Globalisation is a double-edged sword. While it has enabled the flow of capital and commodities across borders providing impetus for growth, it has also engulfed the world into a nexus of interdependence limiting economic and geopolitical choices.
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Globalisation has been the celebrity of the past few decades. From a cursory perspective, the idea of globalisation seems no less merry than Christmas in July. However, there lies a subliminal threat within this celebrated concept and practice, a threat which might soon be reaching the threshold.
The central tenet of globalisation is connectivity. Connectivity for transfer and exchange of goods, services, capital and even humans across borders for greater optimal utilisation of all. However, this connectivity brings with itself a perilous itch i.e., interdependence. And it is this very interdependence in the growing unstable political world which casts a pernicious shadow upon the common man. Look at it this way, you and I, a layman reader and a relative layman writer in India should in no way be practically affected by the Ukraine war, moreover, be suffering from the revanchist Russian endeavour. But we are. We are being scourged by the whip of Inflation. With every passing day, with every political decision being made regarding the fate of Ukraine, our chances are being written unknowingly too, and the sad part is, we can do nothing about it. And by we, I dare not mean we the commoners, by we I mean we the people, involving the politicians and the big boys at the helm. The reason why we seem in no control of the situation is that we're too deep in this marsh of interdependence termed Globalisation.
We no longer fight wars with tanks, but with tariffs. The imposition of sanctions is the first response to enmity in the growing world order. The thing with tanks is that it hits the ones facing them on the field, causing devastating destruction but destruction that can be contained, now with tariffs, the targets are as wide as the cosmos.
Recent times have blasted us with more than enough insinuations of globalisation.
The Case for Sri Lanka
Sri Lanka is the most outrageous example of what globalisation is guiding us towards. The downfall of the small island nation which was a healthy economy until recently i.e, early 2019, can be attributed to the erosion of its foreign exchange reserves. The Sri Lankan economy relied heavily on its tourist sector. Following the incident of a bomb blast in a church and the spread of Covid-19, by 2022 the Sri Lankan economy fell into an abyss so deep, it is now clouded with despair. Another claimant point while discussing the downfall of Sri Lanka is the case for its reliance on imports for the bare minimum. Such a practice culminated in the form of trade deficits so heavy, that the economy found itself languishing to cope. Sri Lanka relied on imports for necessities such as fuel, gas, electricity and even medicines. When Covid spread across borders, it caused supply chain issues in the global economy which eventually led to cost-push inflation in Sri Lanka. What was once seen as a necessity quickly became a hard-to-find luxury; the government had to propose blackouts and energy cuts for up to 10 hours because it simply did not have enough reserves to import the required oils. The indignation of the Sri Lankan people grounded itself into massive protests as the nation faced its worst economic crisis since independence and a political crisis ensued from the economic catastrophe. The then president Gotbaya Rajapaksha resigned and his successor Ranil Wickremesinghe still struggles to stabilise the sovereign he serves which is burdened by international loans. As he struggles to negotiate a restructuring of debts and attempts the onerous task of acquiring an IMF bailout, the Sri Lankan population has been coerced back by the situation to use firewood for cooking purposes as oil has become impossible to import. Countries have extended credit lines but they come seldom come without stipulations.
The Case for USA
One might fancy that the ground might be relatively stable for the USA. Given its position in the world, the US economy enjoys a sort of despotic power which enables it to be the primary manufacturer of sanctions whenever something blows against the wind of US interests. The CAATSA Act is a paragon of this despotic power. However, the nexus of interdependence fostered is such that even the most formidable economy of the planet is being mauled by the claws of globalisation. It is also worth mentioning that among others, a substantial reason why the USA is reluctant to directly engage in Ukraine’s defence is due to the underlying pressure of Inflation. A direct advance of the NATO forces will unsurprisingly squeeze the pockets of the USA and other European countries resulting in a surge in the already fan-touching inflation in these countries.
Another testament to the nefarious interdependence created by globalisation is the example of how the stimulus checks advanced by the Federal Reserve to refuel the economy ended up debasing it further due to Supply Chain Issues.
Giving up Globalisation? No.
Now one might very well argue that maybe the only reason why we care about Ukraine’s future is that our economies are suffering as a result of it. But Ukraine’s future would be better protected if we were in a state to advance assistance, which we aren’t as a courtesy of globalisation and interdependence which has spiked inflation in every country, containing the capabilities to provide substantial aid.
With Europe apprehending a freezing winter without Russian Oil, and the world dreading as the cost of living increases, maybe it’s time we rethink what globalisation has done to us and if we have taken it too far. Martin Wolf, who is the chief economic commentator at Financial Times, rightly argues that the future of Globalisation is more on side of services as compared to goods. He argues that globalisation in the form of outsourcing jobs and virtually relocating work centres is the future. Globalisation is indeed essential and it has led to exponential economic growth in India itself since policies in accordance were first adopted in 1991. The Indian economy grew at an impressive 3% in the decade following the announcement of the liberalisation of markets.
Globalisation has also been the catalyst for entrepreneurship in India. Globalisation does and has led to the welfare of people by providing them with a wider range of markets to choose from and indeed a wider market to pitch their goods and services.
A connected global system is good, it imbues a cosmopolitan spirit that has us care about developments anywhere on the globe. However, this cosmopolitan spirit carries with itself economic interdependencies which might become a scourge of coercion at times. High levels of interdependency at the state level translate to negotiation tools and the fairness of these tools is not always agreed upon. Other times, globalisation may actually prevent certain economic policies as nations worry about damaging relations with other states. A recent example of this is the European resentment voiced by French President Emmanuel Macron on his Washington visit, where he complained about how the subsidiaries under the Inflation Reduction Act by the USA would dilute investment in the European automobile market. As valediction, I would wish to clarify that I by no means call Globalisation a vice, nor do I vouch against it. All I suggest is a mere re-evaluation of its gears. Globalisation must continue to exist, but it must be inspected conscientiously to maintain stability.
By Varun Manda (Guest Writer)
The writer is a student of Political Science Honours at Kirori Mal College, Delhi University. Interests include International Relations, Economics and History.
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