Countries that staked their entire GDP’s on the bonanza decades of globalization are having to reposition their economies overnight as the global downturn sinks in its teeth. The side effects of reverse globalization are both unpretty and unexpected, and spark an urgent conversation on what will be the new mantra of the world economy.
The redoubts of Asian manufacturing are going idle. Singapore, Bangkok, Jakarta and Hong Kong have seen their exports plummet as American and European demand stagnates. China, with the world’s largest manufacturing base is in a slightly better position, but millions of newly jobless factory workers there have headed back to the countryside since January. With factory outputs dropping, shipping companies are staying in port. Maersk said their business has dropped 20 percent in volume since January of last year.
Like stateless castaways out of the sequel to Casablanca, foreign workers who were making hefty salaries in emerging markets are now waiting for the next outbound flight. Even the gilded class has been affected. Expat professionals in Dubai, hit with last-minute condo and car payments they can’t meet, are leaving the keys on the counter and their Mercedes in the airport parking lot. Over 3,000 vehicles sit collecting dust in the desert sun at the moment. A shocking $1 billion in capital fled emerging markets last week alone.
For many countries the new realities have meant a reluctant acceptance of protectionist policies. Nicholas Sarkozy made some of the more dramatic moves with his call for French automakers to return from Eastern Europe to prop up the labor market in France. His neighbors in the European Economic Community, long founded on borderless trade, also seem to be opting away from multilateral action as highlighted by German Chancellor Merkel’s refusal to bailout Eastern Europe.
A prescient article from VOX EU says isolationism however is not to blame for shrinking economies just yet. A contraction in supply chains and credit availability has occured and that has hit manufacturaing nodes on the Pacific Rim particularly hard, but no country has sworn off imports completely–despite rhetorical calls to “buy American” or French or Chinese. Still, it should be noted that what started as a financial crisis last year has expanded into a full-scale global trade crisis. The G 20’s meeting in London this spring will have to grapple how to keep emerging economies afloat while successfully investing billions in stimulus plans at home.
If you have a global trade plan for the G 20 to consider, do upload it to your ideas page on Big Think.