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Trump’s Misguided Tariffs: Collapsing African Economies and the Death of the African Growth and Opportunity Act

written by Chaitanya Kishore

On April 2, President Donald Trump announced tariffs on virtually every trading partner of the United States in what he called “Liberation Day.” He said the day would “forever be remembered as the day American industry was reborn.” As part of Trump’s tariff plans, every American trading partner had a baseline 10% tariff imposed on their exports to the United States. Many countries also were hit with further tariffs beyond the 10% baseline. One of the hardest hit regions by the recently announced tariffs was sub-Saharan Africa. Countries in the region include Lesotho which was hit with a 50% tariff, Madagascar with a 47% tariff, Mauritius with a 40% tariff, Botswana with a 37% tariff, and South Africa with a 30% tariff. 

On April 9, Trump announced that he was pausing most additional tariffs after the 10% baseline tariff for three months. However, if the tariffs are to go into effect, they will likely devastate the economies of numerous developing economies in sub-Saharan Africa. The impact will be even more amplified as African countries are still working to recover from the dismantling of USAID, which provided significant foreign aid to many African countries, by the Trump Administration. The tariffs on African countries will not only damage economies in Africa, but also raise prices of goods for American consumers.

Many economists agree that the formula used by the Trump administration to determine tariffs on American trading partners is faulty and misguided, which led to unnecessarily high tariffs on many countries. First, the tariffs were determined based on the U.S. trade deficit in goods, as opposed to actual tariffs imposed by American trading partners on the U.S. This move punishes smaller African countries such as Lesotho and Madagascar, which import less American goods than they export to the U.S.. Another issue is the U.S. trade deficit measure only considers manufactured goods, not services, which the U.S .exports more than it imports. If the trade deficit measure was calculated including services exported by the United States, it would decrease for nearly every country in the world the U.S. trades with. Additionally, in calculating the trade deficits, the Trump administration primarily relied on the retail prices of goods, as opposed to import prices as many economists have suggested. If this correction was applied to the formula, Lesotho should have had a tariff rate of 13.2% imposed instead of the 50% tariff rate that was actually announced.

Trump’s tariffs on countries in Africa also signal the likely end of the African Growth and Opportunity Act (AGOA). AGOA was first implemented in 2000 and provides countries in sub-Saharan Africa duty-free access to American markets for thousands of products. AGOA was passed under President Bill Clinton and has been the centerpiece of American trade policy in sub-Saharan Africa for the past 25 years. Thirty five African countries are eligible for duty-free access under AGOA for goods such as motor vehicle parts, textiles, and agricultural products and AGOA has been credited for industrialization and job creation in these countries. 

Support for AGOA in the United States has historically been bipartisan and renewed twice under Republican President George W. Bush and Democratic President Barack Obama. Many American politicians see the AGOA as a way to improve U.S. influence in the continent and to limit China’s influence in Africa. But, AGOA is set to expire this year in September. Although the Biden administration supported its renewal, it was unable to enact policies to renew AGOA. In light of Trump’s announced tariffs on many sub-Saharan African countries, the renewal of the AGOA seems highly unlikely, signaling the end of the act after 25 years. The end of AGOA is also coming at a time when China’s influence in the continent is growing and more African countries are entering into trade relations with China. Almost every country in sub-Saharan Africa is part of the Belt and Road Initiative and has taken on significant amounts of Chinese debt. If the United States ends AGOA and goes forth with its tariff plan, it will likely push more African countries to develop even stronger economic ties to China, which poses a threat to American trade. 

An example of an African country whose economy will likely collapse if Trump’s tariffs are to take effect is Lesotho. The 50% tariff imposed on Lesotho is the highest rate out of all the countries in Africa. Trump has described Lesotho as a country “nobody has ever heard of.” The textile industry in Lesotho, which produces for brands like Levi’s jeans, is the country’s largest private employer and employs about 40,000 workers. Textiles also make up 90% of Lesotho’s exports and 45% of the country’s exports go to the U.S. The country’s exports to the United States are valued at close to $300 million and make up 10% of Lesotho’s GDP. The AGOA is also credited with supporting the growth of the textile industry in Lesotho and Lesotho is the fourth largest beneficiary of AGOA. The end of AGOA severely threatens Lesotho’s textile industry, the foundation of the country’s economy.

The unemployment rate in Lesotho was at 25% in 2023 and a significant portion of the population lives below the poverty line or lack access to basic education, health care, and clean water. Also, one in four adults in Lesotho have been infected by HIV, which is one of the highest HIV infection rates in the world. The tariffs on Lesotho will likely affect the country’s ability to respond to and will exacerbate the unemployment, poverty, and health crises facing the country. Because of the significant impact Trump’s tariffs will have on Lesotho’s textile industry, many economists predict that the tariffs will collapse the country’s entire economy. The tariffs will most likely lead to the closure of textile factories and a significant loss of jobs, worsening the country’s high unemployment. This will affect other industries in the country that rely on textile workers spending their money, such as retailers and property owners. If the textile industry collapses, Lesotho’s entire economy will likely collapse with it.

The negative effects of Trump’s tariffs will also impact American consumers since they will pay an additional price on unique African goods and crops from countries hit with tariffs. For example, Madagascar is one of the largest exporters of vanilla and American consumers buy more than a thousand tons of it annually. If Trump’s tariffs take effect, American consumers will likely see the price of vanilla rise drastically and may be forced to lessen their consumption of vanilla or use cheaper alternatives. Similarly, Botswana, one of the largest diamond exporters in the world, relies on trade with the U.S.for the sale of diamonds. American consumers will now pay higher prices on diamonds as well. Ivory Coast, which was hit by a 21% tariff, is the world’s largest exporter of cocoa, so Americans will also see prices rise for this good as well. South Africa also exports billions of dollars worth of vehicle parts to the United States, which may raise prices for American consumers and car manufacturers.

The Trump administration’s approach to trade policy in sub-Saharan Africa is greatly misguided and risky. The administration should reverse its tariff plan for sub-Saharan Africa, or at the very least significantly lower the tariff rate. It should also renew the AGOA before its expiry later this year. The high tariffs and the end of AGOA will likely collapse growing economies in Africa and reverse two and a half decades of economic progress and development. The death of AGOA will mostly benefit China’s position in Africa and allow it to develop even closer trade relations with more African countries.

Image source: Wikimedia Commons

May 19, 2025 0 comment
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DevelopmentDonald TrumpEconomicsFeaturedGeopoliticsHuman RightsInternational TradeMiddle EastSecurity and Conflict

How the US can utilize sanctions to grow the new Syria

written by Zack Apt

As Syria emerges from a half-century of the brutal Assad regime, they face political and economic uncertainty as they attempt to form a new government. Hay’at Tahrir al-Sham (HTS), the rebel group which led the overthrow of the regime, is expected to form a government signaling that they will respect minority groups and adopt liberal principles. A primary challenge to their legitimacy stems from the remaining crippling U.S sanctions levied on the Assad regime, which prevent foreign investment and keep the economy stagnant. In hopes of fostering stability in the new Syria, the U.S should remove sanctions to allow the country to stabilize economically. 

The effects of the sanctions the U.S has on Syria are extensive. The economy shrank throughout the Syrian Civil War, with more than 90% of Syrians living below the poverty line in 2022. U.S-led sanctions restrict business with Syrian companies, block investment, and prevent economic growth. The Biden administration announced last month that they are easing some restrictions allowing for energy transactions and maintaining basic needs. However, to allow a full rebuild of infrastructure and grow the economy, the U.S must remove all sanctions and allow Syria to prosper. 

The designation of HTS as a foreign terrorist organization (FTO) is counterproductive and not entirely accurate. It stems from HTS’s ties to al Qaeda starting in 2011, but since its dissociation in 2014, HTS territory in northwest Syria provided freedoms to minorities and women. The U.S lifted the bounty on HTS leader, Muhammad Al-Jalani, and Western governments have been in contact attempting to establish relations with the new government. The FTO designation punishes groups who cooperate with the Syrian state, which deters foreign companies from investing or communicating with the new regime. This designation does not accurately reflect HTS’ national security threat, as the U.S shared ISIS-related intelligence with HTS in January, indicating the U.S views ISIS as a greater national security threat. This designation hinders the Syrian government’s ability to function normally. If the U.S hopes to see a functioning state in Syria, they should treat it as a functioning state until given a reason not to. Waiting to remove the FTO designation could become a self-fulfilling prophecy where HTS fails to function as a state because they are not given the opportunity to do so.

The Biden Administration was hesitant to remove sanctions due to HTS’s distinction as a terrorist organization. They chose to condition sanctions relief on improvements in minority and women’s rights, and encourage them to adopt Western rule of law instead of strict Islamic law. Under their logic, if the new Syrian government respects minority rights and adheres to American requisites, they will cut sanctions. While this approach seems logical, Syria does not have the privilege of forming a legitimate government without full economic power. The Assad regime relied heavily on the Captagon trade due to their inability to access Western markets. If sanctions stay in place, the new government will struggle to create a functioning economy before fully fleshing out its policies. The economy is the number one priority for an incoming government after 15 years of civil war, and restricting its ability to provide for its citizens can have detrimental consequences in the long term. 

