadership of Putin and Xi does appear

to have one watertight element - joint opposition to a US-led global order.

"Beijing, under Xi Jinping, has seen Putin as allied in their common resentment of the

United States and the US global leadership as a superpower and what they see as interference

in their domestic internal affairs, criticism of their political systems, pressure to change

their economies, fix human rights, et cetera.

And so that alignment has probably gone further than most expected."

China may want the United States to stay out of its business.

But the reality is the two countries' economies are deeply entangled.

Despite the tensions of recent years - which saw the countries slap tariffs on each other's

goods - China and the US remain each other's biggest individual trading partners.

US trade with China has grown dramatically in recent decades.

But as you can see here - it's an uneven relationship- with the United States importing far more

from China than it exports.

That has led to calls for the United States to "decouple" - in other words - disentangle

- itself from China.

But how realistic is that?

"If the United States tried to decouple entirely from China, it would be very harmful to our

economy.

It would probably be harmful to our innovation.

It would just have other economies, industries step in where the United States stepped out

so it wouldn't work."

Decoupling probably wouldn't be a very good idea for China, either.

"China also knows that its larger economic fate lies with the rest of the world.

And even though it has this tense relationship with the United States and others, most of

its economic growth has been dependent on globalization with the rest of the world needs

to find a way to balance those things.

And so they are struggling.

I think that is why China has, I think, for the most part, as far as we can tell, abided

by Western sanctions on Russia."

At the beginning of this video, we asked if we were at the dawn of a new global economic

age.

All of the experts we spoke to believe we are at an inflection point.

But they emphasized this may not necessarily lead to the emergence of one system over another.

If it's a case of a US versus a Chinese-led system, the differences are major.

The market-led system of the US favors a lack of government intervention.

The Chinese system favors heavy state involvement.

They have reinvigorated support for state owned enterprises, really focused on indigenous

technology, achieving, trying to achieve self-reliance, not done what previous leaders have done in

trying to manage and maintain a healthier, constructive relationship with the United

States and the west.

And so what I'm talking about what China would like.

It's really what kind of order a Xi Jinping led China would like, which is a world safe

for state, capitalist, authoritarian systems."

But that system is always likely to have powerful enemies.

"I think China's presence on the scene definitely pulverizes the old post-Cold War landscape

and chessboard for sure.

But the question is really how does the rebalancing occur and how does it take place?

And I would say that China has through its very strong authoritarian actions and its

actions visa vis the Uighurs in Xinjiang and its actions visa vis Hong Kong has demonstrated

political viewpoints and sense of what it believes is the way to go, that is not appealing

to large segments of liberal market economies across the world."

So could opposition to a Chinese-inspired protectionist order be strong enough to push

back the tide?

"I think it's a realistic hope that there could be a backlash to the backlash, that

large numbers of people, maybe even a clear majority in many countries, will realize that

nationalism and protectionism and rivalry and closing this is all worse for them than

being more open, more engaged with the world around them, and having political bullies

is worse than signing up the global rules."

As for the people making those rules, this is a critical moment:

"If one part of the world, and I think we've been told loud and clear, wants to change

the global order.

And this is not only Russia, this is China too.

We need to listen."

The turmoil unleashed by the global financial crisis of 2008 and 9 - and more recently the

pandemic and war in Ukraine - has laid bare a new truth: blind faith in globalization

has come to an end.

We'd love to know whether you think the economic order is changing.

Let us know in the comments.

And if you like what we do and want to see more, do check out the Business Beyond playlist.

A good place to start would be our recent video on the global food crisis.

Thanks for watching and until next time, take care.