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A NEW term, 'deglobalisation', has entered the lexicon of economic speak. It usually evokes a sense of dread and fear. Most recently, Tony Tan, deputy chairman of the Government of Singapore Investment Corporation, used it in his address to members of the Economic Society of Singapore. 'De-leveraging, de-risking, re-regulation and, on the margin, even some deglobalisation are disrupting markets and dampening economies and could reverse some of the progress due to past liberalisation, globalisation, and reforms.' He was talking about how the developed world was likely to experience lower growth in the coming years.
Earlier this year, UK Prime Minister Gordon Brown was even more emphatic. When referring to a decrease in certain banks' foreign lending in favour of domestic lending, he said: 'This is a trend that must be halted if we are to prevent a damaging worldwide spiral of deleveraging and then deglobalisation with adverse consequences for all our economies.'
Deglobalisation is often associated with nationalism and protectionism. However, whereas those words suggests an unassailable sovereign right, 'deglobalisation' connotes the unravelling of something widely accepted to be good. However, in the current economic climate, where economies cannot rely as much as before on US and European consumers, there are certain aspects of deglobalisation that do merit consideration.
In his book, Deglobalisation: Ideas for a New World Economy, Walden Bello says: 'Deglobalisation is not about withdrawing from the international community. It is about re-orienting economies from the emphasis on production for export to production for the local market.' At the height of the last economic boom a couple years back, this might have been considered heresy, but today, a few economists are beginning to think differently. Increasingly, economists are calling on China, for one, to shift away from a heavy reliance on exports and do more to develop its local market, particularly in services. Indeed, even the IMF and the World Bank have emphasised the need for China to strengthen its social safety nets, especially in health, education and pensions. Such a shift would help reduce China's savings rate and thus spur consumption - and strengthen social stability.
Similar recommendations could be made for other Asian economies, which lack social safety nets and have relatively low consumption levels. While obviously, small, open economies such as Singapore have little choice but to remain overwhelmingly export-led, even Singapore would benefit from higher consumption in Asia; reducing its reliance on the US consumer would be no bad thing.
At the end of the day, so-called deglobalisation need not lead to a world of less free trade and investment. Indeed, it could even hold out the prospect of opening up more areas of the world to investment - for example, in service-related industries in China. But it would also lead to a more balanced global economy that is less reliant on the no-longer-profligate US consumer.
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