The approach taken by Biden, and likely Trump, ignores the fact that sanctions can easily be reinstated if the U.S decides. If Syria proves to follow strict interpretations of Islamic law and repress the rights of minorities and women as many fear, then the U.S can and should reapply the sanctions. The effect is the same: if the U.S seeks to sanction Syria there will be sanctions. But retaining outdated sanctions deprives Syria the best opportunity to rebuild its society and reinvigorate the economy. The U.S should reward behavior that helps its interests, and removing Assad from power is a humanitarian and geostrategic win. Even if the new government does not fully align with the American vision of Syria, it certainly is preferable to the brutal Assad government responsible for the deaths of thousands of Syrian civilians through the use of chemical weapons. The current sanctions are outdated and misfitted, meant for a past regime that is no longer in power. In the current geopolitical competition, the collapse of Assad weakened Iran and Russia’s position in the region. Iran is the U.S’ main regional adversary, and HTS directly eliminated a crucial ally of Tehran. As a consequence, Iran lost its access to resupply routes to Hezbollah in Lebanon, a sympathetic neighbor. Instead of waiting to see if Syria needs sanction relief, the Trump administration should remove sanctions to reflect the facts on the ground.

While eliminating sanctions seems to be an unrealistic approach under President Donald Trump, it aligns with his foreign policy vision. The decimation of Assad will likely empower Turkey, who enjoys closer relations to HTS. President Trump speaks positively about Turkish President Recep Tayyip Erdoğan, who stands to gain significantly from the change of power in Damascus. A strengthened and competent state that is no longer beholden to Iran aligns with his regional vision to decimate Iran. By lifting sanctions and allowing economic growth, Trump can be the savior of Syria and be credited with a miraculous recovery. And if the situation deteriorates forcing new sanctions, Trump can be the tough president who forces them into compliance. In all, the lifting of sanctions and the opportunity to stabilize Syria benefits Trump’s long-term vision for the region while maintaining the opportunity to show strength.

After a brutal 15 years, Syrians are not fully out of the dark and their main handicap is U.S sanctions. The debilitating effect of these sanctions will delay the recovery process and risk backward progress. President Trump should drop sanctions against Syria in order to more accurately reflect the situation and provide Syria the opportunity to thrive peacefully.

Image source: Council on Foreign Relations

February 22, 2025 0 comment
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ChinaInternational TradeUnited States

A Trade War Reborn: Trump’s China Gambit

written by Jade Faircloth

Many remember Trump’s first presidency by his trade war with China and controversial statements about COVID-19’s origins there. Before imposing tariffs, Trump initially showed admiration for Chinese President Xi Jinping, which only adds to uncertainty around his unconventional legislative style. His emphasis on personal diplomacy has often led to misunderstandings, overreactions, and an overall chaotic and unstable U.S.-China relationship. On the contrary, Biden’s more structured diplomatic approach focused on economic discussions and maintained open channels for dialogue on critical issues such as tariffs, technology restrictions, and financial stability. 

After Trump’s victory in the recent election, China’s Foreign Ministry stated that it “respected” America’s choice and stressed “mutual respect, peaceful coexistence, and win-win cooperation.” Meanwhile, Xi personally congratulated Trump, expressing hope that their nations could “find the right way” to “get along in the new era.” Despite the plunging U.S.-China relations during Trump’s previous term, Trump has often praised Xi as a “very good friend,” consistent with his admiration for authoritarian leaders. This dual response from China reveals both caution and optimism, underscoring the delicate balance of U.S.-China diplomacy. Additionally, there is uncertainty surrounding whether Trump will follow through on his campaign promises or pursue a policy approach similar to his first term. From an economic standpoint, Trump’s campaign proposal to impose a 60 percent tariff on all Chinese goods could further destabilize China’s economy, perhaps sabotaging its current growth model and cutting its growth by up to two percentage points. While China’s economy is currently struggling with a housing crisis, dwindling consumer demand, failing prices, and rising local government debts, it remains heavily driven by exports and manufacturing. 

Trump’s potential move would not only impact China but also American consumers, particularly lower-income households. While Biden’s tariffs targeted key sectors rather than broad-based goods, Trump’s tariffs could lead to a significant increase in the price of everyday goods. Moreover, this will impact other economies that are reliant on global supply chains and industries that depend on international inputs. In retaliation, China would likely impose its own tariffs on the U.S., while U.S. allies, such as the European Union, Japan, and South Korea, might respond with tariffs on American goods. This would create a state of fear and confusion as countries and companies begin to brace for a trade war. On a larger scale, an escalating trade war risks isolating the U.S. and diminishing its global economic influence.

Conversely, Trump’s policies might create new opportunities for China to exploit. For instance, China may seek to strengthen economic ties with Europe, anticipating that Trump’s tariff policies will be unpopular there – especially if Trump already plans on distancing the U.S. from the alliances and institutions that Biden has worked to preserve, such as NATO. Trump has previously stated that he would not support NATO allies in the event of a Russian attack if they do not meet spending targets, signaling a shift from traditional U.S. commitments. Historically, Washington has attempted to contain China through initiatives like an “Asian NATO.” The U.S. has defense treaties with the Philippines, Japan, and South Korea, and this past April, an unprecedented trilateral summit brought together the Philippines, Japan, and the U.S.. However, if Trump disengages from such international alliances, China could focus on the Global South, asserting its influence more freely.

A Trump presidency could dramatically reshape China-Europe relations. Trump has maintained that he could quickly end the war in Ukraine, and if U.S.-Russia relations were to improve, they could drive a wedge between Russia and China. Notably, Trump views China, rather than Russia, as the U.S.’s main adversary. 

Regarding Taiwan, the previous Trump administration demonstrated support for the country through increased arms sales and diplomatic visits. Yet, during his campaign, Trump asserted that Taiwan should “pay” for US protection and accused it of “stealing” the chip industry from the U.S., illustrating Trump’s transactional stance toward Taiwan. This is ironic considering the country built its semiconductor industry independently and has been a main purchaser of U.S. weaponry. In an interview, Trump suggested that China would not invade Taiwan because Xi respected him and knew Trump was “crazy.” Sensing ambivalence, China may seek to leverage economic incentives and coercive tactics to push the U.S. toward reducing its military and political backing for Taiwan. 

In response to technology restrictions, Trump is certain to prioritize national security considerations, which will add another layer of regulations that embody the U.S.-China relationships. He is expected to uphold Biden’s export controls on advanced technologies relating to AI and semiconductors, potentially restricting China’s access to these technologies even further. Regarding autonomous vehicle technology, Trump will also need to decide whether to continue limiting Chinese access. Amid rising tensions over Taiwan and fears of Chinese espionage, Trump is anticipated to advocate for even stricter technology controls.

Should Trump maintain and expand his China policies, the result may be an era marked by heightened tension, confrontation, and diminished cooperation. It remains uncertain whether a severe economic crisis could be on the horizon – or if the U.S.-China relationship can withstand another Trump presidency.

Image source: Wikimedia Commons

December 4, 2024 0 comment
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ChinaEconomicsFeaturedInternational TradePrint ArticleThe International EconomyUnited States

China’s Debt Issue: Its Weakening Economic Grip

written by Jack Hill

In his first campaign for the presidency, Barack Obama highlighted the U.S.’s difficulties with promoting American interests in Asia. The most imposing obstacle? China’s fiscal influence throughout the continent articularly lamenting China’s fiscal influence. “It’s pretty hard to have a tough negotiation,” Obama complained, “when the Chinese are our bankers.” (1)

At the time, the People’s Republic of China (PRC) held well over $1 trillion in U.S. government debt, with some estimates even ranging up to $1.7 trillion (2). While that number has dipped to $980.8 billion dollars as of October 2022, China’s holdings of U.S. government debt are still some of the largest in the world (3). China’s massive share of U.S. government debt effectively confers serious influence over American policy making. Moreover, as China competes with the U.S. for global influence (particularly in the Taiwan Strait), their financial authority serves as a particularly potent weapon for the PRC in seeking to supplant the U.S. as the world’s hegemon. Yet as the global economy enters a period of turbulence, and the American economy teeters on recession, China’s financial leverage is bound to be weakened, thereby threatening the PRC’s greater hegemonic ambitions as well.

Why does China own so much of the U.S.’s debt? In essence, because it is beneficial for the Chinese economy. China’s large volume of U.S. treasuries purchases help stimulate consumption in the American economy, which in turn increases Chinese export sales to the U.S. In addition, Chinese loans allow the U.S. to run persistent budget deficits and continually commit to high rates of government spending (i.e., an expansionary fiscal policy), invigorating American economic activity as a result. Of course, massive spending bills, lower tax rates  also contribute to the U.S.’s budget imbalance. Nonetheless, since the U.S. is the largest importer of Chinese goods, the PRC naturally stands to benefit from strong economic activity in the U.S (4).

