Withdraw from globalization, nationalism

This is a very good book and timely too. No one knows how long Covid-19 will stay with us and therefore its connection to the many crises of our times may last for a long time.

Authors Lim Mah Hui and Michael Heng have done an invaluable service in linking the pandemic crisis to an economic crisis as well as the financial crisis and the crisis of democracy.

Each of these crises has its own roots and we are going through turbulent times where they seem to be happening simultaneously.

We need to think beyond our intellectual silos and think holistically. Planet Earth is both physical and social.

Globalization is a recent phenomenon in the history of mankind.

It dates from the end of the 19th century when the steamboat, the telegraph and the telephone linked countries far apart.

However, this led to the First World War of 1914-18. A second phase of globalization saw the advent of aviation, submarines, biochemistry, machine guns and nuclear energy.

These led to World War II or World War II of 1939-45.

Let us pray that this third phase of globalization from the 1950s does not lead to a third world war. What we are witnessing is a world war with a virus!

The conjunction of such a world war with other world problems is unique in the history of mankind.

The authors conclude with three political-economic issues: (1) a nationalist-populist liberal market; (2) a social democratic market and (3) market authoritarianism.

I would suggest a fourth outcome, that of a retreat from globalization and nationalism.

More than a hundred new nations were born in the aftermath of World War II.

The United Nations was created in 1947 because of these many new nations.

Some of these new nations will disappear with climate change as sea level rise will overwhelm them.

Others are so small that they are actually protectorates, defended by larger powers.

Brunei, for example, has the same population as Toa Payoh, Singapore’s oldest township, with a population of around a third of a million, and is indeed guarded by the British.

Before post-World War II nationalism, the world consisted of several empires.

The biggest was the British, then came the French, Germans, Spaniards and so on.

In Southeast Asia, Myanmar, Malaysia, Singapore, Brunei were part of the British Empire: Laos, Cambodia and Vietnam – the French Empire, the Philippines – the Spanish (then American) Empire, Papua New Guinea – German and Timor Leste – Portuguese.

European empires held the world together. We must not forget the Chinese Empire controlling North and South Korea, Taiwan, Outer Mongolia, etc.

What Lim Mah Hui and Michael have shown is that the world is now united by finance, economics and market ideology.

In the same way that empires broke up because of World War II (the Japanese put an end to European empires in Southeast Asia), the empires of finance, economics and market ideology may be disappearing.

For example, the authors have well demonstrated that a large part of finance today is actually debt.

However, much of Latin America literally canceled its debts to the United States in the 1970s and 1980s.

Nations borrow, but they can also go back on what they borrow. This does not mean that lenders lose.

Interest payments may have paid off the principal of many loans.

There was a time when interest rates were high, unlike the current regime of low interest rates.

Exchange rates can also change, making what could have been expensive debt cheap.

The pound devalued in 1967 by 12% when Britain could not maintain its exchange rate. Britain’s external debt has fallen by this percentage.

Today, all exchange rates are variable following the abandonment of a fixed monetary gold price by the Federal Reserve Bank in 1971.

This price was set at the Bretton Woods conference in 1944, after which the International Monetary Fund was created.

The price of gold was then US$35 for a fine ounce. Today it’s over US$1,000 for a fine ounce.

US dollar debt decreases when the price of gold increases. No wonder the United States continues to borrow.

The Federal Reserve is paying off US debt in US dollars, not gold.

The world today is going through a financial crisis. However, I do not consider this permanent.

Countries can live on much less income than before. The gross domestic product (GDP) of many countries has fallen, Singapore saw an 8.7% decline in GDP in 2020.

I doubt it will rebound more than 7% in 2021. This brings Singapore at best in 2022 back to where it was in 2019. Poverty has increased but the country is still surviving.

The market system has a way of correcting itself. What may not correct itself is the political system.

The authors point to the emergence of a “nationalist-populist” society as well as a “social-democratic” society in their final chapter.

Another possibility is that a nation becomes part of another nation, not by conquest but by cultural and economic absorption.

Taiwan must later become part of the People’s Republic of China: there are cultural affinities and many Taiwanese businessmen have economic ties with the mainland.

Only the United States supports Taiwan, but it will not risk a just war to keep Taiwan alive.

I commend Lim Mah Hui and Michael Heng for keeping readers aware of the multilateral dimension of globalization today.

We need this awareness because of climate change and growing poverty.

We are all human creatures who want to live in dignity. Financial and ideological ties cannot hold the world together.

It is compassion and respect for others that counts.

Lee Soo Ann is Emeritus Professor at the National University of Singapore. Comments: letters@thesundaily.com

Edward K. Thompson