The Global Retreat into Nationalism

Prior to the First World War, the global system was largely driven by Imperial forces that sought to secure and maintain hegemony over vast swathes of the world in support of the Imperial powers self interests. There was nothing really new about this – it had been going on for centuries, as soon as naval power and modern armed warfare became possible. The rewards for the Imperial States were enormous and can be seen in all the main capitals of the World.

Eddie Cross

The two World Wars destroyed that system and because the two events, possibly the largest disruptions to normal life on this planet in history, were based on a form of nationalism that encouraged States to seek control over their neighbors – Japan tried to colonize Asia and Germany, Europe. The United States, always an empire in itself with all its Member States, stood aloof until its own interests were threatened and they could no longer ignore the armed conflict.

At the end of the War, a small coterie of leaders emerged from the ashes of conflict with a single mission – war on the scale that had engulfed the globe from 1914 to 1918 and then from 1939 to 1945, must never be allowed again. The change they sought was a retreat from nationalism and Empire and the creation of linkages in economic terms that would never allow war again.

The initiatives of these remarkable leaders were diverse – the Marshal Plan in Europe, the democratization of Imperial Japan, the League of Nations and then the United Nations and finally the European alliance of States that has morphed into the European Union of 27 States that we have today. Under pressure from these new initiatives, the Imperial structures that spanned the globe before 1939, collapsed and the “winds of change” blew across Asia and Africa and South America.

The emergent regimes that came to power during this era in the former Imperial capitals quickly recognised that the only way they could maintain their standards of life and economies would be by replacing Imperial linkages with global free trade systems. The Multilateral financial institutions of the IMF and the World Bank and all their affiliates were created – funded and controlled by all world States who became both contributors and beneficiaries.

Global trade began to expand and over the next 60 years averaged 15 per cent or more in growth per annum. Associated with this growth in trade in goods was an equally massive expansion in services. Banking systems spread across the globe and it became possible to move money on a huge scale anywhere and in an instant. The capital surpluses which in the Imperial era had been the exclusive mandate of the Imperial leaders and family’s, now became available to anyone with an idea and the capacity to put it to work.

The phenomenon of the multinational Company with offices and operations in many countries emerged and took on a character all of their own – inside their structures, loyalty to the Company took precedence over national interests. They became so large that they threatened the hegemony of many States and commanded influence far beyond their commercial interests.

In the rush for growth, any country that was able to put together the right conditions to attract investment and the interests of the multinationals began to experience an unparalleled surge in their own growth and expansion. The first States to achieve this were the two reconstructed States of Germany and Japan. Both built their new economies on the back of global growth in demand for the products of their factories. They have been followed by many other countries – the most dramatic being the headlong rush for growth in China.

It is no surprise that it was not the head of a multinational, or an international bank, or a global capitalist of repute who recently stood up at the Global Economic Forum in Davros to defend the global village, it was the Head of the Chinese Communist Party. But we must also recognise that the experiment in Europe has been an astonishing success. Europe has prospered, it has expanded from six countries to 27 today and those relatively poor and backward States that have joined the Union have caught up and done relatively better than the richer countries.

Its free movement policies have created millions of new jobs and ensured that every country and every company in the Union can attract the best in human resources and capacity. Of course mistakes have been made; the complex system that dominates Brussels needs drastic reform, the influence of the faceless Eurocrats who control too much undemocratic power must be curbed and brought under control. But those wise men in 1946 who dreamed of a new world which would block out the possibility of a new nationalism or religious fanaticism that would spur new conflict in Europe, were spot on and have given the European Continent six decades of peace, growth and freedom.

So it is disturbing that at this point in time we see the destructive forces of nationalism threatening a world system that has actually worked. Europe has seen the emergence of the Union; the Russian Empire has been broken up and is in the long process of evolution towards democracy. Japan is firmly democratic and China will inevitably move in the same direction.

The much vaunted democratic upheavals in both Britain and the USA (Brexit and Chump) are just that, a return to a narrow, self seeking nationalism that seeks to put their own interests first above the interests of everyone else. Combined, this means that a third of global economic output is now retreating from the global village into a new enclave which they have declared they will defend against all comers. The threat is not so much global conflict but an international trade war which will damage everyone.

Both the USA and the UK were easy targets for the new nationalists with an isolationist agenda. Both have a long history of standing alone and looking after their self interests. Neither has been occupied in recent centuries and both are isolated from the rest of the world by the sea. The UK was always a reluctant member of the Union – they chose to go in when it seemed that the Imperial linkages that had served Britain so well for 300 years, seemed to be less and less relevant. They were irked by the common rules of membership and the apparent loss of “sovereignty”. It took Pearl Harbor to drag the USA into the global fight for freedom and it will not take much to persuade Americans to withdraw into the “safety” of their own borders.

But the global consequences will be difficult to manage. Any major movement of global financial resources back into the USA, enticed by low taxes and a high demand for new investment in all spheres, will reduce the amount of capital available to the rest of the world. Breaking international agreements, negotiated over many decades will be easy, just a signature on a Executive Order, replacing them with bilateral agreements that will specifically serve narrow self interests, is quite another. The abrupt withdrawal from the Asia Trade Agreement will open the door to China who will step into the gap created.

Nations who expect preferential access to markets must be prepared to allow others access to their own markets or ultimately face difficulties. Securing the best in human capital requires free movement and then security in their new home States. Countries that want to compete and win; must follow these rules. I do not think that many others will follow the lead of the USA and the UK and therein lies the key to why the system that has served us all so well in the past half century, will survive for the rest of the century. Isolation does not pay but participation means we must all follow the key rules that govern the game.

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