As China and the U.S. have grown closer as trade partners, Chinese holdings of U.S. debt have ballooned. And as mentioned earlier, China’s status as a large creditor to the U.S. provides the PRC with significant political leverage over American policy making. A Chinese sell-off of American debt would hinder the U.S. to continue to commit to high levels of government spending. As a result,  the U.S. would be forced to restrain its fiscal policy by either reducing its budget deficits, or by selling U.S. treasuries to other countries. However, the feasibility of both these solutions is questionable. The dollar’s value is currently riding strong as the U.S. Federal Reserve has hiked interest rates to tame inflation, making it an expensive investment. The U.S. would thus experience trouble finding willing states to purchase American debt. Similarly, it is unlikely the U.S. would significantly reduce their budget deficit, since it would require further economic austerity measures, which would be challenging politically for the Biden administration. However, what is certain is that both of these solutions would slow economic activity in the U.S. This means China can levy the threat of sell-off whenever American policy conflicts with their goals. For instance, China’s recent reduction of U.S. debt in July of 2022 dropped their holdings to their lowest level in 12 years, which analysts argue was motivated largely by the U.S.’s exclusion of Russia from the SWIFT international banking system (5).

However, many disregard the notion that China’s share of U.S. debt confers political leverage to the PRC. Instead of a coercive instrument, analysts emphasize the degree of China’s ownership of American foreign debt as a mere reflection of  the interconnectedness of the two economies.This approach states that China could not threaten a wholesale sell-off of its U.S. debt holdings, contending their sheer scale would have negative consequences for the Chinese economy itself. Thus, why worry about China’s fiscal influence over the U.S., or even portend its weakening as a result of the global economic downturn?

While China and the U.S. may share a very close economic relationship, the aforementioned attitude ignores not only the diametrically opposed political orientations of both nations, but also that they are both engaged in competition for global hegemony. This is particularly exemplified in the controversy of Taiwan’s sovereignty. If the U.S. is reliant on the PRC’s purchasing of American debt to maintain strong economic performance,  China can leverage this to deter U.S. policy which conflicts with their aims to reincorporate Taiwan with the mainland. Though it did not force the U.S. to reverse its policy, China’s debt reductions after the U.S.’s exclusion of Russia from the SWIFT international banking system exhibits the execution of this threat clearly. Furthermore, China need not threaten a complete sell-off of its American debt in order to influence the U.S.’s actions if the PRC did attempt to reincorporate Taiwan through military means.  Small but significant reductions would still be capable of forcing the U.S. to reevaluate its policy by inflicting severe enough damages for the U.S. to sustain. Thus, it is misguided to assume that China’s status as a significant creditor of American debt does not threaten the U.S.’s position as the world’s predominant power.

However, the global economic downturn poses a serious hazard to the potency of China’s fiscal influence over the U.S.. As previously mentioned, projections for the U.S. economy in 2023 are characteristic of recession, with the U.S. Federal Reserve predicting GDP growth to grind to 0.5% in 2023 and unemployment to rise (7). Additionally, the Conference Board, a nonprofit think tank, expects that the American economy will experience three consecutive quarters of negative economic growth beginning in Q1 2023 (8). Similarly, the U.S. Federal Reserve’s efforts to tame inflation through restrictive monetary policy will tighten the American money supply, further contributing to a sluggish economy. 

Decreased economic activity in the U.S. will naturally harm China by reducing demand for Chinese goods in the U.S., a worrying trend the PRC is already facing globally (9).  Consequently, China’s massive investment in U.S. debt will not yield equally substantial returns as poor economic conditions affect American consumption. The severity of the economic downturn will harm China despite their past financing of strong activity in the U.S. economy. In turn, this will render the PRC’s holding’s of U.S. debt as less consequential to American economic performance and thus reduce the political influence attached to China’s large share of U.S. Treasuries. This is particularly true in the event tensions escalate further over Taiwan as they are expected to do.  If their financing ceases to significantly contribute to a strong U.S. economy, then the PRC only wields empty threats. Thus, how can China expect the U.S. to flinch if it threatens to decrease its holdings of American debt in the event of a clash over Taiwan?

It should be noted, however, that the American economy is expected to rebound in 2024, along with the rest of the global economy (8). Nevertheless, global economic turbulence will leave scars on China’s fiscal influence, and with it consequences for the nation’s goals of global hegemony.

Citations:

  1. Oatley, T. (2019). International political economy. Routledge, Taylor & Francis Group.
  2. Stetser, B. W. (2009, February 26). Who bought all the treasuries the US issued in 2008? and who will be the big buyers in 2009? Council on Foreign Relations. Retrieved March 14, 2023, from https://www.cfr.org/blog/who-bought-all-treasuries-us-issued-2008-and-who-will-be-big-buyers-2009 
  3. Sebastian, A. (2023, February 7). 5 countries that own the most US debt. Investopedia. Retrieved March 14, 2023, from https://www.investopedia.com/articles/markets-economy/090616/5-countries-own-most-us-debt.asp
  4. China Trade. China Trade | WITS Data. (2020). Retrieved March 14, 2023, from https://wits.worldbank.org/CountrySnapshot/en/CHN
  5. Jamali, L. (2022, July 19). Why is China reducing its U.S. debt holdings? Marketplace. Retrieved March 14, 2023, from https://www.marketplace.org/2022/07/19/why-is-china-reducing-its-u-s-debt-holdings/
  6. Is it a risk for America that China holds over $1 trillion in U.S. debt? China Power Project. (2020, August 26). Retrieved March 14, 2023, from https://chinapower.csis.org/us-debt/
  7. Schneider, H. (2022, December 20). Recession, or recession-ish? Fed outlook for U.S. walks a fine line. Reuters. Retrieved March 14, 2023, from https://www.reuters.com/markets/us/recession-or-recession-ish-fed-outlook-us-walks-fine-line-2022-12-16/
  8. The Conference Board Economic Forecast for the US Economy. The Conference Board. (2023, February 15). Retrieved March 14, 2023, from https://www.conference-board.org/research/us-forecast
  9. China balance of trade February 2023 data – 1981-2022 historical – March forecast. China Balance of Trade – February 2023 Data – 1981-2022 Historical – March Forecast. (2023). Retrieved March 14, 2023, from https://tradingeconomics.com/china/balance-of-trade
June 4, 2023 0 comment
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AsiaDevelopmentEconomicsFeaturedGlobalizationInternational TradeInternetPrint ArticleTechnology

The Chip Shortage: a Lasting Symptom of COVID-19

written by Seher Alvi

Every day, the average person will come into contact with hundreds of chips. The term “chip”, which refers to the entirety of an integrated circuit contained within a microchip, has become somewhat synonymous in everyday conversation with semiconductors. This is in spite of the fact that semiconductors, which are elements that function in between insulators and conductors, are merely one element of a circuit, used to allow an electrical current to flow in some cases and not in others (1). Common semiconductors such as silicon, germanium, gallium arsenide, and others are used by the majority of manufacturers in building integrated circuits that are later installed in computers, cars, microwaves, and countless other devices. Many have complained that the COVID-19 pandemic has caused a shortage in semiconductors. In reality, the shortage has impacted microchips themselves, due to insufficient supply from manufacturing companies.

With the entire world on lockdown in the beginning of 2020, the transportation industry came to a grinding halt, and automotive manufacturers drastically cut down on their chip orders (2). The demand for chips, however, was simply relocated; as more and more people began to work from home and seek entertainment in quarantine, electronics and digital appliance manufacturers found themselves with an uptick in sales and sought an increased supply of microchips as a result (2). 

It’s important to note, however, that the complexity of chips and the subsequent cost of production can vary greatly depending on what the chip is being manufactured for. As semiconductor producers adjusted their factories according to the market’s appetite for sophisticated processors and electronic semiconductor circuits, their prices rose accordingly. When people began to emerge into the outside world and travel once more, the demand for transportation skyrocketed, and the vehicle market scrambled to create fresh stock for eager waiting customers. However, they found themselves faced with an insurmountable challenge: the chip factories which once churned out low-cost, simplified chips for cars were now focused on a new clientele, and their motors and navigation systems simply could not function without these advanced circuit mechanisms. 

This story of supply and demand racing to keep up with one another is by no means new. It is merely the typical cycle seen in any market. But why, then, has it gained so much visibility? The first answer is surprisingly simple; even though the auto industry only makes up 10% of the overall demand in chips, it’s extremely important to many leading world governments such as the United States’ and the U.K.’s, due to the great deal of domestic revenue it generates (3). As a result, many pieces of active legislation have actually been passed in an attempt to alleviate the circuit shortage. The CHIPS and Science Act of 2022, for example, provided over 50 billion dollars to American research and production of integrated semiconductor secrets, so that U.S. auto and technology manufacturers can source their supplies domestically without the added hassle of international imports (4). The widespread nature of chips in nearly every area of production and industry, be it transportation, electronics, and household goods, has also added to the notoriety of the scarcity issue. A surprising aspect of the chip market and its conspicuousness is its underlying involvement in the U.S.-China conflict. 

