Insight: The Perils of De-Globalisation

The recent economic data suggest that the fallout from the financial crisis has abated and is nearing a bottom thanks, in part, to stimulus measures taken by countries around the globe. Yet, according to the author, it is these very stimulus packages that may undermine the global economy in the long run. By filling stimulus plans with “buy local” mandates, the US and other wealthy nations could be on a protectionist drive, leading to “de-globalization.” Indeed, China – whose economy is one of the few that is still seeing growth despite the recession – has announced its own protectionist measures, requiring government agencies to buy Chinese products whenever possible. More worrying is that protectionism tends to beget more protectionism, leading to slower growth for all countries due to inhibited trade and capital flows. As the author notes, if China is enacting protectionist measures despite its current economic strength, then the likelihood for worse off countries to push through further protectionism is that much greater. Hence, the prospects for greater de-globalization in the future are much stronger now despite what appears to be promising signs in the global economy. – YaleGlobal