Globalisation has run its sorry course. We must find a new model – The Telegraph

You might as well debate whether autumn should follow summer, Tony Blair once said, as debate the nature or desirability of globalisation. Blair was, as so often, intellectually clear, politically provocative, and entirely incorrect.

For globalisation the treaties, processes and structures that have made the world more complex, inter-connected and inter-reliant is the product of political choices. Those choices, such as the regulation and deregulation of labour markets, the regulation and taxation of capital, and the terms on which countries traded with one another, determined not only that globalisation proceeded apace, but the nature of change it brought.

Trade in manufactured goods was liberalised, while services were protected. Trade deals with states that would clearly ignore the terms most notably China were agreed with little regard to their abuse. With domestic policies, some countries did more than others to protect their people from the winds of change, and some did more than others to protect their national infrastructure from the prying eyes of hostile states.

For a while, all seemed fine. We imported cheap clothes and manufactured goods. Our borrowing costs and inflation were kept down by government policies and savers in Asia. House prices rose and plenty felt better off for it.

But slowly the costs became more apparent. Mid-skilled work disappeared. Pay stagnated. As productivity increased, returns for workers failed to keep up with those for investors. As factories closed and manufacturing moved to Asia, the link between the success of British companies and the prosperity of British people ruptured: while once executives might have shared some gains with low and mid-skilled workers, these days such workers are employed in other countries.

Even some of the fruits of globalisation are turning to rot. While the limited development of the Chinese economy once kept inflation low, now it drives it up as we compete for scarce resources like oil and gas. While the abandonment of manufacturing was seen as the height of modernisation, during the pandemic we found we were exposed without it. While openness to foreign investment was once our leitmotif, now we understand it is exploited by hostile states to launder dirty money and gain leverage against us.

Even now our leaders are reluctant to see the truth. They cling to long-disproved liberal assumptions that our values are universal, that the rest of the world wants to become like us, that interconnectedness makes war impossible, that the liberalisation of trade inevitably leads to open societies and democratic politics and hope that events might still swing their way.

The longer this foolhardy hope goes on, the more painful the inevitable change will be, and the more our rivals and enemies will conspire to inflict new blows upon us. Russia, so long as it is led by Putin or his allies, cannot expect a return to normal diplomatic or economic relations. And like it or not, Western countries will soon be forced to decouple, perhaps to varying extents, from China.

But if this phase of globalisation is over, what comes next? To answer we first need to be honest with ourselves. We do not, as we often tell ourselves we do, live in a liberal, rules-based order. Since the Cold War we have lived in an American-led order, in which US military and financial might has allowed Washington to dominate the world. American hegemony is preferable to anything that might replace it, but we should not delude ourselves that global institutions and structures are in any way fair. They are backed by force, and the rules are bent to protect American interests.

That US-led order has not been destroyed, but it is challenged. America lost its wars in Iraq and Afghanistan. Through naivety and neglect, it invited China into the global trading system and watched as Beijing broke all the rules, dumped cheap products on the West, pilfered economic and military secrets, and caused deindustrialisation and social decay across the Rust Belt. American political instability, repeated elsewhere in the West, is directly linked to the economic and social anxiety fuelled in part by globalisation.

The rivals and enemies who challenge us do not seek to export their ideology, overthrow our system of government, or destroy our culture. But as China becomes more powerful, its global interests are growing and with them its security and military interests grow too. As Western relative power declines, the likes of Russia, Iran and North Korea will become more assertive.

The new model, then, needs to resist and restrict our rivals and enemies. It requires recognition that economic might matters, and so the pursuit of growth is not optional. It requires us to prioritise national resilience over the notional efficiency of stretched supply chains. It requires economic nationalism, strategic planning and the maintenance of domestic production and core capabilities.

It also demands closer cooperation across the West, and with allies who stand with us. We need new institutions and fora to secure such cooperation, and coordinated policies on defence and security, access to commodities like energy, and vital tech capabilities, from the manufacture of chips to expertise in sectors like artificial intelligence and telecommunications. We need to be prepared for the end of the open, global internet and a challenge to the dollar as the worlds reserve currency.

We will need to accept the reality of spheres of influence and, engage in a contest for support, power, trade and access to natural resources in non-aligned countries. We will need to accept we cannot help liberals and democrats in every country, and sometimes ally ourselves with countries that are neither liberal nor democratic. We will need to spend more on defence and security policy and use our combined aid budgets to rival Chinas belt and road initiative. At home, we will need to do more to heal the social and economic divides our enemies like to exploit.

There was nothing inevitable about the globalisation of the past three decades. Indeed, we are now approaching its end. But our security, prosperity and liberty depend on us shaping what follows.

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Globalisation has run its sorry course. We must find a new model - The Telegraph