Trade has never been just about economics and finances. It has also been deeply inter-linked to political economy and geopolitics. During the European colonial period between the 16th century and mid-20th century, regional powers such as the Great Britain, the Netherlands and France set up colonies in Africa, Asia and the Americas, and followed a form of economic nationalism called Mercantilism purely aimed at boosting the home economy. However, as part of the post -Second World War developments, which included the dominant British Empire giving up its theory of Mercantilism and the US becoming more internationalist, the focal point of trade became not solely aimed at increasing prosperity, but also at improving relations and bind countries together in order to engage in fair commercial competition and avoid any future wars.
Globalisation and the extension of trade over the next few decades after Second World War brought incredible benefits to the global economy, particular to the US where income per capita nearly doubled during the period and the country further established itself as the world’s wealthiest and the most powerful nation. However, recent years have experienced a pushback and strong political activism against globalisation. Critics advocate that the significance of globalisation is waning, as trade is not the solution for developing sustainable socio-economic growth that it once was. Industrial robots engaged in manufacturing are not an employment boon either, they allege.
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With countries seeking to fortify their sovereign identities, the rapid rise of populism has recently surprised the political establishment in several countries across the globe. This anti-globalisation – a so-called ‘politics of rage’ – largely contributed to Britain’s rejection of the EU in 2016 and the victory of Donald Trump as the US president later that year, as well as the rise of nationalist political parties in parts of Europe and Asia. While governments, socio-economic experts and intellectuals have termed the populism as irrational, they also have failed to acknowledge that a substantial number of the population shares an opinion that the current political and economic system does not have much to offer.
Those favouring populism are people who think that the globalisation has profited only a small and privileged elite, but not them. Seeing through their vantage point, it appears rational for the bottom majority of the population to ask why they get only a few percent of income gains. A recent report by a leading British think tank, Resolution Foundation, suggests that workers in the UK are set for the worst pay growth decade since the Napoleonic wars. There is a need to concede that the current wave of populism is a repercussion of global economic failure, and protectionism is not a cure for this.
The vulnerability of protectionism or any other form of economic nationalism is that it misleads us into believing that our problems are born abroad and can be quick-fixed by stringent policies. Factually, a large number of major economic setbacks in the modern economic history of the world have been domestic in origin. Globalisation is under threat, and the need for governments, policy makers and civil society groups is to properly articulate the benefits of globalisation to the public. The threats of adopting a protectionist approach should be better conveyed to locals, and communities adversely affected by open markets and free trade policies be better compensated for their losses.
