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Wednesday, May 17, 2017

Populism vs. Globalisation

May 16, 2018. Shanghai – The Brexit vote, Donald Trump’s White House victory and Turkey’s constitutional referendum that critics say tightened Erdoğan’s hold on power have raised concerns, in some quarters, that a wave of populism is sweeping the globe. But Robin Bew, CEO of the Economist Intelligence Unit (EIU) is convinced that things are not as bad as they appear. “We need to keep perspective. Things are not as bad as they were in the 1930s,” he told the audience gathered at CEIBS Shanghai Campus for his Executive Talk this evening. “We are seeing a series of isolated incidents but these are not adding up to a sea change, everywhere, in populism.”

The EIU’s opinion matters as it is The Economist’s research and analysis unit which helps businesses, financial firms and governments understands how the world is changing. Bew noted that there is, in fact, very little totalitarianism (except in North Korea) and cited other political developments which may help those not enamoured with populism to breathe a sigh of relief. He pointed to this February’s Swiss referendum which eased naturalisation requirements (bucking what was then the trend of tighter immigration controls), the defeat of the populist candidate in The Netherlands’ elections in March, as well as Macron’s victory over Le Pen in the recent French elections (though it was still an anti-establishment vote and many voters didn’t turn out). Bew anticipates that seven of eight upcoming major votes – in South Korea, Iran, the UK, France’s parliamentary votes, New Zealand, Germany, Argentina and Chile – will continue this trend away from populism. The only exception is September’s Czech elections where he expects the populists will win because the nationalists – though popular – are fragmented. 

But while he is optimistic that there is no immediate danger of the extremism that swept across Europe as the Great Depression brought out the worse in many, he cautioned that the concerns being expressed by those who are anti-globalisation, anti-immigration and in favour of building walls should not be ignored. Their views, he said may be perceived as being “politically incorrect” but they still need to be addressed by politicians. Failure, he said, to put in place social welfare measures to offset the economic stagnation seen in large swathes of the society and sudden influxes in migrants (both of which politicians often blame on globalisation) will only “provide a breeding ground for extremism”. The best approach, said Bew, was for politicians to tackle these concerns head on, put national sovereignty back at the heart of policymaking, and have constructive discussions about how to address the problems while providing a safety net for those affected.   

As he explained during the Q&A, Bew is among those convinced that – from a rational perspective – globalisation is the better option.  “Globalisation has been fantastic for the global economy; throwing it out would be a crazy thing to do. The much more economically rational thing to do is embrace it and deal with the difficult consequences,” he said. “There is a political narrative about moving away from globalisation, but can we afford to go down that path? No we can’t. But that doesn’t mean it won’t be done, because policy decisions are not always based on what’s economically rational – look at Brexit. The answer is not about telling people globalisation is good, it’s about putting policies in place to mitigate the challenges.”

During his hour-long presentation and the Q&A session that followed, Bew also touched on:

  • The global economy:
    The easy wins are over, global trade growth which has outpaced GDP growth in the past, will be sluggish. While conditions have improved for emerging markets, China is at risk of a bumpy landing next year and there will be a “significant dip in overall economic growth in 2019”. That will also be the year the US will likely suffer from a recession, he said, but not on the magnitude of the one that began in 2008. 
  • How Donald Trump will govern:
    The first 12 months, at least, will be “messy” and even with Republicans controlling both Houses Trump will have a hard time getting anything done because of a split between the party’s nationalists and traditionalists.  Congress will be unlikely to pass Trump’s much vaunted healthcare bill because it satisfies neither Tea Party nor Republican governors.  Trump’s planned infrastructure spending will likely not be as big as he claims it will be and he will also have a tough time with proposed tax cuts. “Pronouncements and tweets are not policy. Anti-Washington administrations need time to understand institutions and policymaking so it will be a steep learning (curve) for Trump’s team of outsiders,” Bew noted.

    In terms of the relationship between the US and China, Bew believes the current ‘bromance’ between the countries’ leaders will not last. “Trump likes Xi now, but Trump doesn’t really believe in globalisation and free trade. It’s unlikely he will support free trade with China and we will see the relationship become a bit more strained,” he predicted. “This will inhibit trade and China will feel the effects as collaboration will be more difficult. India and other countries in Asia will also feel the effects.” He added, though, that despite these challenges Asia – especially the two economic power houses of China & India, and a rising Indonesia – will still perform well. “The future belongs to parts of the world still willing to embrace the global economy,” Bew said.

  • Post-Brexit UK, the EU:
    Though the initial economic fallout has been more muted than expected, the economy is now slowing down, there are tough times ahead, and “Brexit will be tough for the UK”.  The UK’s departure will see other countries questioning the benefits of being a part of the EU, and debt-plagued Greece may be one of those to depart as the financial strain will eventually become too great.

CEIBS Executive Talks are a series of events which bring thought leaders to the school for lectures attended by members of the CEIBS community including students, alumni and faculty. There was a full house and active Q&A session for tonight’s event, which was moderated by Professor of Strategy and International Business Klaus Meyer.

Charmaine N. Clarke