Technology is the biggest threat to globalisation and capitalism

Stephen D. King’s new book, Grave New World: The end of globalisation, the return of history, is a salutary reminder that progress is not inevitable and that we may have become far too complacent in believing liberal capitalism will survive in the 21st century.

King – who put forward his world vision in these pages last month – argues that, seen through technological advances, it is easy to believe that globalisation is inevitable, because we are connected in so many increasingly inexpensive ways; whether through WhatsApp and Facebook, or FaceTime and Skype.

TEPHEN D. King’s new book, Grave New World: The end of globalisation, the return of history, is a salutary reminder that progress is not inevitable and that we may have become far too complacent in believing liberal capitalism will survive in the twenty-first century. King – who put forward his world vision in these pages last month – argues that, seen through technological advances, it is easy to believe that globalisation is inevitable, because we are connected in so many increasingly inexpensive ways; whether through WhatsApp and Facebook, or FaceTime and Skype.

The global village is a reality, but one of King’s key arguments is that technology does not rule out competing versions of globalisation.

Economic development that reduces inequality between nation states but appears to increase it within those states inevitably creates a tension, and for some, a yearning for stability. But this desire for stability is then challenged by large migratory flows, with a consequential populist backlash.

King warns that while technology may have encouraged globalisation in the past, it is not all a one-way street. Advances in artificial intelligence and robotics may result in onshoring as companies replace cheap overseas labour with even cheaper 24/7 robots at home. King asks whether global supply chains will survive such developments.

Technology can also have a dark side. Islamic State is a non-state actor that has gathered support via social media. Cyber attacks also risk creating a reactionary backlash towards globalisation, with a cry of “circle the wagons”.

What King doesn’t state – but is the elephant at the table – is that the reactionary backlash to globalisation is merely the international manifestation of the states versus markets battle. The economic case for a smaller state is overwhelming, but it has little political traction at home – exhibit A: the General Election manifestos. Similarly, at the global level, the perception of markets is often negative regardless of whether or not the reality is.

In the nineteenth century the biggest driver of globalisation wasn’t trade or capital flows, but people. And this is where the current challenge is perhaps greatest.

Migratory flows within the EU are being added to by the consequences of civil war and population growth in the developing world. Over recent years, 12m of Syria’s 22m population have been displaced. African countries such as Nigeria are set to more than double their population to 400m between now and 2050.

And herein lies enormous economic tension. Sensing higher incomes and opportunities, vast numbers of people will head north. An irresistible force will meet an immovable object. Countries like Italy, with collapsing working populations and stratospheric tax rates to pay for the provision of their elderly populations, will be economically desperate but politically incapable of accepting these migrants. King rightly deduces that “Nigeria and Italy offer only a flavor of what will ultimately prove to be a new demographic epoch.”

Such trends will run in parallel with the automation of routine occupations and while economic history teaches that technological advances are net positive for employment, there will inevitably be winners and losers – and the losers will shout loudest.

King concludes by reiterating Dani Rodrik’s globalisation “trilemma”. Nations are faced with three options: 1) Restrict democratic choice to maximise economic and financial gains. 2) Restrict globalisation to maximise democratic choice. 3) Create new institutions to facilitate globalisation. Number 1 is ruled out because of political fears about being seen as in the pocket of “bankers”. Number 2 threatens a return to 1930s protectionism and isolationism. Number 3 looks impossible in Trump World. There is one institution which would work – unilateral free trade. But sadly, it ain’t gonna happen.

City A.M.’s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

Courtesy Newsrep