The 2016 U.S. presidential election ended with the surprise victory of property mogul Donald J. Trump. An outsider without a political track record, Trump defied predictions by most polls, pundits, and political observers when he defeated Hillary Clinton, the favored “pro-establishment” candidate backed by the liberal elite. The world is now slowly coming to terms with this unexpected result, while weighing the impact of a Trump presidency on global growth.
The triumph of this dark horse could upset the status quo and affect traditional military alliances and trans-Atlantic ties. But the most troubling outcome would be that it may chill the effects of globalization. Free trade and the free movement of people—the crux of globalization—have suffered two major setbacks in 2016: Britain’s choice to leave the European Union, or Brexit, and the election of a renegade who has vowed to tear up both the Trans-Pacific Partnership (TPP) with Pacific Rim nations and the North American Free Trade Agreement (NAFTA) with Canada and Mexico.
The global economy is still reeling from the shock and uncertainty unleashed by these events that threaten to weaken the process of globalization.
Globalization has removed barriers to trade, enabling the cross-border flow of goods, capital, information, technology, and services. It has made economies the world over more interconnected and interdependent. It has also had an impact on the development trajectory of most countries, and China has benefited much from it.
The U.S. has been a major driving force behind globalization. Prior to that, Britain was the torchbearer for global trade in the 19th century. But politicians in both countries have tapped into the rising anti-globalization sentiment at home to secure power, casting a long shadow on the future of free trade and the movement of people and ideas. The bubbling discontent that is threatening to reverse the course of globalization could dent global growth and have a serious impact on China.
Trump’s victory took the world by surprise, as much as Britain’s decision to break away from the European Union four months ago did. U.S. mainstream media called it “a populist revolt against the political elite.” The reason for this backlash is clear: The “silent majority,” who felt they had gotten the short end of the stick due to globalization and other socio-economic factors, spoke up.
Resistance to globalization has been on the rise since the late 1990s. From massive protests during the 1999 World Trade Organization meeting in Seattle to the long-delayed Doha round of talks on a new multilateral trade pact, opposition to the idea lingers on today. The U.S. subprime crisis, which triggered the global financial meltdown, only served to deepen the resentment against it.
Capitalism was considered the most efficient means to build a strong middle class that would form the bulwark of a stable, mature economy. But this assumption has been shaken, giving rise to an urgent call for reform. Yet change is difficult to push through. Although the information technology revolution in recent years has disrupted the status quo, wealth is still concentrated in the hands of a few, squeezing the middle class and widening inequalities.
Theoretically, globalization should create a win-win situation in which most people benefit. But in reality, it takes a long, painful process to arrive at this status, and many will suffer along the way.
The election outcomes in Britain and the U.S. show how a significant number of those in economic distress or masses instigated by politicians have taken up arms against the elite-controlled status quo. They have also started venting their frustration through social media. Xenophobia and racism seem to be slowly raising their ugly head as some blame “others” for their socioeconomic woes, creating division and hatred among people. The best way to contain this is to listen to their anger and concerns rather than pretending that nothing is wrong.
All these developments are highly relevant to China. The country is looking for clear signals from the global economy as it tries to deepen reforms at home to stabilize growth. China has reaped the benefits of globalization after opening up its economy in 1978, but the dramatic changes in the aftermath of the 2008 crisis have blunted its positive effects. China has readjusted its game plan while waiting for Western economies to bounce back. While China gradually opens its doors to the outside world, the rising danger of a more isolated U.S. will pose challenges to her.
Recent developments in the global political arena have dealt a severe blow to the process of globalization. But these outside hiccups should not hinder China’s reform push. The course for China’s reform plan has already been set, and the ruling party has announced its resolve to go ahead with it. But China must not lose the opportunity to learn from these global upheavals. The key lesson that the country can draw is that reforms must be deepened in a way that it benefits most people while creating a strong middle class. Lawmakers must ensure that liberalization efforts are not hijacked by a few with vested interests and also must keep abreast of changes brought about by new technology. The world would continue to shrink into an interconnected global village, but this process would hit many more speed bumps along the way.