It is the season of lists: best movies, best books, and on and on. Since I teach and write on globalization and international political economy, I thought it would be interesting to continue a tradition I started last year of creating a different type of list: a geo-political-economic list -- a list of the globalization top five from an American perspective.
Why only five? Because I am only giving an overview, a macro look at how globalization is now shaping or will shape America. More than five and the list would tend to become less of an overview and more of a detailed analysis.
1, Energy independence is helping to awaken America's re-occurring fantasy of isolationism.
Energy independence and the false sense of security brought on by that independence, combined with budget constraints in Congress, are beginning to fuel isolationist sentiment. Adding to the fire is America's global fatigue, the unfamiliarity and unease of having to share power with emerging market countries, and the sense of many Americans that globalization has been detrimental at best.
In fact we have already begun to see a swing towards isolationism in the reaction by some members of Congress in reference to the proposed Syrian vote. So at a time when actual security threats, depending upon the day, could be viewed as diminishing, the to easy-to-ask political question with the hard-to-defend answer is, 'what is the return on investment to the American taxpayer for continuing to fund America's role as the global cop?'
2. The corollary to this is a strange paradox: energy independence frees America of much of its global economic dependency but also diminishes America's influence in the world.
With out a doubt America's energy imports are falling. But America's international buying patterns in terms of heavy industry, chemicals and other basic products have also changed. Very cheap domestic natural gas has enabled the US to become the inexpensive producer of those items, reducing the need for importation.
In the process, the U.S. is losing what in business school is described as the 'buying power of the customer.' Under the market-driven game of globalization, part of America's power was derived from the fact that it was the world's market place, a situation that is the exact reverse of Germany today. America's trade deficits, its tremendous buying power, strangely gave it additional economic global clout. Now if America's purchases decline whether from the Arabian Peninsula, Europe, China or India, by definition it looses influence.
3. Welcome to the age of Central Bank Power. Since the 2008 crash, the U.S Federal Reserve Bank has become a new type of global hegemon.
Financial globalization, combined with floating exchange rates, the fact that the dollar is the reserve currency, and the stability at this time of the US economy, have made the Fed the ultimate arbiter of international interest rates and investment flows. The Fed has become, singularly, without having any global mandate, one of the most powerful global institutions. Rumors of the possibility of the Fed tapering will, in and of themselves, cause investment capital to flow out of nations such as Brazil and India, while putting pressure on those nations to raise their interest rates.
Domestically, while Congress and the President have been gridlocked over fiscal issues, it has been the Fed that has been the leader in pushing the country out of the recession.
The European Central Bank has had a similar but not as powerful role within the politically gridlocked system of the Euro Zone.
4. NAFTA REDUX-
George H. Bush and Bill Clinton's dream of NAFTA is finally starting to come to fruition. NAFTA was philosophically partly based on the premise that uniting the economies of Mexico the United States and Canada through trade would create a larger economic market to compete with China. Practically it was also based on the idea that if the Mexican economy grew rapidly, fewer Mexican immigrants would come into the United States.
Now, due to rising labor and energy costs in China, rising shipping costs, and the reforms of the Mexican President Pena Nieto, Mexico is becoming a manufacturing engine. Illegal immigration into the United States has dramatically slowed, partially because of the recession but also because of the growth of the Mexican Economy.
According to Gary Hufbauer, a Senior Fellow at the Peterson Institute for International Economics, "U.S. trade with its North American partners grew 156 percent in 20 years. Of course all three economies are larger: real North American gross domestic product grew 70 percent between 1993 and 2013 But real two-way trade grew faster than real gross domestic product, by a margin of 86 percentage points."
5. The dominant global-political/economic issue of 2014 will again be China.
Can China redirect its economy and maintain its growth rate under its current governing system? Or has the low-hanging fruit (cheap labor for manufacturing) already been picked and is it now facing an insurmountable growth wall fortified by vested interests, which will inhibit any change?
As important is the question of what will be the cost of change for China and the world? Will the Chinese government be able to continue to liberalize its economy without moving to the right on human rights issues? At the same time, will China's government become both more nationalist and more aggressive internationally? Or are these aggressive moves essential politically within the Chinese autocracy in order to protect the government from attacks on the right as it reforms the economy?
On a broader note, if the Chinese government can successfully balance its needs to fuel nationalism at home without accidentally stepping into a conflict with its neighbors, (many who are under the United States security umbrella), what happens to price and availability of world resources if China successfully brings another 300 million people into middle class status? What happens to the global prices of oil, agriculture and, yes, water?