Over 50% of microchip manufacturing happens in one firm in Taiwan: the Taiwanese Semiconductor Manufacturing Company, or TSMC (4). This means that this small island is single handedly responsible for nearly a third of the United States’ digital computing power (2). As a result, the American motive behind protecting the nation’s sovereignty extends beyond a Good Samaritan dedication to upholding democracy, and ventures into the territory of capitalist self-interest. Even so, the political nature of public support for Taiwan cannot be ignored, given the salience of the issue. While it’s unlikely that China would destroy the chip plants in an invasion of Taiwan, considering their own reliance on the technology, they would most likely take control of them in order to profit. And considering the rocky nature of Chinese-American trade relations, there’s a high possibility that they may withhold the sale of chips to factories in the United States, forcing them to turn to Korean factories or other manufacturers elsewhere (4). 

At this very moment, the chip shortage appears to be following a cyclical pattern. Experts predict the surge in demand will subside as the pandemic recedes and the travel infatuation dies down, and the competition for semiconductor chips will die down accordingly (5). However, it will be interesting to see how this market, which is now proven to be extremely volatile, will be impacted by future world events, and if it will change further as a result. Perhaps Taiwan will lose their long-held monopoly, or perhaps will evolve to rely on some new innovation. Either way, it is certain that those in the forefront of the manufacturing industry will hold not only a great deal of economic power, but also an incredible amount of sociopolitical influence as well. 

  1. Sean Speer and Chris Miller. “Why are chips so important, anyway? Professor Chris Miller on the fight for the world’s most critical technology.” The Hub, November 24, 2022. Accessed February 17, 2023, https://thehub.ca/2022-11-24/why-are-chips-so-important-anyway-professor-chris-miller-on-the-fight-for-the-worlds-most-critical-technology/. 
  2. Tamera Max. “Understanding the Current Global Semiconductor Shortage, Preparing for the Future.” S&P Global, August 19, 2022. Accessed January 19, 2023, https://www.spglobal.com/engineering/en/research-analysis/understanding-the-current-global-semiconductor-shortage.html.
  3. Samuel K. Moore. “How and Why the Chip Shortage Will End, in 4 Charts.” IEEE, June 29, 2021. Accessed February 3, 2023, https://spectrum.ieee.org/chip-shortage.
  4. David Shepardson and Patricia Zengerle. “U.S. Senate passes bill to boost chip manufacturing, compete with China.” Reuters, July 28, 2022. Accessed January 27, 2023, https://www.reuters.com/business/majority-us-senate-backs-bill-boosting-chipmakers-compete-with-china-2022-07-27/.
  5. J.P. Morgan. “Supply Chain Issues and Autos.” August 11, 2022. Accessed February 3, 2023, https://www.jpmorgan.com/insights/research/supply-chain-chip-shortage. 
June 4, 2023 0 comment
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EconomicsInternational TradePrint ArticleTechnologyWomen's Rights

Covid, Automation, and their long-term effects on Women’s Work

written by Joshua Potter

Joshua Potter’s article is additionally featured in The Generation’s Spring 2022 Digital Print Edition: Women. Coming June 1st 2022.

Automation has been ever since the Industrial Revolution , and due to recent events it will affect women more than ever. The COVID-19 pandemic accelerated many trends due to its destructive nature, and one such way is through massive automation effects around the globe due to lack of labor. Particularly throughout the United States, millions have quit their jobs in the phenomenon dubbed “The Great Resignation.” Due to the current labor shortage, the pandemic may be accelerating the trend of automation to tackle these issues and drastically change labor relations for years to come. . However, one of the issues with this increase will be the effect that it has on women, as they stand to lose the most in an ever increasingly automated world. 

One of the keys to understanding automation’s effects on women labor is to exhibit how automation is starting to introduce itself to all occupations. In previous years, blue-collar workers were most at risk of losing their jobs to automation in factories or to self-checkout lines, but now this trend has spread to white-collar work as well. But recent research indicates that white-collar jobs are increasingly being taken over by machines — maybe not by robots directly, but certainly facing pressures from artificial intelligence (AI) and machine-learning solutions. Just as robots are now displacing blue-collar workers, advances in artificial intelligence are beginning to displace accountants, lawyers, and other service-based professions.1 This is nothing new, and historically automation increases more during a recession since humans cost more to employ.  Machines are designed to serve us in numerous ways, they don’t need paid time off, scheduling changes, or health insurance .  It has been estimated that up to 45 million Americans will lose their jobs to automation by the year 2030.2  Unfortunately, women will lose many of these jobs.

A big reason for this trend is because of the occupations where women work, and that’s why it is estimated that women are twice as likely to be replaced by automation than men. These figures are even higher when considering BIPOC (Black, Indigenous and People of Color) women. One of the reasons for this can be traced back  to the demographic history  of working women in the 20th century in the United States. During the second world war, millions of men went overseas for the war effort, and male dominated work such as working in the factories went to women.3 Due to the labor shortage, this allowed millions of women to leave the home and enter the workforce. However, the majority of these women were demobilized and these jobs went back to men once the war ended. Because of the baby boom that occured around the same time, women were needed for a variety of positions such as clerical work and frontline service jobs, and they continue to dominate these positions today. In 2017, the Bureau of Labor Statistics found that 22 million people are employed in office and administrative tasks, and the majority are women.4  Unfortunately, these are the same positions that can be replaced by automation, and in the near future we may see millions of women struggling for work. 

This trend isn’t specific to the United States either. A study by the International Monetary Fund found that over 26 million women from over 30 countries could lose their jobs to automation within the next 20 years.5 This is likely due to the fact that women have been excluded from certain industries for years, and they have to look for clerical positions that can be replaced with advancements in technology. Even if white collar jobs are being eliminated, men in those positions will have more skills and connections that would give them a better  chance to find work, while women are left behind. We must ensure that no one is abandoned in our ever-changing society, and other countries are already leading the way.

If we know that women are more susceptible to losing their clerical positions, then why don’t they join other industries? One reason is because many women are still the primary caretaker for children and handle most household tasks in the United States.6 Furthermore, childcare is expensive throughout the country and due to the cost many mothers have to stay home instead of being in the workforce.7 Increasing childcare benefits or subsidizing child care altogether could allow more women to further their education to obtain different types of jobs. However, this isn’t the only reason. This is  because many professions are male-domainated. For example, construction is a massive industry with over seven million workers, but few women work in this industry.8 This is due to a lack of recruitment by employers, as well as stereotypes that it is “man’s work.” However, there are many other careers but are male dominated; such as Software Developers, Aerospace Engineers, Aircraft pilots, and many others. Even when women can break into blue-collar work, they are often looked down upon. When women worked at electrical plants in the 1960’s and 70’s, women were placed at the lowest level in the blue-collar hierarchy, with newly hired men placed above them. They also had worse pay and fewer highly skilled positions.9 Sexism in the working place is unfortunately nothing new, and because of societal pressure it is one of the major reasons why women risk losing to automation. We are seeing that more traditional trends of men being breadwinners is decreasing as is marriage rates and child born, but since this is a societal view only time can change these viewpoints. However,  we can look to other countries to see how to manage the transition from human to automation work. 

South Korea is one of the most heavily automated countries in the world, and its robot density has been increasing rapidly since 2015.10 In combination with the pandemic, some South Koreans have been struggling looking for work, and few groups have been hit harder than women working in the service industry. The labor rate for the country is not optimistic, as the rate for women stands at 53% in South Korea, compared with 73% for men.11 However, the country is taking steps to mitigate some of the issues that rapid automation has created. For example, the government plans to expand it’s employment insurance policy to over 20 million people in the country, as well as provide stipends for younger people that are struggling to find work in these trying times.12 Nonetheless, it is difficult to predict whether or not this will be enough to offset the loss of income as people look for work. 

An important aspect of this discussion has to do with where the growth in automation is taking place.13 It’s no coincidence that eight out of the ten countries with the highest robot destiny also have some of the highest average per capita wealth on the planet.14 While countries such as South Korea have the means to offset changes in their labor demographics, developing countries and the women in them will be hardest hit. One of the big reasons for this is that many of these countries rely on manufacturing, and with advancements in technology these jobs can be automated easier, leaving people without work.15 This is not the only industry at risk, and in worst-case scenarios, whole economies will be left vulnerable. Developing countries’ risk of job loss from automation ranges from 55-85%, which is higher than the 57% risk in wealthier OECD countries.16  Without proper support, the effects of this could be devastating, leading to violence and political instability. Furthermore, the industries that are most vulnerable have a majority of working women. For example, a Mckinsey study found that over half of retail and food service positions can be automated.17 This would lead to millions of women losing their jobs in the coming decades, and would also mean the loss of financial security for many women. Not only that, but this would contribute to the ever widening growth gap that is happening around the globe. While developed countries will be in a better position to provide for women affected by these changes, they will be affected everywhere. However, changes can be made to alleviate some of the issues created by widespread automation. 

