Freedom

Opinion by Dan Perry

Vladimir Putin’s invasion of Ukraine is imperiling more than just the balance of power in Europe. It could spark a world-changing reversal on globalization. What was once widely seen as a boon for humanity has bred bitter resentments over deindustrialization in the West and an awkward dependence on despotic regimes.

At its core, globalization can be summed up as the view that widgets should be assembled wherever the labor is most affordable, because savings would far exceed the cost of transporting them home. Thus did the United States and Europe see whole industrial sectors uprooted to Asia and elsewhere. Along with the liberalization of currency markets and trade, it was expected to yield an efficient planetary economy where all would share in growth. Concerns that this would put masses of people in the West out of work were largely swept aside with promises to retrain workers for the knowledge economy, where there was supposedly more real value.

There is no question that this indeed brought efficiencies to industries and played a part in easing poverty around the world; developing countries now account for over half the global GDP. But there were also problems.

Globalization projected arrogance by suggesting manual jobs were of lesser value than knowledge industry jobs—while of course still fine for certain countries. It also largely ignored something akin to slave and even child labor in developing countries’ sweatshops. Even worse, it proved overly optimistic about retraining.

It is not so simple to turn auto workers into computer programmers; instead of thriving coding communities, America’s Rust Belt is now filled with deaths of despair; huge swaths of the once-industrial American heartland have been economically devastated, yielding opioid addiction, societal unrest and political extremism. Making up for the losses sustained through globalization and outsourcing will take generations.

But beyond the economic cost, we’re now seeing the cost of the political aspect of globalization. Put simply, interconnected economies also mean democracies like the U.S. are dependent on regimes that oppress their own people and threaten others. Such regimes have tended to adopt liberalism of the economy (capitalism) but not society (democracy).

The ultimate case in point is China. In 40 years of intense globalization, its GDP has grown from about 191 billion dollars in 1980 ($650 billion in today’s terms) to $14.7 trillion in 2020. China now accounts for 29 percent of global manufacturing—over 50 percent more than the U.S. does. The Chinese at all levels have gained vast experience with liberal democracies—yet China remains a closed society where media is tightly controlled and the courts are devices of the Chinese Communist Party, which enjoys one-party rule and stamps out opposition.

What if China should invade, occupy and annex Taiwan? The West is obviously quite hobbled in reacting due to its newfound dependence on the Chinese manufacturing sector—which used to be ours.

Which brings us to Russia.

After the Cold War, the West hoped that it might become a democracy in line with the logic of globalization. The International Monetary Fund urged shock therapy in the transition to capitalism, even though it was predictable that this would wipe out the savings of a generation and create a gold rush for state assets.

Like China, Russia has not exactly liberalized. It is a fake democracy with rigged elections, a poisoned, intimidated and jailed opposition, captive courts, and domesticated media. Its ruling class is a kleptocratic mafia reputed to have looted the country’s coffers.

In invading Ukraine, Russia clearly believed it had leverage: Europe gets much of its natural gas from Russia, which is critical especially in winter, and Russia is a major part of the global financial system and a valuable trade partner. Russia seems to have assumed the West would prove unwilling to pay a price to exact a price from Russia.

But Russia miscalculated. Condemnations of Putin are pouring in from all over, as is financial, humanitarian and military aid to Ukraine. Western nations froze Russia’s hard currency reserves and began the process of cutting its banks from the SWIFT system. The ruble has tumbled and Russia’s central bank reacted by jacking up interest rates in dangerous ways to stem a run on cash.

The U.S., EU, Britain, Australia, Canada and Japan announced plans to target wealthy Russians stashing assets abroad. Britain will stop Russia from selling sovereign debt in London. Apple, ExxonMobil and Boeing and other companies announced steps to withdraw business. Countries are banning Russian planes from airspace. Most critically, Germany has signaled readiness to cancel the Nord Stream 2 pipeline, the source of much of Russia’s perceived leverage.

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This should not come as a surprise. We are living in an era in which Western companies are expected to display a social conscience. They have sustainability and diversity campaigns, as well as “officers” whose purpose extends beyond immediate profitability and comes from a demand by the younger generation.

Russia’s malfeasance is going to force America and Europe to move in the direction of making themselves self-sufficient again. What we’re witnessing is the end of globalization as we know it.