Crisis of globalisation: Kindleberger versus Keynes

Many prominent thinkers today agree that the post-covid-19 world will have less globalisation and more nationalism. From the globalist, liberal, internationalist point of view, our main challenge is “resisting the drift to autarky and nationalism and embracing instead the challenge of re-globalisation”.

Yet, we ought not to see either economic nationalism or globalisation as take-it-or-leave-it packages. We can and indeed must pick and choose as we experiment our way out of this crisis.

Once again, a crisis has revealed deep structural flaws in what is patently a hierarchical and highly unstable global division of labour. And there are two ways to deal with hierarchy if you’re in the lower tiers: either call for global leadership or try to be as self-sufficient as possible. Let’s call this Kindleberger versus Keynes.

Charles Kindleberger famously called for leadership in the global economy, a benign but still self-interested expression of the inevitable hierarchy in world politics and economics. His was not merely a noble plea. It was and remains accurate in terms of what the combination of democracy and globalisation entails institutionally, especially in terms of world money. Kindleberger's intuition, at once practical and democratic, was that if we’re going to be connected up and use one nation’s money as world money, we had better all have a say in how that money is managed. Failure of leadership of this kind led to the Great Depression as well as the crisis of 2008.

Hierarchy is an intrinsic technical feature of monetary systems, including global ones. For a long time now, the entity at the top of this hierarchy has been a national entity, since the architecture of national states enables them to amass substantial and durable economic scale. And nations are of course self-interested actors.

Why then would Kindleberger expect leadership from them? Because an international order needs leadership to function well. This assumes a substantial degree of investment in the international order on the part of the nation at the top of the pile.

As far as the US is concerned, however, that investment in the international order came about not because of a broad internal consensus but despite its absence. Only a

small fraction of the US population benefits from the global order. Their spokespeople were the globalists.

One might argue that a larger fraction of the world benefited from this order, namely the new Chinese middle class, but they do not vote in American elections. The losers of globalisation do vote, and they have been consistently voting out the globalists of late. This was happening across the advanced and middle income world leading to the rise of economic nationalism.

Once the globalists and their backers lost control, we saw a schism emerge between the rhetoric of nationalism coupled with the continuance of deep globalisation especially in finance. The dollar still rules; we always knew it was America first, now it was just out in the open.

So let’s face it, Kindleberger’s world is not the world we live in. So we come to the second way to deal with hierarchy, namely self-sufficiency. That plays out as national self-sufficiency because the nation remains the most binding form of collective action. Democrats ought to push for civic as opposed to ethnic nationalism, but to think outside nationalism altogether is to miss people’s deeply-felt need for a sense of belonging to something greater than themselves; this of course was the globalists' gravest oversight.

For Keynes, the “silliness” of economic nationalism came from its doctrinaire thinking, its dangerous haste, and its unwillingness to tolerate the criticism required when experimenting. The need for self-sufficiency derived from bellicose interstate competition, domestic priorities warped by the threat of capital flight, and damage caused when the separation of ownership and control is added to international disjuncture.

If we cannot leave economic nationalism to the doctrinaire, we cannot leave globalisation to the globalists. We must ask, globalise what? Keynes’ answer: “Ideas, knowledge, science, hospitality, travel— these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national.”

Kindleberger’s formula for dollar leadership was to give other major economies a say in the running of the dollar, i.e., to have both globalisation and democracy. For Keynes, the answer was to depend less on the dollar by depending less on international trade and finance.

Self-reliance will make us more robust. It also leaves us free to globalise the things we love, culture and knowledge. The top show on Netflix in India is a Spanish crime drama. Keynes, who wanted cultural exchange rather than cultural hegemony (“Death to Hollywood,” he once cried), would have approved.

Pondering the future of American hegemony, Gideon Rachman asks rhetorically: where do the global middle classes want to send their kids to college? What currency do they trust the most? Both those answers point to the US, but our unstable and unequal world begs the question. This is less about alternatives to the dollar than alternatives to our particular version of globalisation. A more equal world is a world with greater national self-sufficiency, but divorced from debilitating interstate competition, ethnic chauvinism and authoritarianism.

As for universities, they are already globalising at pace. Here then are two aspects of a different, better globalisation: bottle up finance, globalise the universities!

Anush Kapadia is faculty member at the Indian Institute of Technology Bombay in the humanities and social sciences department. These are the author’s personal views.