Something that we can do to ensure that women can still find jobs is to make it easier for them to have the education and training needed to switch careers. Many educational programs are designed to prepare people for a certain type of job, but that is inefficient if that position will cease to exist down the line. One idea is to allow education to become more flexible, and allow women to only focus on what they need to do. One way for this to occur would be to have training programs primarily online, and due to the pandemic pushing all of us further online this change will not be as difficult. Also, nanodegrees or micro credentials provided by online education platforms such as Udacity and Coursera can be used for mid-career adjustments at low cost.18 There are numerous options available, but its critical reform is made as soon as possible. The longer we wait the more women will struggle if they are let go and can not find any work.

While this paper brought up possible consequences of automation for women, this does not have to be the case. With proper reform and policy, automation can be used to lessen the amount of labor needed for certain tasks, and ensure a safer working environment. For this to happen, meaningful change has to occur and women need more support to make sure that they are not further left behind. Automation  can lead to a more equitable world, but only time will tell if this is accomplished. 

Endnotes

1.  Busch, Jason. “White-Collar Jobs Are Increasingly Being Automated.” In Business Madison, 18 Oct. 2021, https://www.ibmadison.com/white-collar-jobs-are-increasingly-automated/#:~:text=Research%20suggests%20artificial%20intelligence%20and,more%20easily%20automated%20than%20others.&text=Professionals%20with%20college%20degrees%20and,felt%20relatively%20safe%20from%20automation. 

2.  Carey, Kevin. “Do Not Be Alarmed by Wild Predictions of Robots Taking Everyone’s Jobs.” Slate Magazine, Slate, 31 Mar. 2021, https://slate.com/technology/2021/03/job-loss-automation-robots-predictions.html. 

3.  “Striking Women.” Post World War II: 1946-1970 | Striking Women, https://www.striking-women.org/module/women-and-work/post-world-war-ii-1946-1970. 

4.  Kinder, Molly. “The Future of Work for Women.” New America, 25 Feb. 2019, https://www.newamerica.org/work-workers-technology/shiftlabs/blog/future-work-women/. 

5.  Majumdar, Romita. “Working Women More Vulnerable to Automation than Men, Says IMF Report.” Business Standard, Business-Standard, 22 Dec. 2018, https://www.business-standard.com/article/economy-policy/working-women-more-vulnerable-to-automation-than-men-says-imf-report-118122200699_1.html. 

6.  Brenan, Megan. “Women Still Handle Main Household Tasks in U.S.” Gallup.com, Gallup, 20 Nov. 2021, https://news.gallup.com/poll/283979/women-handle-main-household-tasks.aspx. 

7.  Whitehurst, Grover J. “Russ”. “Why the Federal Government Should Subsidize Childcare and How to Pay for It.” Brookings, Brookings, 9 Mar. 2022, https://www.brookings.edu/research/why-the-federal-government-should-subsidize-childcare-and-how-to-pay-for-it/. 

8.  “U.S. Construction Employees 2000-2021.” Statista, Statista Research Department, 19 Jan. 2022, https://www.statista.com/statistics/187412/number-of-employees-in-us-construction/. 

9.  Blum, Linda M. “Constrained Choices: Women’s Interest in Women’s Work.” Between Feminism and Labor: The Significance of the Comparable Worth Movement, University of California Press, Berkeley, Ca, 1991, pp. 132–140. 

10.  Wessling, Brianna. “10 Most Automated Countries Worldwide.” The Robot Report, 15 Dec. 2021, https://www.therobotreport.com/10-most-automated-countries-wordlwide-in-2020/. 

11.  King, Sam, and Jeong-Ho Lee. “Korean Workers Need to Make Space for Robots, Minister Says.” Bloomberg.com, Bloomberg, 13 Apr. 2021, https://www.bloomberg.com/news/articles/2021-04-13/south-korea-workers-need-to-make-space-for-robots-minister-says. 

12.  King, Sam, and Jeong-Ho Lee. “Korean Workers Need to Make Space for Robots, Minister Says.” Bloomberg.com, Bloomberg, 13 Apr. 2021, https://www.bloomberg.com/news/articles/2021-04-13/south-korea-workers-need-to-make-space-for-robots-minister-says. 

13.  Wessling, Brianna. “10 Most Automated Countries Worldwide.” The Robot Report, 15 Dec. 2021, https://www.therobotreport.com/10-most-automated-countries-wordlwide-in-2020/. 

14.  Papadopoulos, Anna. “Richest Countries Globally with Average per Capita Wealth.” CEOWORLD Magazine, 26 July 2021, https://ceoworld.biz/2021/07/26/richest-countries-globally-with-average-per-capita-wealth/. 

15.  Khor , Martian. Automation, Robots and the Threat of Economic Disruption in Developing Countries, The Third Resurgence , 2017, https://www.twn.my/title2/resurgence/2017/319-320/cover01.htm#:~:text=Recent%20studies%20are%20showing%20that,the%20already%20great%20global%20inequalities. 

16.  Khor , Martian. Automation, Robots and the Threat of Economic Disruption in Developing Countries, The Third Resurgence , 2017, https://www.twn.my/title2/resurgence/2017/319-320/cover01.htm#:~:text=Recent%20studies%20are%20showing%20that,the%20already%20great%20global%20inequalities. 

17.  Manyika, James, et al. “A Future That Works: Automation, Employment, and Productivity.” McKinsey & Company, McKinsey & Company, 3 May 2018, https://www.mckinsey.com/featured-insights/digital-disruption/harnessing-automation-for-a-future-that-works/de-DE. 18.  Cerf, Moran, et al. “3 Practical Solutions to Offset Automation’s Impact on Work.” Singularity Hub, 7 Apr. 2019, https://singularityhub.com/2019/03/11/3-practical-solutions-to-offset-automations-impact-on-work/.

May 25, 2022 0 comment
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AuthoritarianismEconomicsEuropeFeaturedGeopoliticsHuman RightsInternational TradePrint ArticleThe International EconomyUncategorized

Why Liberal Internationalism Can Survive a Global Rise in Autocracy

written by Annabelle Werner

“Will we apply and strengthen the core tenets of the international system, including the U.N. Charter and the Universal Declaration of Human Rights, as we seek to shape the emergence of new technologies and deter new threats? Or will we allow those universal principles to be trampled and twisted in the pursuit of naked political power?”

In his first speech before the UN General Assembly, President Biden acknowledged his administration’s sustained commitment to a rules-based order. He affirmed that the fundamental international legal doctrines created in the post-World War II era are not rendered obsolete by the passage of time, “new technologies” or recent grabs for power. Yet Biden’s declaration of support for the international system is far from accepted in the international relations community. In fact, the liberal international order (LIO) is coming under more fire than ever. Because while theorists agree that the world is collectively experiencing democratic decline, scholars and practitioners want to know: can liberal internationalism survive this global rise in autocracy?

According to Freedom House, 2021 was the 15th straight year of an overall rise in global autocracy and the worst single year of democratic deterioration.1 The “overall rise” occurs when more states experience a decrease in democracy than an improvement. This translates to nearly 75% of the world’s population living in a state that experienced democratic backsliding in 2020.2

It is widely accepted that 2020’s drastic deterioration occurred because of state leaders using emergency measures regarding COVID – 19 to postpone elections, indefinitely expand executive power, and erode democratic institutions. Few states were spared in the rise of populism as both struggling democracies like Hungary and secure governments like the United States both felt their democratic safeguards tested. The upcoming Freedom House reports will most likely measure whether political officials relinquish some of this emergency power. But while COVID – 19 may explain the rise in autocracy in 2020, there have still been years of democratic decline before it. Many theorists are claiming that the liberal international order is failing to prevent such decline, and it will not survive further changes in international hierarchy, such as the rise of China.

In order to tackle this argument, let’s first define what the liberal international order is, and what it is not. The LIO is a rules-based system defined by the essential, universal principles of human rights as well as political and economic liberalization that was established following World War II. Many international organizations and treaties were founded on these principles in the post-1945 era. Yet it is key to mention a fundamental idea developed by Professors Mette Eilstrup-Sangiovanni and Stephanie C. Hofmann: not anyone international organization defines the entirety of the rules-based order – organizations can come and go as long as the fundamental principles of the LIO remain the same.3 It is also important to understand that the organizations created in the name of these principles were created by and for a handful of western states left after the end of WW2, thus they were designed to facilitate diplomacy between only a few state actors. Thus, it seems only natural for the organizations themselves to change over time in reaction to new events, phenomena, and actors. As long as newly amended or created organizations are upholding the LIO’s key principles, these are to be considered changes within the LIO, not challenges to them.4

Since the post-1945 world, one can see how the LIO has survived developments in world politics. For instance, the post-World War II hierarchy shortly gave way to the bipolar world and international stalemates of the Cold War. And while the LIO and its various international organizations were able to survive the great power competition, many of its functions were blocked throughout this period. After the fall of the Berlin Wall, the LIO was essentially run by the U.S. until 2001. This unipolar, U.S.-led system arguably provided stability as the LIO’s agencies and mechanisms functioned unencumbered by the interests of other powers. 

