De-globalization is good for the World.

Radiotherapy- what it does? We all know about its unmatched curable properties in cancer. What was the situation before its discovery? Drastic and horrible- to be short. Overtime, it became clear that Radiotherapy has its own side-effects which differs from individual to individual. Some may suffer more some less. But does it makes sense to stop using radiotherapy for a weird reason like they have side-effects? Or its better to work upon advancing Palliative care and going for even more research in the field of Radiotherapy to make it less painful and to lessen its side-effect? Choice HAS TO BE MADE, rationally.

The purpose of explaining so much about an out-of-the-track topic like Radiotherapy was to basically introduce the gist and theme of the following write up. As we know, a wide section of intellectuals are making an argument for de-globalization instead. Reason being that although the globalization generated great prosperity, but the elite gained the most. It is a fact that it has increased inequality in the world. It made the biggest companies more powerful and made the world more vulnerable to crises because everything is networked. Hence, the trust of the people is degenerating worldwide.

Glancing over the current scenario, with global demand weak, and many nations erecting import barriers, global trade growth has slowed and state interference is on the rise. The flow of people is slowing, too, despite the flood of refugees. There is surging inflation & rising conflicts all over. For developing economies in Asia, the Gini coefficient — which measures income inequality on a scale from zero to one where one is worst – has risen considerably in last two decades. No doubt, these facts represent and indicate the enormity of a looming crisis, if not taken care of immediately.

But this doesn’t mean we need to out-rightly reject Globalization. Moreover, only globalization is not the sole cause of growing inequality. There are other forces at work in the restructuring of the global economy, like digitization. Also, there is rapid divergence of salaries among top earners. Poor are getting poorer and the rich are getting richer. Tax evasion is one such menace which is enhancing such wide gaps. Tax havens are the tumours of the globalized world. Corporations take advantage of tax loopholes that individual countries have created.

Examining the cause for these changes post-2008 crisis, we can say that trade deals have become more complex take much longer to complete. Protectionist measures are on the rise since 2008. And once such protectionist walls spring up around one industry, they tend to grow and spread to other industries. Earlier, developed countries supplied intermediate goods to manufacturing hub China. But supply chains are contracting now as China has shifted towards making its economy less dependent and manufacturing more parts at home.

Today, populists are again calling for protecting domestic industry and sharing wealth, which could have the same impact. Redistributing wealth within nations could narrow the income gap between individuals. But more protection could widen the wealth gap between nations.

The governments are increasingly willing to close borders and to project military power. But this has only enhanced tensions in the region and turned them in to war-torn-sufferers-turned-immigrants. Trade and financial globalization have already weakened the bargaining position of relatively (to capital) immobile labour, driving down wages. Dependence on capital flows made countries more vulnerable to economic and financial shocks, causing lower growth and employment.

Among all this, a study by IMF claims that a major portion of the slowdown appears to be a collapse in investment rather than deliberate actions by governments. If policy makers can find a way to revive investment—by boosting demand or unblocking supply—then trade might pick up. But the study also says that the rest of the slowdown was largely explained by a reduction of trade liberalization and rising protectionism. With the interest rates already close to zero across the developed world, ultra-loose monetary policy risks would do more harm.

Nevertheless, in my opinion, Globalization is the guarantee for prosperity which made possible to integrate the world & lift so many people out of poverty. In last 25 years, the share of people living in extreme poverty has been reduced from 40% to 10% percent. It has been a tenet of economic thinking for two centuries that trade benefits both parties, through increased specialization, greater efficiency, the exchange of ideas and ultimately increased innovation and productivity. It is productivity growth which ultimately drives wages and growth.

Isolation is not going to be proved as a sensible decision in any circumstance. Just like post World War I, so called populists appealed, isolated and closed borders of the nations, just to discover later (As late as 1980s) that it is leading them nowhere. Though it is a fact as well that the prosperity has never been distributed equally but it has more to do with imperfection on the part of nations to recognize their field of strength and exploiting it to the full extent.

There is a no point in interpreting de-globalization as deploying protectionist measures & withdrawing from the world economy. Rather, it’s time to reshape Globalization and re-interpret it, if at all.

And the most ideal place to start with is home, in each individual country. What we need is a process of restructuring the world economic and political system so that the individual countries can work upon increasing their domestic capacities. The new order need to be integrated around the needs of people & communities, & labour in particular.

Instead of relying on a fancy term like Inclusive growth and giving rounds and rounds of talk over it, we need to give a thought over the Mahatma Gandhi’s idea of being self-sufficient first, albeit in a tweaked manner. Nations need to work upon producing for the local market instead of being completely dependent on dumped exports from other low cost manufacturing countries. Care should be taken of employing technologies that enhance rather than destroy the community, as well as the environment.

Implement policies that redistribute the sources of income and wealth such as land, ensuring domestic control over key sectors of the economy and promoting communal access to basic services like water, health care and education. Provide more resources to rural areas to halt the migrations that increase inequality. This means expanding public services in rural areas.

Here comes the role of government in play. Well-conceived tax and transfer systems can hinder further growth in the gap between rich and poor. They need to ensure that those being left behind are provided with sustainable social safety net and a minimum wage to prevent them from falling further. There is a dire need to invest in education on war scale, especially for India.

All this will require the money that is getting under-grounded and transported to fuel a parallel economy. That’s why preventing tax evasion will be one of the most important tasks in the coming years. Elimination of Tax haven and tailoring corporate taxes according to each country will go long way in elimination of Black economy.

All this sounds simple and is not as much difficult as well, provided there is a will. We should try to eliminate the drawbacks of globalization without destroying its advantages. If, on the other hand, protectionism and populism gain the upper hand, there is a danger that global prosperity could shrink. The above idea of de-globalization need to be debated and carved uniquely and in a best possible way because it holds promise of a better world than ever been before.

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