Lured by the wrong kind of nostalgia
As nations go their own way, past gains are being lost, writes Carl Tannenbaum
Each year, new talent streams into our companies from universities. The youngsters provide intelligence and energy, but there is a downside: they have terribly short memories.
I recently noted to a class of new trainees that the world’s major economies had double-digit interest rates in the 1970s; the group reacted with the kind of disbelief normally reserved for reports of aliens landing on the planet.
The class of 2019 also has little recollection of the music of the 1970s.
One of the biggest albums of the decade (yes, this was before iTunes) was Rumors by Fleetwood Mac. A track from that LP, Go Your Own Way, has been on my mind as the world’s trade battles broaden and deepen. After a generation of fruitful economic partnership, we have entered an era where countries feel that they might be better off on their own.
The world economy evolved powerfully from regional to global models in the 1980s. International trade mushroomed, as did crossborder capital flows.
The benefits of this trend accrued generously to consumers, firms, and investors. International associations and alliances expanded in concert with this collective success.
But the Great Recession of 2008 illustrated the downside of integrated markets and economies.
Many countries began to question the wisdom of these links, and took steps to limit them.
Trade disputes increased and stress began to surface within regional cooperative organisations in Europe and North America.
This sentiment reached a tipping point in 2016, with the Brexit referendum and the US presidential election.
On those occasions, politicians found support for a nationalist vision that viewed international commerce and co-operation cynically.
This spirit has been spreading since, in developed and emerging markets. Tariffs and other trade barriers have risen and trade flows have diminished.
Although the United States and China are the main combatants, they are not the only ones.
A number of countries that are heavily dependent on international trade and capital flows are getting caught in the middle of a myriad of disputes.
International organisations like the World Trade Organisation and the International Monetary Fund find themselves struggling to sustain resources and support.
Economic globalisation hasn’t been perfect; there are communities in many countries who have been struggling.
Some careful thought should be given to how gains from trade might be shared more broadly.
But a wholesale rejection of the international system would be very damaging, commercially and politically.
Economically, the 1970s was a decade that most would like to forget. If we break the chains that have bound countries together in the years since, we could get a very unpleasant history lesson.