But the U.S.’s unipolar moment ended in 2001 after the attacks on the Twin Towers and President Bush’s declaration of the “War on Terror”. The ensuing failures of unilateral intervention in the Middle East soon became synonymous with the failures of the LIO. Other troubles arose, like the deadlock of the WTO, which has resulted in the stalling of the Doha Round for 20 years, and the deadlock of the UN Security Council (UNSC), which has resulted in the perpetuation of humanitarian disasters in Syria and Yemen. Furthermore, the nature of war has shifted: internal/civil conflicts are more common than state versus state conflicts, and now non-state actors as powerful players in international relations. These changes have brought into question whether the LIO and its structure operating with states as primary actors, can adapt to such new challenges. Some theorists are even questioning if the LIO ever truly existed in the first place.

Despite this laundry list of problems regarding the efficacy of liberal internationalism, the general disillusionment with its ability to quell the rise of autocracy, and the doubt that our rules-based system can live through a change in the international hierarchy like the rise of China, the LIO is not obsolete and can survive in the 21st century. Rather than abandon our core principles, lower our standards for the quality of life, and abandon the pursuit of sustainable development, I argue that the LIO can stave off this rise in autocracy. Although in order to do so, the international community needs to apply new, innovative mechanisms to actualize the LIO’s core principles of multilateralism, and its international organizations need to adapt to a broader view of global governance and the reality of a multipolar world. The good news? In some ways, these adaptions have already started.

Although the Doha Round has been stalled since 2001 due to conflicts between the US and China, trade liberalization and the average global lowering of tariffs have continued exceptionally well; the average world import tariff remains below 5% (as of 2019).5 Economist Richard Baldwin argues that this is due to the increase in bilateral investment treaties and regional trade agreements (RTAs), which are innovative adaptions to a world that is far more globalized and complex than the one that existed at the conception of the WTO in 1995; he argues that such complex and nuanced solutions will be a part of the future multilateralism in the global economy.6 And while we still need to work with and reform the WTO in order to actualize its benefits, such as its dispute settlement body, we can pair this necessary reform with utilizing other innovative, solutions to promote key principles of the LIO: multilateralism and economic liberalization. And while we will still have yet to see the outcome of the current trade war between the US and China, I mention these localized adaptions to argue that despite the trade war, tariffs globally have been kept low. Thus, these aforementioned adaptations and suggested reforms can occur within the rules-based order despite periods of great power contention and stalemates between powerful actors.7

Another application of Sangiovanni and Hofmann’s theory to the WTO can be explored through the transition from the GATT (the former tariff lowering practice) to the very creation of the WTO in 1995. The WTO was created in order to adapt to the end of the Cold War as well as better incorporate so many of the newly decolonized states at the end of the 20th century. This development occurred without the claims that the end of the LIO was upon us, thus showing how there have been historical changes in our international economic systems within the liberal international order in order to adapt to new events. And while it is important to mention that agreements like RTAs could be used to facilitate protectionist policies, they also have the potential to “pave the way for deeper multilateral integration”.8 OCED describes RTA’s as having the ability to establish “deep and comprehensive market integration” while covering pressing issues such as intellectual property and environmental regulation.9 In summation, as long as the LIO’s key principles like economic liberalization and multilateralism are being actualized (which can be measured by analyzing tariff rates), the prominence of regional agreements should not be used as evidence that the end of LIO is here.

While innovative adaptations are already happening, our international organizations themselves still need to adjust to a multipolar international hierarchy. The reality is that we are no longer in a world that operates at the will of U.S. hegemony, and our current IO’s are struggling to operate because they were designed around an essentially unipolar world. They also face significant bureaucratic red tape in the pursuit of any reform. If some of the LIO’s structures can be amended to reflect an expanded system of global governance, and its mechanisms are better equipped to learn from their own shortcomings, the LIO can propel a recession of autocracy without reconceptualization or a retreat from our principles. 

One area that needs such reform is the UN Security Council. The P5 shaped the Security Council to reflect the victors of WW2, and it doesn’t even include a single state from South America, Africa, or Southeast Asia. The UNSC has been deadlocked, even during genocides, leading to a failure to halt such atrocious crimes. But an expanded and reformed Council could include more world powers and reforms such as where “permanent members shall not exercise the right to veto in the event of mass atrocities”, which is an idea proposed by a P5 member themselves, France.10  The stakes regarding the UNSC reform are particularly high as this is the only international mechanism that can legally sanction the use of force, which is one of the most powerful functions of the international community.

Yet the stakes are also high for many issues we face in the 21st century, and success cannot be achieved by regression to unwavering reverence to state sovereignty: we cannot simply give up on the principles or current mechanisms of liberal internationalism. Global pandemics and climate change do not occur in vacuums that individual states can solve on their own. Large swaths of our planet will become uninhabitable due to rising temperatures and sea levels, and massive levels of migration are inevitable. Resorting to isolationism and dismissing the fundamental principles of the LIO will only lead to more suffering. Accepting the inevitability of conquest and war will only lead to self-fulfilling prophecies. The only sustainable solutions to collective action problems will involve the just principles of equality and collaboration defined in a rules-based order.

So, if there’s broad consensus that the world is inevitably moving towards a multipolar world, shouldn’t we also ask ourselves what the benefit could be to 1) having our international organizations match the current international hierarchy and 2) having a multipolar world that also falls along the with LIO? Because couldn’t “a multifaceted world order based on complex and polycentric governance arrangements among a wider community of national governments, international organizations and non-state actors” better lead to more accountability and efficacy in our diplomatic practices? 

Overall, instead of rejecting the LIO on the grounds that it has failed to quell a rise in autocracy, we should focus on adapting these institutions to a world that is no longer unipolar while ensuring that our principles remain the same. Because it is not our guiding principles of equality, peace, and multilateralism that have allowed for autocracy to develop, but rather a lack of reform that has hindered our global governance and accountability mechanisms from being used, or for being used as vehicles to serve other interests. Ultimately, the LIO can outlast this rise in autocracy. But in order to tackle these modern dilemmas, we need to apply nuanced solutions and update our structures to fit the modern international arena while upholding the principles of the rules-based order.

Endnotes:

1. “Freedom in the World 2021: Democracy Under Siege.” Freedom House, 2021, https://freedomhouse.org/report/freedom-world/2021/democracy-under-siege.

2. ibid.

3. M. Eilstrup-Sangiovanni and S.C. Hofmann. “Is the Liberal International Order in a state of terminal decline?” London School of Economics, January 7, 2020, https://blogs.lse.ac.uk/europpblog/2020/01/07/is-the-liberal-international-order-in-a-state-of-terminal-decline/.

4. ibid.

5. “International Trade in Goods – tariffs. International trade in goods – tariffs – Statistics Explained.” Eurostat, July 21, 2021, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=International_trade_in_goods_-_tariffs.

6. R. Baldwin. “The World Trade Organization and the future of multilateralism.” Journal of Economic Perspectives, 2016, 30(1), 95-116.

7. Mette Eilstrup-Sangiovanni & Stephanie C. Hofmann. “Of the contemporary global order, crisis, and change,” Journal of European Public Policy, 2020, 27:7, 1077-1089, DOI: 10.1080/13501763.2019.1678665.

8. “Regional Trade agreements,” OECD, https://www.oecd.org/trade/topics/regional-trade-agreements/. 

9. ibid.

10. “Ministère de l’Europe et des Affaires étrangères,” France and the United Nations, France Diplomacy – Ministry for Europe and Foreign Affairs, https://www.diplomatie.gouv.fr/en/french-foreign-policy/united-nations/france-and-the-united-nations/.

11. M. Eilstrup-Sangiovanni and S.C. Hofmann. “Is the Liberal International Order in a state of terminal decline?” London School of Economics, January 7, 2020, https://blogs.lse.ac.uk/europpblog/2020/01/07/is-the-liberal-international-order-in-a-state-of-terminal-decline/.

February 16, 2022 0 comment
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AuthoritarianismEconomicsFeaturedGlobalizationInternational TradePopulismPrint ArticleThe International Economy

The Free-Market Democracy Scam

written by Katherine Jones

“The Free-Market Democracy Scam” was originally published in our Fall 2021 Print Edition: Authoritarianism.

Our story starts in 2000, at the close of Bill Clinton’s second term in office. Clinton, a man who has been known to “see the world through rose-colored glasses,” saw a brighter, more democratic future for China.1 At the eleventh hour of his presidency, Clinton advocated the admission of China into the World Trade Organization (WTO), with the sincere belief that an open and free economy would lead to prosperity, and that prosperity would gradually force an increase in civil liberties.2 History has unfolded quite differently, yet Clinton was not wrong to see a connection between free markets and democracy. 

