Home / Opinion / Columns /  Ukraine has exposed globalization’s inherent fallacies

The term ‘globalization’ may have been born earlier, but became popular in the 1990s. It reflected a freer trade regime, global supply chains and an interconnected world. It was supposed to build a more peaceful earth after 45 years of Cold War angst. The Soviet Union had collapsed, the people of the Warsaw Pact countries in eastern Europe had overthrown their dictators and moved towards democracy, and liberal values seemed to have won in both the political and economic arenas.

But the war in Ukraine has woken us up to the fallacies that were inherent in the project of globalization.

One, the terms of globalization were all negotiated and decreed by the West. When the US and its allies invade Iraq for flimsy reasons, the rest of the world is expected to cheer their armies on. But when Russia attacks Ukraine, for concerns it has been articulating for at least 15 years, it is thrown out of the global banking system, its sovereign funds and properties of private Russian citizens are seized, and Russian sportsmen are banned. What exactly are the rules in the new ‘rules-based world order’?

Yet, the West continues to buy Russian oil, gas and coal, while lecturing 80% of the planet’s population to shun all Russian products. The Ukraine war has made it clear that the ‘world order’ is actually a Caucasian compact between North America and western Europe.

Two, the country that gained the most from globalization is China. When the late Deng Xiaoping started opening up the Chinese market in the late 1980s, Western firms rushed in gleefully, setting up factories and transferring precious technologies. It is fair to say that throughout the 1990s and much of the 2000s, the West—and especially the US—funded China’s rise.

China today produces more than 25% of everything manufactured on our planet. It started with labour-intensive low-tech components and apparel, but has now a significant share in state-of-the-art products. Shanghai is the busiest port in the world. Covid lockdowns in China threw global supply chains into disarray, causing price rises and shortages in categories as varied as toys and automobiles across the world.

China is very well aware of the power that it wields and has been pursuing an aggressive ‘Made in China 2025’ programme that will make it even stronger and less dependent on imports. It also held a 60% global market share in 2021 in the production of rare earth metals, which are becoming increasingly critical in sunrise areas like batteries, electric vehicles and wind turbines. Beijing has been consolidating its rare earth industry into a few giant state-owned corporations, creating a political tool that it could one day perhaps use in its relations with Washington and the West. This may constitute a long-term threat to the Western definition of globalization. Whatever rules the West had formulated for the new world order, China has subverted with impunity.

Three, international trade itself as a percentage of world gross domestic product peaked in 2008 and shows no signs of recovering its peak, according to the World Bank. The World Trade Organization has not taken any new global trade initiative in over a decade. Even sub-global trade deals like the Trans-Pacific Partnership or US-European Union (EU) Transatlantic Trade and Investment Partnership have foundered. These multilateral treaties are increasingly being replaced with bilateral trade agreements, such as the one recently signed by India and Australia.

Four, over the last decade, many countries around the world have been adopting nationalistic policies rather than adhere to the grand vision of globalization unifying the planet under a single economic and eventually single political system. These range from Brexit and Donald Trump’s ‘America First’ to India’s ‘Make in India’ and ‘Atmanirbhar Bharat’ initiatives.

The Narendra Modi government appears to draw its foreign policies now from ‘realist’ international relations theory, which recommends that nations act solely in their rational self-interest and in a transactional manner. These efforts will only strengthen after the Ukraine war, which has exposed the capriciousness underlying global financial and trade frameworks.

How can an Egypt or an India now be sure that it will not be cut off from the international banking system overnight or its sovereign funds seized at the stroke of a pen if it is forced to take military action that is not to the West’s liking, or even in response to a major domestic upheaval?

Five, how long will it be before the US dollar’s position as the default global currency is weakened? After all, even EU nations are buying Russian oil, gas and coal with roubles. Brazil, which imports 85% of its fertilizers and is largely dependent on Russia for potash and other key fertilizer components, is reportedly considering upping Chinese fertilizer imports or implementing a yuan payment system. And Saudi Arabian crown prince Mohammed bin Salman has not been taking US President Joe Biden’s phone calls.

For India, the message is: No one is your permanent friend; there is only self-interest in many forms, and the world is divided into bullies and the less powerful. The best way to guard a nation is to grow your economy fast and furiously. Globalization may well never be the same again after Ukraine, but money will always be the loudest voice at any negotiating table.

Sandipan Deb is a former editor of ‘Financial Express’, and founder-editor of ‘Open’ and ‘Swarajya’ magazines

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