Globalization: Between Walls and Roads
In today’s multipolar world, creating barriers to trade will invariably result in reciprocity, so in the end all countries will be worse off.
Brexit, the US election results, stagnant trade growth, the Syrian refugee crisis, etc. are all being widely interpreted as definitive indications of the beginning of the end of the globalization phenomenon. Policymakers and economists are justifiably concerned about the viability of a trade-driven growth model in present times. Many proponents of nationalism, isolationism, or protectionism have been forcefully advocating for policy—and even physical—barriers to trade. It is vehemently believed in some quarters that numerous well-paying jobs could be created locally by simply reversing globalization. References to ‘walls’ are rather commonplace nowadays.
Throughout history, explorers, travelers and traders faced numerous obstacles to connect with the “other side.” From extreme climatic conditions and inhospitable terrains to vast oceans, every natural impediment had to be overcome. Even as people learnt to navigate through natural barriers, socio-political conditions erected artificial hurdles. Security was a paramount concern due to innumerable and distributed conflicts, violent robberies, and seemingly omnipresent piracy. Diverse social, cultural and linguistic issues constituted further barriers. Ability to communicate and gather information was severely limited by distance. But in spite of these ostensibly insurmountable impediments, cross-country interactions and trade flourished.
The huge volumes of goods, multitude of travelers and waves of migrants that traversed the Khyber Pass connecting modern-day Afghanistan and Pakistan, the ‘Amber Road’ connecting the North and Baltic seas to the Mediterranean, and the famed ’Silk Road’ linking Europe to East are a few examples of human endeavors to venture beyond the known frontiers in the pursuit of progress. There is also emerging evidence of pre-Columbian trading between ancient American civilizations and those in Europe and Asia.
Traversing the vast expanse of the known world to exchange knowledge and goods carried considerable risks and repercussions, and many perished. Yet the caravans moved on. Cross-border interactions and trade survived the grueling test of time, and continued to expand as the technological capacity to traverse great distances and communicate improved.
As more parts of the globe became connected, trade increased exponentially. But even as the benefits of these exchanges were being realized through greater wealth and expanded knowledge, they also brought some unsettling effects. Competition from better-endowed nations threatened the livelihoods of certain societal segments. Exchange of ideas and greater knowledge threatened certain social, political and religious orders. Often the prevailing establishment, acting partly to protect the vulnerable societal segments and partly to preserve their power structure, moved to regulate trade and exchanges. Measures of protectionism ranged from restrictions on freedom of expression to taxes and tariffs, to near complete isolationism. However, what seemed effective in the short or medium term often turned detrimental in the long run.
Protectionism was seen as breeding complacency, inefficiency, and stagnation. The nations that prospered were those that had the right infrastructure to channel resources gained through exchanges and trade to increase the skills and competitiveness of local sectors, facilitated innovation via unhindered expression and experimentation of ideas, provided the space to challenges conventional wisdom and traditional norms, and justly rewarded achievement.
No barrier, impediment or wall to trade ever really worked in the long run. When the Eastern route to Asia was effectively closed, Christopher Columbus set out to find a Western route, and found a whole New World full of potential and possibilities. Trade, interactions and migrations happen due to people’s inner yearning for betterment, change and exploration. As history has shown, no wall is high enough or strong enough to match the human spirit and ingenuity.
In today’s multipolar world, creating barriers to interactions and trade would invariably result in reciprocity. No one nation or entity can act unilaterally and expect to reap all the benefits. If high tariffs are imposed on imports to protect domestic sectors, then retaliatory actions by others could adversely affect the country’s high value-add jobs that are often international in nature. While restrictive trade actions may create low- and medium-wage jobs to serve local markets, a good portion of high-wage globalized job and profit opportunities may be foregone. Walls block movements both ways – in effect leaving countries worse off.
Throughout history the processes of interaction, transaction and trade have grown despite brutal wars, devastating calamities, overwhelming barriers, and long-drawn sieges. Brexit and the US election results are but two outcomes of civilized societies sorting out their immediate priorities through respectable norms. Due to the current level of global interconnectivity, such eventualities are unlikely to result in extreme isolationist measures. But if they do and lead to building walls, their proponents will quickly find out how ineffectively porous such barriers are in the age of digital economies and 3D printing. Between those who want to build walls and those who want to build roads, there are no prizes for guessing where the epicenter of the global economy will be gravitating to.