BREXIT, one of the biggest geopolitical risks of 2016, became a reality on June 23 2016 when the "Leave" camp won by a small margin with 51.9 percent of the vote.
The referendum, with an unprecedented voter turnout of 72 per cent, has attracted the attention of the whole world, as its outcome will not only impact the future of the United Kingdom, but also bring about huge and unpredictable changes to the European integration process, as well as to the future of globalization.
From a strategic and global perspective, BREXIT may be defined as the first wave of anti-globalization and rising populism that washes over the world, in particular the advanced nations. What follows next will certainly be more intense and ferocious as globalization and anti-globalization forces engage in fierce battles in different fields involving more countries both in and outside the EU.
What does BREXIT mean?
It is a word that has been used as a shorthand way of saying the UK leaving the EU - merging the words Britain and Exit to get BREXIT.
What was the breakdown across the UK?
Globalization refers to the economic, social, and political integration of nations. Economic globalisation can be seen in the exchange of goods. It can also be seen in the rising movement of people and capital around the world.
However, Globalization is under attack these days from all quarters. It is because the race of globalization has left majority of the world's population far behind. According to UNICEF, the richest 20 per cent of the population gets 83 per cent of global income, while the poorest quintile has just 1 per cent. This trend is getting worse. A new UNDP report called "Humanity Divided" estimates that 75 per cent of the population lives in societies where income distribution is less equal now than it was in the 1990s, although global GDP ballooned from $22 trillion to $72 trillion.
Also the fundamental challenge posed by the increasing reach of global markets is that global markets are inherently dis-equalizing, making rising inequality in developing countries more rather than less likely. This is due to following reasons:
In developing countries inequality is economically destructive; it interacts with underdeveloped markets and ineffective government programs to slow growth - which in turn slows progress in reducing poverty. Economic theory suggests why: weak credit markets and inadequate public education mean only the rich can exploit investment opportunities. Middle income and poor households cannot borrow and miss out on potentially high returns on their own farms and small business ventures for example - often higher returns than the rich are getting on their capital. The most able children of the less rich miss out on the education and skills that would maximize their own economic prospects and their countries' own growth.
Due to this, the trend has started to reverse to deglobalisation. Several prominent countries including the UK resisted globalisation by rising tariffs. Far-right parties in Europe gained popularity in this atmosphere of financial weakness and supporting deglobalisation.
What are the indicators of deglobalization?
Apart from rise of right wing parties across globe, which is political manifestation of deglobalization, economic indicators show that post 2008 economic slowdown de-globalization is becoming the norm.
What are the reasons for this new trend?
There are several reasons behind this trend today. Some of them are:
Concept of de-globalisation
According to Walden Bello and Focus on the Global South, who coined the term "deglobalisation", the objective is not to withdraw from the global economy, but rather to trigger a process of restructuring the world economic and political system so as to strengthen local and national economies instead of weakening them.
De-globalisation questions the integration process dominated by the logic of capital and the supposed rationality of the economy that erodes the decision-making capacity of the people and States. Deglobalising means starting to think and build an integration process based on the needs of peoples, nations, communities and ecosystems.
Deglobalisation does not oppose trade nor the exchange of products or services, but proposes that trade is not done at the expense of the communities, the local and national economies and the diversity of its products whether agricultural or industrial.
The one size fit all policy of structural adjustment programs pushing countries to only remain producers of particular cash crops or goods, destroys that country's ability to satisfy people's needs, diversify and more importantly, be self-reliant in its ability to feed its people.
Deglobalisation embraces the principle of subsidiarity that affirms that all political or economic decisions must be adopted by the level of government that is closest to the problem. The ones who know the most about the local situation and will be the first to suffer the consequences of a decision must be the first to give their opinion and state their position. A political or economic decision that affects a local area must fundamentally be made at this level and only when it is truly necessary should this decision-making power be transferred to the national, regional or global level.