Where he may have miscalculated is the way in which these phenomena relate- perhaps free markets destroy democracy rather than create it. Perhaps Clinton should have expected that the rise of China, the first genuine competitor to U.S. economic supremacy since WWII, would slowly diminish the relative economic power of the United States. The ensuing “race to the bottom” would force the U.S. to introduce economic reforms that would reduce standards of living in order for our economy to remain internationally competitive. Such reforms would have sociopolitical consequences including increasing Americans’ appetites for authoritarianism. When all was said and done, China’s free-market may have reduced Americans’ civil liberties rather than building up their own.

Free markets, Free Men?

Free markets and democracy exist not as compliments, but largely in opposition to each other. At their core, the motives that govern markets and democracy almost always directly contradict one another. Democracy seeks to find the best outcome for the majority, capitalism seeks to satisfy individual self-interest.3 Democracy relies on the principle that we are all equal, capitalism inherently produces inequality.4 Democracy can break down free markets through punitive redistribution and regulation. Free markets break down democratic systems through poverty and inequality. 

Every “free market democracy” relies on the fragile balance between the interests of citizens and corporations, with the pendulum swinging back and forth depending on the era’s prevailing economic theory. In 1950s America, the more “democratic” Keynesian system of regulation and social welfare was popular. This was an era of strong unions and a robust middle class. By the 1970s, economists such a Milton Friedman interpreted the success of the 1950s and 60s to be due to democracy and capitalism reinforcing one another.5 A more “free market” focused ideology came into vogue. This period was characterized by deregulation, financialization, and an increasing frequency and severity of financial crises. Since the 1970s, this trend has only continued to intensify.

In modern-day America, we have levels of inequality that rival the pre-WWI era, stagnating wages, a breakdown in labor unions, and large-scale political discontent.6 However, our domestic economy tells only a fraction of the story. All other Western liberal democracies have, to some extent, suffered a similar fate. Globalization would have deteriorated regulatory and social welfare frameworks even if strong national policies had been maintained.

Globalization’s Caused Much More Than Discontent 

Free-market globalization has contributed to a breakdown in democratic accountability and produced instead governments accountable to, and run by, corporations, banks, and international organizations.

International trade has insidiously contributed to the breakdown of democratic accountability, by forcing countries to undercut the needs and best interest of their own citizens, in favor of more competitive economic policies. Take for example the corporate tax rate: large corporations pay almost zero tax, however countries are often hesitant to raise their tax rate, as businesses may then choose to base themselves in another country with a lower corporate tax rate. This phenomenon   is further applicable to labor rights, environmental protections, and many other components of the “ease of doing business.” Within this framework, there are more extensive rights granted to corporations than to people with respect to free movement and migration, the movement of capital, law enforcement, and more. 

Countries grant these special rights and privileges to not only corporations but often to international organizations and banks as well. Such was demonstrated during the Euro crisis when all of the countries within the Eurozone were accountable to the European Union over their individual sovereign governments. This policy required the Germans to pay the debts of the Greeks, and the Greeks to undergo harsh austerity, despite that neither of these policies would have been democratically feasible in their respective countries.7 In addition, the very premise that the Northern European countries were bailing out “The Greeks” or “The Irish,” veils that everyday citizens were required to bail out international financial institutions, demonstrating nation’s loyalties to banks over citizens.8

In tandem with this, banks, corporations, and International Organizations have all contributed to the direct deterioration of democratic systems, particularly in the global south. Countries within the global south have less developed economies than countries in the global north. For the last several centuries “free markets” in the global north have been subsidized by the imposition of exploitative and extractive policies in their “colonies,” then former “colonies.” These policies have resulted in structures of economic and political dependence that encumber many countries in the global south from maintaining free and open democracies. As an illustration, let’s say there’s an election in Latin America, and Western banks may favor one candidate over the other. Voters essentially must choose to pick the banks’ candidate or choose to undergo a painful recession.9 Any “choice” is an illusion. 

The Allure of Authoritarianism

As the global economy continues to erode democracy, many countries shift towards the authoritarian model. Authoritarianism’s growth in popularity in recent years could be due to its perceived superior ability to ensure economic growth. Authoritarian governments can execute the most favorable economic policies without winning elections, compromising with opposition parties, or contending with unfortunate voter decisions (such as Brexit.) In many ways, these authoritarian regimes have experienced unprecedented success. A 2009 IMF study shows that economic growth in capitalist authoritarian nations averaged 6.28% over the previous 15 years, whereas growth only averaged 2.62% in liberal democracies.10 In addition, there are individual case studies, such the China, boasting growth rates as high as 19.3%, which make authoritarianism appear as a guarantor of success.11

The growth of authoritarianism speaks to countries, and perhaps people, valuing economic prosperity over freedom. For those that have never known either this deal with the devil may be worth the price, yet what about those that already have both?

To the Republic, for which it stands…

People like authoritarianism; even in Western Democracies. Political theorist Robert Kuttner warns that support for right-wing extremists in Western Europe is even higher today than it was in the nineteen-thirties.12 According to a 2021 study from the Morning Consult, 26% of Americans are in favor of right-wing authoritarianism.13 The increase in authoritarian sentiment seems to be linked to the failures of free-market globalization, particularly the decline in voter power and the growth of inequality. According to economist Dani Rodrik, the issues that draw supporters to populism (authoritarianism more palatable precursor) are the same on both sides of the aisle: voters are “anti-globalization, anti-free trade, anti-immigration, and anti-Wall Street,” though it usually manifests in opposing ways.14 Rodrik explains that “When mainstream politicians are unable to generate meaningful responses to inequality, social exclusion and insecurity, populists of various ilk gain ground.”15 However, what’s interesting, and sad, is that this feeling of powerlessness leads people to cede even more power to strongmen. And there is a precedent for democracies developing in authoritarian regimes. Take for example ancient Rome, Hitler in Weimar Germany, Chavez in Venezuela, Papa Doc in Haiti, Mugabe in Zimbabwe, Erdogan in Turkey, and many more. As Socrates stated, “tyranny is probably established out of no other regime than democracy.”16

Potential Solutions 

What can we do to save the world’s democratic capitalist system? There are more ways in which we can reimagine the relationship between our economic and political systems to produce more favorable outcomes. 

On the international scale, The most desirable, and perhaps most unrealistic solution would be to establish democratically accountable global regulatory bodies to effectively create a fair and even playing field. We currently have organizations such as the World Trade Organization (WTO) and the International Court of Justice (ICJ) constructed to fulfill this role, that have in some respects fallen short and may be improved by democratic accountability and enhanced enforcement power. We additionally have national organizations such as the Securities and Exchanges Commission that are relatively effective and would be valuable to be expanded on a global scale.

However, in reality, compliance on a global scale would be near impossible to achieve. Worldwide solutions, in general, will be difficult to implement; it is possibly more productive to put forward domestic solutions. 

If our problem is globalization, the natural reaction may be to tend towards isolation. Yet, complete isolation is not feasible in the modern world due to global issues including cyberattacks, pandemics, terrorism, and climate change. The closest examples we see to isolation are pariah states such as Iran and North Korea. However, the world, and the United States, may be ready for a period of American withdrawal. A 2019 poll shows that “a plurality of Americans want the country’s role in the world to shrink or end altogether.”17 An American retreat could allow for more resources to be directed to education, cybersecurity, and social welfare, all of which would likely aid our ailing democracy. On the other hand, a retraction is risky as it could damage alliances, leave a power vacuum, and allow us to fall behind other countries. 

Perhaps we should instead abandon democracy altogether to save global capitalism. There are relatively more attractive forms of authoritarianism such as technocracy that may allow for a smooth transition. We have already experienced a huge growth in independent agencies unaccountable to the voter, such as the Environmental Protection Agency (EPA), the Federal Reserve, and the FDIC.18 This is potentially an interesting proposal in light of the many modern Americans who believe in ceding individual rights and freedoms for the collective good, for example removing the individual right to choose in terms of guns, abortions, or vaccines, for the sake of public health and safety. Should people give up the right to vote for the collective good? Should we all? 

Endnotes:

1. Joel Roberts. “Bill Clinton: The Optimist.” CBS News, June 25, 2004, https://www.cbsnews.com/news/bill-clinton-the-optimist/.

2. Brian Stauffer. “When the World Opened the Gates of China.” Wall Street Journal, July 27, 2018, https://www.wsj.com/articles/when-the-world-opened-the-gates-of-china-1532701482.

3. Wolfgang Merkel. “Is capitalism compatible with democracy?” Harvard University, July 26, 2014, https://projects.iq.harvard.edu/files/mobilized_contention/files/merkel_-_is_capitalism_compatible_with_democracy.pdf.

4. ibid.

5. John Weeks. “Free Markets and the Decline of Democracy.” Open Democracy, July 18, 2018, https://www.opendemocracy.net/en/can-europe-make-it/free-markets-and-decline-of-democracy/.

6. Michael Hirsh. “Why Trump and Sanders Were Inevitable.” Politico, February 28, 2016, https://www.politico.com/magazine/story/2016/02/why-donald-trump-and-bernie-sanders-were-inevitable-213685/.

