The 5 Key Trends in Globalization That Are Changing America and the World
Why only five? Because I am only giving an overview, a macro look at how globalization is shaping America and the world. More than five and the list would tend to become less of an overview and more of a detailed analysis.
1. China Gets the Slows
For the past 35 years the major globalization story has been the rise of China and how its caffeinated economic growth has affected the world. Now the story has changed to how the slowing of China's economy will affect not only the world outside China but also how it could affect China's internal politics.
The Chinese government's political legitimacy since Deng Xiaoping has been based not on communism, but on substantial economic growth and the guarantee of increased standard of living of its citizens from year to year.
This a modern, economic update to the historic Chinese concept of the Mandate of Heaven where if the emperor does not rule wisely he or she will lose heaven's mandate and be overthrown.
How the Chinese leadership reacts when they can no longer live up to the mandate of growth is still to be seen. The challenges facing the government are massive. How do you re-engineer a gigantic and slowing economy from being investment led to become a more balanced consumer-driven economy, without causing some disruption and pain, which then threatens the legitimacy on which the government is based on? How long can the Chinese government continue to allow very inefficient state owned companies to continue to operate, and accumulate massive debt just to prevent unemployment?
How does the government control the perception that the mandate of heaven is still enjoyed by the party when growth could fall from 7% to 4%. In a developed economy like America, a 4% growth rate would be an unbelievable boom. For the Chinese who have become accustomed to a 7% plus growth rate, the fall to 4% could be perceived as a severe recession, a recession that challenges the mandate of growth.
2. The 3 Scourges
Globalization has been spectacularly successful, it has enabled hundred's of millions of people to move out of poverty. But Globalization has also nurtured three global scourges that by feeding off of each other rapidly metastasized this year. The scourges are global warming, terrorism, and politically coerced immigration.
Time Magazine in its November 15, 2015 pointed out the direct linkage between the three plagues.
"U.S. military officials refer to climate change as a "threat multiplier". A 2014 Department of Defense report identifies climate change as the root of government instability that leads to widespread migration, damages infrastructure and leads to the spread of disease. "These gaps in governance can create an avenue for extremist ideologies and conditions that foster terrorism," the report says.
The parallels between the situation described in the government report and the situation on the ground in Syria are striking. The worst drought on record in the Middle Eastern country has created instability for farmers and threatened the food supply. At the same time, the government has struggled to hold on to power across the country in the face of militant groups and millions of Syrians have fled their homeland."
In addition these scourges are nourished and protected in the nether world where globalization has knock down borders between countries while old-fashioned concepts of sovereignty prevent new global rules from being devised
3. Myth of the BRICS
2015 is the year that the acronym BRICS created by Goldman-Sachs came crashing down. The BRICS a term coined by Jim O'Neil of Goldman in 2001 stood for the rapidly growing emerging nations of Brazil, Russia, India and China. South Africa was added later to the list. These countries then first met privately together in 2006 and formed the BRICS Forum in 2011 to encourage commercial, political and cultural ties among the BRICS nations.
History, culture and geography however can make a mockery of financial analogies; especially when the term is used in a geo-political context. Now that China is no longer enjoying spectacular growth which also supported Brazil's commodity based economy and the oil boom no longer exist for Russia, the BRICS look like they did before they were re-christened by Goldman- four countries who in terms of history and culture never related easily to each other. At the moment, only India is showing the possibility of extraordinary growth and India's growth is totally unrelated to China, Brazil and Russia.
4. Watch Out For The Loser
Globalization has tossed a long standing principle in International Relations on it head. It was always taught that a rising power threatens the world order. The examples goes back to ancient Greece and the Peloponnesian War, and the examples of course include Pre World War I Germany and its rapid economic rise, challenging England's dominance.
Globalization has changed this. Today's rising power (China) is the poster child for globalization: It is much too invested in the system, too economically intertwined with the world to radically shake up the existing order. China needs stability not disorder. It is the declining power, Russia, that is threatened by the global order and threatening to the global order. It is the country that has nothing to lose in trying to reshuffle the deck. Russia is the only major economy that, beyond a collapsing energy market, has no skin tying it to the globalized game.
Russia needs to prove it is a great power but has not wanted to recognized that economics has changed the definition of great powers. China is the opposite constantly buying into the globalized system. Look at China's successful push to get the Yuan recognized as a reserve currency. Or how China, the largest customer of the mid east oil doesn't demand a military seat at the Mid East table? China has its checkbook and knows that whoever is in power needs to sell to them.
5. The Game Changer
The price decline in oil began as a simple market correction spurred on by the development of fracking in the United States and the increased use of alternative energy. Many of the experts said at the time that the oil market would find equilibrium in the $60-70 area. That has not happened and oil has now turned into a major rout with tremendous historic implications.
In 2014 the United States imported approximately 25% less oil from the Middle East than in 2000. A September 2014 report by the American Petroleum Institute stated that the largest declines in U.S. oil imports were from the Middle East countries and projected that those imports from those countries would decline by another 34% by the latter half of the decade."
On June 9, 2015 the Financial Times ran a banner headline, "G7 in historic accord to phase out fossil fuel emission this century." As Martin Kaiser, head of International Climate Politics at Greenpeace, stated in the article following, "the G7 leaders' decision signals the end of the age of fossil fuels, the vision of a 100 percent renewable energy future is starting to take shape."
According to the consulting group, Petro Strategies, "the Mid- East now accounts for 47.9 percent of the world's oil reserves, with a presumed lifetime based on current usage of 78.1 years." The value of these reserves however is similar to pre 2008 mortgage bonds held by banks: their value rested on the perception that things will continue as is. However, if Martin Kaiser's projection holds true, the monetary value of the Middle Eastern oil reserves will certainly fall.
The rout in oil brings up many questions with many apparent and some more difficult answers. Obviously the fall in the value of oil puts additional pressure on Russia while also making life much more difficult for countries like Nigeria and Venezuela. But what about the future stability of the Saudi regime, and most important of all, putting Israel aside, does the U.S. need to be so heavily involved in the mid east if we do not need to protect our energy source anymore?
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