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4 ways in which the re-emergence of geo-economics could cripple globalisation

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3. State capitalism

State capitalism is undoubtedly charging up competition between governments for power and influence.

With the US, arguably the most dominant country in the finance market, as an example, the state attempts to play a levelling role in markets. This ensures that booms and busts are limited and that unbridled capitalism is tempered by the interests of the state and other stakeholder.

This is nothing new. But governments have been increasingly using their ownership of companies and financial institutions in new ways.

“But as fiscal authorities have become increasingly paralysed and politically constrained, post-crisis responses have fallen to central banks via monetary policy,” he suggested. “Central bankers have, by choice or otherwise, become owners of enormous swathes of securities, with enormous influence as a result. In addition, central banking supervisory authority has been enhanced by post-crisis legislative efforts to
manage financial system stability. Emerging market central banks are increasingly caught between domestic political pressures and alleged monetary policy and supervisory independence.

“Emerging market central banks are increasingly caught between domestic political
pressures and alleged monetary policy and supervisory independence. The risk of states using central banks to advance interests beyond those explicitly consistent with
their mandates is on the rise. The establishment of cross-border norms for financial market instruments, banking, technology, energy and trade has always been inherently political, while ostensibly technical. Now, we can add strategic as well, with market, legislative, regulatory and other policy tools increasingly being used to try to strengthen state-owned enterprises (SOEs) and national champions.”

In a sense, standards are being set by the countries who are dominating specific fields something that could become incredibly risky in the future.

“And they are blurring commercial and strategic lines for sectors like technology and finance, where implications of advancing national agendas have global implications. Technology is of increasingly strategic concern, with major powers assessing a landscape of economic and security concerns emanating from the opportunities and risks posed by the interlinkages and deep dependence on technology as the foundation of global economic, military and political security.

“As the US and China, for example, discuss technological and intellectual property concerns, NATO grapples with its potential response function to intrusions under its mutual defence obligations. Recent ‘hacking’ into Sony Pictures and disclosure and theft of its private files and films has sparked speculation of government related catalysts and retaliation.”

This just leaves us with further questions: How will future security and technology concerns be addressed and agreed upon Who will set the rules and who will seek to ensure that they are enforced

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4. Changing trade patterns

There has been a surge of trade talk all across the world. But although this could bring in some much needed growth, Leonard is convinced that it is far more likely to accelerate the multi-polarisation of the world or even competition among regional blocs far beyond trade.”

Take China and Russia for example, both of which are challenging the Western-led economic and political order by developing ‘trade zones’.

“China is strongly pushing for the Regional Comprehensive Economic Partnership, against the US-led Trans-Pacific Partnership,” Leonard explained. “Quite a few Asia-Pacific nations have been placed in the awkward position of working out how toreconcile the two competing frameworks. Each discusses different rules on flows of goods, money and intellectual property in line with the respective interests and principles favoured by the US and China. The turf battle mirrors the rivalry between the worlds two largest economies in far broader arenas, including military prowess.”

Meanwhile, you also have Brazil, which hasexerted its influence over Mercosur and Argentina.

“Now four emerging stars Mexico, Colombia, Chile and Peru are trying to provide an alternative to Mercosur through the development of the Pacific Alliance,” he said. “The new framework emphasises the inclusion of Asian economic powers into Latin American development, and could change the political and economic landscape of the region.”

This might promote freer trade, but if all the great powers of the world influenced the nature of deals to be competitive both politically and economically, global consumers and businesses would become clear losers. Countries in the periphery of major regional powers would be under their strong influence and lose out too.”



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