By Samantha Kirsch
On Thursday June 16th, the Henry Jackson Society warmly welcomed Mr. Stephen King, specialist adviser to the House of Commons Treasury Committee and Senior Economic Adviser at HSBC. Mr. King’s new book, A Grave New World discusses the recent rejection of globalization by world powers.
Mr. King began his talk by speaking about 2015, when he first began his book. He pointed out that many of his friends had said there was no way there would be an end of globalization, and that such extreme events, such as the election of Trump and Brexit, would never come to fruition. As time has shown, these extremes have occurred and are on an upward trend. King then took time to discuss what globalization meant in terms of his book, and defined it as the dissolving of borders and nations developing economic interdependence. King then traced backwards, delving into history to discuss the peak of globalization on the world stage. The peak of globalization for the west was in 1989, when the Berlin wall finally fell and the world emerged out of the Cold War. Communism had fallen, western democracy had “won” and then the west made a series of risky predictions. It assumed that capitalism was a perfect system and markets would never fail, as well as that after the fall of the Soviets, authoritarian regimes would all crumble and recede, and as the world democratized this would benefit the western economies.
However, not all these assumptions proved accurate. The first surprise to the west was the economic success of China, a non-democratic state. This disproved that economic success had to work intertwined with democracy. By most measurements, China currently is the world’s second largest economy, no small feat. The second surprise was the failure of the capitalist markets to continue growth. The west, comparatively to the rest of the world, has slowed in growth since 2000. King described this as a large modern day issue, using a creative metaphor of a cake. Today, the west is too focused on how to divide up the fixed size cake that is the economy, instead of trying to make the cake larger. The third surprise to the west has been the stalemate of standard of living. While the GDP has continued to grow in the United States, the bottom 60% have seen little income growth or improvements in living standards; however this is a uniquely American phenomenon. While the US contents with issues in regional inequality, the Eurozone is faced with issues in national inequality. Some countries have experienced growth in both living standards and economies, such as Germany, while others have fared much worse, such as Italy. But what accounts for these gaps in inequality? King has three explanations. Technology is destroying blue collar jobs, education standards are declining in the west, and the social mobility of the 1950s and 60s no longer exists in the modern era. However, these explanations are difficult to explain politically, which leads into the crumbling of globalization. Instead of admitting the problems are domestic, many western leaders are finding scapegoats; Trump has already blamed Mexicans, China, and Islam as causes of American problems, giving root to “America first” isolationists policies.
Turning back to history, King reflected on the differences of the post WWI world versus the post WWII. With the failures of the 1919 Treaty of Versailles, the US was determined to end empires and spread democracy. Results of this determination include the WTO, NATO, the Marshall Plan, and the EU. This all worked well, peaking in 1989, but resulted in an unquestioning faith of capitalist markets, which came crashing down in 2008, made worse for the entire world by the level of global economic interdependence.
King concluded his speech by warning about the possible effects of the US stepping out of its role as world power. His example was the US abandonment of the TPP, which has allowed a power vacuum to be created in the pacific, which is a role China will step into and increase its global influence. As the second largest economy, China is looking to exert its power and with the rejection of globalization by the west, it is becoming more and more possible.