Currently, trade rules cannot be the same for all countries. Trade and investment rules must be asymmetrical so as to favour the smallest economies and countries whose economies and agricultural sector were weakened by transnational capital, colonialism and the interventionism of the superpowers. Trade policies - such as quotas, tariffs and subsidies - must be used to protect local economies from imported goods subsidised by large corporations that set prices at artificially low rates.
Principles of De-globalization by Walden Bello
In economics, protectionism is the economic policy of restraining trade between states (countries) through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations. Protectionist policies protect the producers, businesses and workers of the import-competing sector in a country from foreign competitors. According to the proponents, these policies can counteract unfair trade practices, to allow fair competition between imports and goods and services produced domestically. WTO rules allow countries to use methods of protectionism but in a limited manner and in specific cases.
WTO tries to maintain the scenario of free and fair trade mechanism based on following principles:
Multilateralism is the process of organizing relations between groups of three or more states. Beyond that basic quantitative aspect, multilateralism is generally considered to comprise certain qualitative elements or principles that shape the character of the arrangement or institution. Those principles are:
Multilateralism has a long history, but it is principally associated with the era after World War II, during which there was a burgeoning of multilateral agreements led primarily by the United States. The organizations most strongly embodying the principle of multilateralism are to be found in trade (the World Trade Organization [WTO]), security (the North Atlantic Treaty Organization [NATO]) and environment (numerous multilateral environmental institutions also exist).
Brief History of Multilateralism
• Concert of Europe: The end of the Napoleonic wars in Europe saw the establishment of the Concert of Europe, with the great powers redrawing European borders peacefully at the Congress of Vienna.
• League of Nations: The First World War destroyed the European Concert and replaced it with League of Nations.
• UN, IMF & IB: The post-World War II world saw the creation of a new world order sustained by multilateral and supranational institutions such as the United Nations, the International Monetary Fund and the World Bank.
To better understand the nature of multilateralism, it is useful to contrast it with bilateralism. Bilateralism is the conduct of political, economic, or cultural relations between two sovereign states. It is in contrast to unilateralism or multilateralism, which is activity by a single state or jointly by multiple states, respectively. Some examples in different sectors are -
More controversially, it has been argued that multilateral institutions may be inherently more stable than other forms of organization in that the principles underlying them appear to be more durable than other arrangements and more able to adapt to external changes.
Thus, despite the perceived decline in the relative power of the United States after the 1970s, the multilateral institutions continued to play an important role in shaping the international system.
However due to 'Great Recession', Globalisation concept is at a crossroads.
The dynamics of freer circulation of goods, capital and people has lost steam. Trade protectionism is on the rise. Multilateral institutions such as the International Monetary Fund, the World Bank and the World Trade Organisation provide slow and often insufficient responses to contemporary challenges.
Reasons for failing Multilateralism
– WTO negotiations are stuck in gridlock.
– Developing nations are not getting due membership in UNSC.
Some examples are as follows:
UN (The most important Multilateral Institution) is undermined by
WTO's (the most important multilateral trade organization) failure:
Rise in "Our country First" concept
US pulls out of Paris climate accord to 'put American workers first'
US has announced that it will withdraw the US from the Paris climate change agreement.
The decision was condemned immediately by environmental campaigners and by the president's political opponents who said it heralded the death of America's position as a global leader.
It means the US stands alongside only Syria and Nicaragua as nations who are not part of the deal.
Environmental campaigners said the American absence will make it considerable harder for the remaining 190 or so countries to reach their agreed goals, given that the US is responsible for about 15 percent of global emissions of carbon and promised $3 billion to help other nations. This can be interpreted as an example of deglobalisation
The current context, characterized by a weakening of multilateralism, the return of protectionism and the rise of extremist political movements, undermines the advancement of that global consensus, poses a grave challenge to the world economy and threatens the attainment of the Sustainable Development Goals.
Today more than ever, we must promote and expand cooperation and integration on a multilateral basis. The 2030 Agenda and the SDGs are universal not only in that they aspire to include all the world's countries and that their attainment may develop inclusive society, they are also needed to improve the national efforts by global & regional cooperation.
WTO negotiations are stuck in gridlock.
Developing nations are not getting due membership in UNSC.
Verifying, please be patient.