The age of globalisation began on the day the Berlin Wall came down. From that moment in 1989, the trends evident in the late 1970s and throughout the 1980s accelerated: the free movement of capital, people and goods; trickle-down economics; a much diminished role for nation states; and a belief that market forces, now unleashed, were unstoppable.
There has been pushback against globalisation over the years. The violent protests seen in Seattle during the World Trade Organisation meeting in December 1999 were the first sign that not everyone saw the move towards untrammelled freedom in a positive light. One conclusion from the 9/11 attacks on New York and Washington in September 2001 was that it was not only trade and financial markets that had gone global. The collapse of the investment bank Lehmann Brothers seven years later paid to the idea that the best thing governments could do when confronted with the power of global capital was to get out of the way and let the banks supervise themselves.
Now we have Britain’s rejection of the EU. This was more than a protest against the career opportunities that never knock and the affordable homes that never get built. It was a protest against the economic model that has been in place for the past three decades.
Extraordinary times are leading to extraordinary challenges. Linda Yueh, Fellow in Economics, Oxford University addresses these geopolitical challenges and demographic changes and how it will affect global economics and the asset management industry.
Modern humans have created many thousands of distinct cultures. So what will it mean if globalisation turns us into one giant, homogenous world culture?
The importance of the tribe in our evolutionary history has meant that natural selection has favoured in us a suite of psychological dispositions for making our cultures work and for defending them against competitors. These traits include cooperation, seeking affiliations, a predilection to coordinating our activities, and tendencies to trade and exchange goods and services. Thus, we have taken cooperation and sociality beyond the good relations among family members that dominate the rest of the animal kingdom, to making cooperation work among wider groups of people.
And so in a surprising turn, the very psychology that allows us to form and cooperate in small tribal groups, makes it possible for us to form into the larger social groupings of the modern world. Thus, early in our history most of us lived in small bands of maybe 50 to 200 people. At some point tribes formed that were essentially coalitions or bands of bands. Collections of tribes later formed into chiefdoms in which for the first time in our history a single ruler emerged.
But two factors looming on the horizon are likely to slow the rate at which cultural unification will happen.
One is resources, the other is demography. Cooperation has worked throughout history because large collections of people have been able to use resources more effectively and provide greater prosperity and protection than smaller groups. But that could change as resources become scarce.
This must be one of the most pressing social questions we can ask because if people begin to think they have reached what we might call ‘peak standard of living’ then they will naturally become more self-interested as the returns from cooperation begin to leak away. After all, why cooperate when there are no spoils to divide?
If we try to draw some conclusions from the ‘why’ we can see high levels of global employment and any form of prosperity will elude us and big reductions of poverty in the emerging world will not happen quickly enough.
Obviously, it is important to base these conclusions on where people are located and their individual views about the economies in which they live: how they see the problem, how they see their future, and whether the ambitions of different countries’ citizens can be advanced by stronger, more coordinated action around the world.
If you were to ask Americans what America has to do now to sort out its economy, some would say ‘cut deficits’; many would say ‘cut taxes’; but most would say ‘cut the foreign imports that are stealing our jobs’.
If you were to ask Europeans what their answer is, they would probably say ‘cut the debt’; and some might even complain about the very viability of the Euro and Brexit.
If you asked the Chinese what their solution was for their best future, they would probably answer that they are a developing country so other countries should stop threatening them with protectionism and complaining about their currency.
If you asked the developing world, they would call for an end to unfair trading practices that ruin their basic ability to export and say that aid is unfairly being cut or withheld.
If I asked the question a different way, asking the citizens ‘what do you really want to achieve as a country? I am sure that the answer would be very different.
In America people would say the main issue for them is jobs and rising living standards for the working middle class.
In the countries of the European Union people would say that Europe needs to get its young people into work and cut its high levels of unemployment.
In China people would say they want to see more personal prosperity and that means cutting the numbers of poor people and giving the rising middle class the opportunity to buy homes and access opportunities.
In many developing countries, people would tell you the problem was poverty.
Yet in the absence of a bigger vision of what can be achieved, the politics of each country inevitably pulls towards the narrow tasks and not the broad objectives.
So how can this wider debate contribute to global growth and collaboration?
Bradford DeLong once wrote: ‘History teaches us that when none of the three clear and present dangers that justify retrenchment and austerity – interest rate crowding-out, rising inflationary pressures on consumer prices, national overleverage via borrowing in foreign currencies – are present, you should not retrench’.
Yet in the absence of seeing a different and global route to greater prosperity, each country is trying, post-crisis, to return to its old ways. However, the security people crave will come not from countries clinging to an old world, but from reinventing themselves for our new interdependent world: Asia reducing poverty and building their new middle class; America and Europe exporting high-value-added goods by building a more skilled middle class; all undertaking structural reforms but in a growing economy.
This is the answer to those who travel today not with optimism but in fear. But there is no old world to return to: it has gone. The transition between epochs is always the moment of maximum danger. It is also the moment of maximum opportunity.
Final thought: against this backdrop the seemingly unstoppable and ever accelerating cultural homogenization around the world brought about by travel, the internet and social networking, although often decried, is probably a good thing even if it means the loss of cultural diversity: it increases our sense of togetherness via the sense of a shared culture. In fact, breaking down of cultural barriers – unfashionable as this can sound – is probably one of the few things that societies can do to increase harmony among ever more heterogeneous peoples.
So, to my mind, there is little doubt that the next century is going to be a time of great uncertainty and upheaval as resources, money and space become ever more scarce. It is going to be a bumpy road with many setbacks and conflicts. But if there was ever a species that could tackle these challenges it is our own.
It might be surprising, but our genes, in the form of our capacity for culture, have created in us a machine capable of greater cooperation, inventiveness and common good than any other on Earth.
And, of course it means you can always find a cappuccino just the way you like it no matter where we wake up.
As Herbie Hancock once said:
“Globalization means we have to re-examine some of our ideas, and look at ideas from other countries, from other cultures, and open ourselves to them. And that’s not comfortable for the average person.”