From cyber attacks to the easy spread of pandemics, the world seems to be aflame with the unintended consequences of globalization. Instead of looking to simple yet destructive solutions like protectionism, isolation and nationalism, leaders should strive to work together and to reform international institutions.
Over the past three decades, the world has experienced unprecedented economic and social development. Poverty rates have decreased dramatically from over 40 percent in the early 1980s to just below 10 percent in 2015. Global life expectancy has risen from 65 years in 1990 to 72 years in 2013. Almost every indicator of well being, from infant mortality to literacy and inoculation rates, has improved faster than at any other period in history.
This era of rapid growth and interconnectedness has brought tremendous benefits to billions of people around the world. However, nearly every opportunity globalization offers also comes with challenges.
This two-sides-of-the-coin scenario is a common condition that presents itself in nearly every choice we make in life. But when it comes to globalization, the remarkable aspect is the belief that the benefits have already been realized— increased connectivity, medical innovations, improved nutrition and global supply chains—and what remains is their unintended consequences— cyber attacks, antimicrobial resistance, obesity and climate change.
The interconnectedness of our globalized world also means that a crisis in one sector can harm other industries, and a pandemic in one country can spread to others.
The sub-prime mortgage crisis in the United States quickly escalated into a global financial crisis in 2008 that we continue to feel the effects of today. And the financial industry is one of the most highly regulated industries in the world. Various institutions at the national and international level, from central banks and finance ministries to the International Monetary Fund, are charged with overseeing it, yet none of these organizations was able to predict the financial crisis.
However, the failure to forecast the crisis on the part of international institutions is more the result of limited resources and outdated models than incompetency or complacency. These organizations were designed to function in a post-WWII world where states were the main actors, not in the world as it exists today, with a plethora of non-governmental actors. Reforms are needed to reflect these dynamic changes that have completely altered the way the world operates.
Perhaps the greatest criticism of globalization has been the stark rise in inequality, which has been steadily climbing for decades. According to the Secretary General of the Organization for Economic Cooperation and Development (OECD), income inequality is “at its highest since records began.”
In response, populism is gaining momentum. In the United States, calls to “make America great again” resonate with people who feel their country and its leaders have failed them. Across the Atlantic, this anti-establishment sentiment is also evident—from Spain’s left-wing Podemos party to France’s right-wing National Front. Scotland also recently held a referendum to pull out of the United Kingdom and, next month, the UK is holding a referendum to pull out of the European Union.
As the world becomes increasingly interconnected, politics have become increasingly fragmented. A backlash is emerging across the globe, appearing as a rise in trade protectionism, increased nationalism and isolationism. And this desire to retreat from global engagement is not unfounded. There are far too many examples of the threats that we face in an increasingly interconnected world. Terrorist attacks in capital cities from Beirut to Paris to Brussels, cyber attacks on the U.S. Government, as well as major corporations like Target and Sony, and pandemics such as Ebola and the Zika virus, to name just a few.
These events, and the perception that threats are growing, have triggered a desire to return to some idealized version of the past where we were more in control and less vulnerable to external forces. Many believe that governments have let them down and have not effectively responded to the forces of globalization. Politicians make promises they can’t keep. Policies are reactive—instituted after crises occur—rather than proactively predicting and preparing for events.
Even if turning inward was the answer, which I don’t believe it is, it would be impossible to shut out the rest of the world. As former UN Secretary General Kofi Annan said, “Arguing against globalization is like arguing against the laws of gravity.”
Rather than trying to build walls to guard against the outside, the proper policy responses should focus on increased collaboration and reform of international institutions. The more we try to isolate ourselves, the less able we will be to shape the forces that will affect our future. By working together, across national boundaries, international institutions and their government stakeholders, can actively manage globalization in order to maximize the benefits and minimize the risks that transcend borders.
(Top Image: Courtesy of Getty Images.)
Leila Aridi Afas is the Principal of EDGE Strategies, LLC, a global advisory firm focused on international trade and investment, project finance and development and strategic communications. You may contact her at Leila@edgestratllc.com and follow her on Twitter @TheTradeLady.
All views expressed are those of the author.