The economic and financial crisis has already started to affect the key drivers of globalisation, a report by the International Monetary Fund (IMF) says.
Private ownership, globally integrated companies, the global supply chain and open markets have been undermined, according to the IMF, while “the spirit of protectionism” has re-emerged.
“The economic and financial crisis marks the end (for now) of a rapid expansion of globalisation,” it concludes.
The report points to figures for the end of 2008 that show that world trade and industrial production were “declining in tandem at double digit rates”.
Public participation in the private sector, for example, has increased in recent months because the crisis challenges companies. The report continues that “the national responses to the crisis can lead to economic and financial fragmentation”: for instance, some governments ask banks to continue lending to domestic customers, while credit to foreign markets is rationed.
Several countries – including Argentina, China, Ecuador and India – have imposed tariffs, violating a G20 agreement reached last November. Gordon Brown’s “British jobs for British workers” pledge and Barack Obama’s “Buy American” bill were also given as examples.
“Political support for globalisation was at best shallow while the global economy was in a buoyant state. This suggests the pendulum is now swinging in the opposite direction,” says the IMF.
The report highlights the importance of international co-operation, but acknowledges this is difficult to foster when countries are trying to save their own economies.
The report recommends a five-point agenda. It suggests trade integration should be preserved and exchange rate policies that trigger external instability should be avoided. National stimulus programmes and aid packages, it continues, should be designed to support globalisation rather than undermine it.
It says there is a need to “build confidence in multilateral insurance rather than self-insurance”.
Experts voice fears as spectre of protectionism returns