By Eric Fromant, Strategic redeployment consultancy & circular economy expert.
Globalization could have been a stronger internationalization of economies, and even policies and cultures. The choices made led to the opposite result. That’s why the World Economic Forum calls it a “backlash” against globalization. That is also why UN Secretary-General Antonio Guterres “calls on all leaders to listen to the real problems of the real people” and considers that “the world is struggling with the negative impacts of globalization”.
Globalization was achieved on the priority and almost unique objective of maximizing short-term profits. This led to the desire for the utopia of a global village, described by Francis Fukuyama in his book “Th end of History”, and the priority choice of the economy of obsolescence on account of the so-called unavoidable reduction of costs[1]..
In reality, the economy of obsolescence corresponded to an apparent reduction in costs and a real increase. Indeed, voluntarily reducing the life of products to force the user to renew his purchases leads to manufacture more products. Even if you reduce the quality, it takes a lot of energy and raw materials to break down, much more than for sustainable products.
The reasons for this failure are:
- The West must be in the fifth globalization. History is made of successive eras, which are different by definition. On Earth, everything is born, develops and dies. This fifth globalization was, therefore, naturally planned to die one day.
In fact, the most important cycles are 30-year cycles. We had the Glorious Thirty from 1945 to 1973 and the cycle from 1973 to 2008, artificially extended until 2020, the date of the pandemic which happens to be a formidable accelerator of the indispensable change.
- This utopia of the global village implied the eradication of cultures, identities, in order to realize David Ricardo’s dream: to reduce men to mere economic agents. Now, peoples need identities, they develop and affirm themselves as much through otherness as by their own identity. This has been the case for millennia and events show that they do not want to change.
- The obsolescence economy has led to resource depletion, an intolerable level of pollution and what has been elegantly called social and environmental dumping. They have corresponded, certainly, to a development for various countries, but also to working conditions of slavery (“The obsolescence economy is based on jobs at a very low level and that must remain so”, Preface by Christian Blanc, former minister ” The keys to renewal through the crisis; Functional Service Economy or PAAS: How to use the tool for business leaders “, Ems-Éditions, in French only).
- This slavery, emblematic of the Rana Plazza case in 2013, whose victims were not compensated, creates conditions for strong demands towards the West, while obviously employees dismissed because they are victims of “relocation”, in more direct language “the export of jobs within the framework of a maximized profit”, are not involved in the decisions taken. Yet, when you look at it, globalization was not happy for anyone except the 1% of the world’s population that shaped it and benefited a lot from it.
- Today, the crisis is rising on the social ladder. Senior managers have long believed that they are closer to the 1% above than all employees and, as a result, they are among the “winners of globalization”. Increasingly, they are becoming aware that the opposite is happening to them. There is a gulf between the 1% of super-rich people and the top executives of large groups, while there is only a relatively flat distribution of incomes between very modest, modest, middle and upper.
Awareness is just beginning, but it will be devastating for the media who will lose their remaining credibility and will tip a large part of senior management in a demand for a return on investment in our countries, a sovereignty guaranteeing the return of jobs. The crisis will deepen and correspond to the logical readjustment of our living standards to what they would be if the immensity of the debt contracted did not exist, that they should be given the transfer of wealth made in recent decades to the so-called emerging countries.
The graph of the evolution of US incomes of the “richest 1% ” and the “rest” is very significant (Figures 1 and 2).
Figure 1
Figure 2
On 3 June 2020, Ms. Kristalina Georgieva, Managing Director of the IMF, joined Klaus Schwab and Antonio Guterres in a video conference and announced that she was considering introducing the Bancor (return to the Keynes-modified gold standard). This decision would prohibit the trade imbalances that have benefited emerging countries so much and ruined the West, plunging it into an abyssal debt. This is to say the 180 degree turn operated by the three institutions mentioned, which play a role, obviously major in the evolution of the world.
In the short term, some will have become considerably richer; in the long-awaited plan of globalization leading to the concept of the global village, the result will be the opposite. The soft internationalization that could have been implemented would have led to respect for cultures, identities and, in this context, international trade could have developed, to a lesser extent but in a stable and sustainable way. For having wanted the excess, the countershock, described by the World Economic Forum since 2013 but announced by Klaus Schwab in 1993 in an article of the International Herald Tribune, will do its work to the end.
Fortunately, it is accompanied by an awareness that it is better to trade with its neighbours than with countries at the end of the world, regardless of the continent on which one is located; for this reason, for many years now, Intra-continental trade is steadily growing on all continents, and intercontinental trade is declining.
The countershock will result in the strengthening of homogeneous areas, politically, economically, socially and culturally. Their homogeneity will give them stability, which will not prevent them from maintaining trade. They will simply be much more selective, and in accordance with the balance of trade and payments.
This is also the interest of the so-called emerging countries. We have seen this with the evolution of China where students who have traveled no longer want to work as slaves, want to consume, but where leaders have understood well what a dependence on resources can cost in general. There was a time when there was a social and environmental prize to initiate development. There must be a time now when sovereignty should take precedence.
In this regard, it is crucial to understand the trilemma of Rodrik, which states that the three following elements: economic globalization, political democracy, nation-state are only compatible by two:
- If the choice is on the pair economic globalization and political democracy, there is loss of sovereignty.
- If the choice of economic globalization is maintained, with the return of sovereignty, what we call the concept of nation-state, dictatorship becomes necessary because the induced unemployment is socially unbearable and generates an identity reflex and protectionism.
- If political democracy is the model maintained in relation to the State – Nation, it becomes essential to proceed with deglobalization.
In other words, all countries that have accepted sacrifices to initiate their development already know that this model is only bearable as long as the population is in poverty. If development allows it to get out of it, these sacrifices are no longer bearable, and for each country to make its own choices, it must get out of the constraints of a globalized market where decisions are always made by others. The key, then, is the circular economy that reduces resource requirements to a level compatible with other criteria.
[1] The success of Nespresso, which lives on margins close to those of the luxury industry, on a product as banal as coffee, is a reminder that differentiation is the only way to achieve this.
This article was partly originally published by Cercle K2.