7. Joseph Stiglitz. The euro: how a common currency threatens the future of Europe. WW Norton & Company, Inc. 2016.

8. Wolfgang Streek. “The Crises of Democratic Capitalism.” New Left Review, September 2011, http://piketty.pse.ens.fr/files/StreeckNLR2011.pdf.

9. Joesph Stiglitz. “Decades of free market orthodoxy have taken a toll on democracy.” The Guardian, November 5, 2019, https://www.theguardian.com/business/2019/nov/05/decades-of-free-market-orthodoxy-have-taken-a-toll-on-democracy.

10. John Lee. “Western v. Authoritarian Capitalism.” The Diplomat, June 18, 2009, https://thediplomat.com/2009/06/western-vs-authoritarian-capitalism/.

11. “GDP growth (annual %)- China.” The World Bank, 2020, https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=CN.

12. Caleb Crain. “Is Capitalism a Threat to Democracy?” The New Yorker, May 7, 2018,  https://www.newyorker.com/magazine/2018/05/14/is-capitalism-a-threat-to-democracy.

13. Cameron Easley. “U.S. Conservatives Are Uniquely Inclined Toward Right-Wing Authoritarianism Compared to Western Peers.” Morning Consult, June 28, 2021, https://morningconsult.com/2021/06/28/global-right-wing-authoritarian-test/.

14. Michael Hirsh. “Why Trump and Sanders Were Inevitable.” Politico, February 28, 2016, https://www.politico.com/magazine/story/2016/02/why-donald-trump-and-bernie-sanders-were-inevitable-213685/.

15. ibid.

16. Andrew Sullivan. “Democracies end when they are too democratic.” New York Magazine, May 1, 2016, https://nymag.com/intelligencer/2016/04/america-tyranny-donald-trump.html.

17. Charles Kupchan. “Isolationism Is Not a Dirty Word.” The Atlantic, September 27, 2020, https://www.theatlantic.com/ideas/archive/2020/09/virtue-isolationism/616499/.

18. Yascha Mounk. “America is Not a Democracy.” The Atlantic, March 2018,  https://www.theatlantic.com/magazine/archive/2018/03/america-is-not-a-democracy/550931/.

January 31, 2022 0 comment
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AfricaEconomicsGlobalizationInternational TradeThe International Economy

African Debt Sustainability: A Chinese Problem?

written by Katherine Jones

 In the past two decades China has invested unmatched resources into the African continent, exploiting underutilized opportunities and markets. China, the world’s largest creditor, has granted 148 billion USD in commercial and concessional loans to African countries, now holding 60% of the world’s poor country debt. As of December 2020, eighteen African countries are at risk for high debt distress, a figure that has doubled since 2013. Evidently, Chinese investment has come at a cost, and it’s one African countries must now pay back with interest. 

The Debt Trap

The inherent issue in debt sustainability for developing countries is an inability to pay debts without structural transformation, and the inability to transform economies without huge investments in infrastructure and human capital. This unfortunate predicament places nations in a vulnerable position in which they must accept unfavorable agreements that may leave them highly indebted. For example, the Mombasa-Nairobi railway in Kenya, funded by Chinese investment, loses 9.2 million USD every month. As a result, Kenya has not been able to effectively repay its loan. 

The failure of the Mombasa-Nairobi railway, along with similar failed projects, has triggered accusations from the West that the Chinese are engaging in “debt trap” diplomacy, in which one country becomes deeply indebted and loses some degree of sovereignty to its’ creditor. Moody’s, one of the world’s top credit and bond rating agencies, has warned: “Countries rich in natural resources, like Angola, Zambia, and Republic of the Congo, or with strategically important infrastructure, like ports or railways such as Kenya, are most vulnerable to the risk of losing control over important assets in negotiations with Chinese creditors.”

Accusations of “debt trap” diplomacy are supported by the fact that Africa receives a disproportionate share of Chinese development assistance in loans, in comparison to other regions. China invested 18 billion USD in foreign direct investment (FDI) in Latin America in 2017, versus only 3 billion USD in FDI in Africa in 2017. The total amount of all investments in Latin America was 200 billion USD, double that of the 100 billion USD in Africa. Moreover, Africa has nearly double the population of Latin America, making the per capita rate of capital transfers, on average, one-fourth the rate awarded to Latin America. The implication here is that the Chinese are offering proportionally more loans to Africa, whereas more favorable FDI, and higher amounts of assistance in absolute terms, are being directed more heavily to other regions. 

Chinese Opacity

However, to suggest Africa’s debt crisis is solely the result of Chinese lending is a gross oversimplification. The reality of the situation is much more complicated and the full picture remains unclear. Before discussing the other factors contributing to debt distress, it’s essential to acknowledge that complete information is not available due to the non-transparent nature of Chinese lending and the Chinese government. According to the Centre for Economic Policy Research, as of 2016, nearly half of Chinese loans may be unreported, a supposed 200 billion USD (Note: 200 billion USD represents hidden debt from all debtors, not just Africa). Further complicating the picture is that the Chinese distribute commercial and concessional (low interest, extended repayment period, often government to government) loans primarily from the same three state run banks: the Export-Import (Exim) Bank of China, the Chinese Development Bank (CDB) and the Agricultural Bank of China (AgBank). Having the same banks make both concessional and commercial loans (rather than development banks making concessional loans, and commercial banks making commercial loans, as in the West), again makes it difficult to determine the exact debt figures. Furthermore, knowing whether a loan is commercial or concessional is vital as it will determine the payment and refinancing options available to the debtor.

How China Does Debt…

The Chinese do not follow international norms for debt defaults and renegotiations, however they do provide debtors options, especially on concessional loans. They have up until this point only canceled interest free loans, for a total of about 3.4 billion USD (out of 148 billion USD total) in 94 separate cases, between 2000 and 2019. Unlike Western countries and international organizations, the Chinese do not cancel entire portfolios of loans, but instead renegotiate each loan on a case by case basis. It is common for Chinese creditors to enter into public private partnerships (PPP) or extend the timeframe of repayment, but uncommon for them to cut interest, principle, or engage in refinancing. Chinese creditors have not taken part in asset seizures or enforced payments through courts up to this point, despite clauses included in loan agreements mandating arbitration. 

Yet, there exists a popular misconception that Chinese creditors have repossessed assets. This notion was highly popularized through the media coverage of Sri Lankan port, Hambanthota Harbor’s, transition to Chinese ownership. In reality, Sri Lanka’s predicament was instead exemplative of how debt distress represents a systemic problem within the financial system, rather than solely a Chinese problem.

The port’s sale was not a repossession but a competitive process in which a Chinese company bought a 70% share of the port at market value. Moreover, the Sri Lankan’s inability to repay their loan was not related to irresponsible lending by the Chinese. Chinese loans represented only 10% of Sri Lanka’s total loans and 60% of the Chinese loans were concessional loans. Sri Lanka’s debt crisis actually originated when the country entered “middle income” status and started borrowing high interest commercial loans. By 2017, Sri Lanka had 39% of GDP tied up in high interest debt, including Eurobonds (see Eurobonds section). A similar situation has taken place in Laos, where a Chinese company will now own the majority of what should’ve been the state electric grid. PPPs, such as these, are not particularly beneficial to debtor countries and do not represent poor inclusive growth. Many countries decide to restructure loans instead. 

In Africa, the Chinese have historically been charitable in their rescheduling and renegotiation of loans. By the end of 1998, China had rescheduled 2.65 Billion USD worth of loans, sometimes up to 10 times, with only 14% being paid back. China has even restructured debts in healthy economies, restructuring Ethiopian debt when the economy was growing at 8% and Djiboutian debt when the economy was growing at 7.5%. Additionally, China has implemented integral changes to encourage sustainable debt repayment. In some cases, Chinese creditors have mandated that 25% of export revenue from China goes to refinancing Chinese loan payments. As well, the Chinese use a loan insurance agent, Sinosure, that requires existing loans are paid before new ones will be insured.

Both PPPs and debt restructuring are preferable to defaults, which downgrade debtors credit and make it more difficult to attain loans in the future. For this reason, only 22 of the 77 eligible countries have accepted G-20 assistance for debt relief (as of 2020). Many countries prefer to unilaterally negotiate, so they do not lose the market access that they have worked so hard to gain. 

Eurobonds: The Real Problem

While Chinese loans are a significant contributor to African debt distress, the greatest contributor may be Eurobonds. Eurobonds are issuance of sovereign debt denominated in a foreign currency. In 2017, 31% of Africa’s debt was denominated in bonds, 17% in China, and only 5% in Paris Club countries (The Paris Club is an association of Western creditor countries). Years of low interest rates in Europe and North America have meant that many African countries can continue to take out greater amounts of debt on the bond market. Ghana, for example, has extracted 1 billion USD in bonds denominated in euros, despite having one of Africa’s worst performing currencies. Twelve countries in Sub-Saharan Africa alone, have taken out 12 billion USD in sovereign bonds. These bonds, unlike government to government loans, cannot be re-negotiated, making them a huge financial liability. In order to mitigate this problem and handle debt in a more sustainable fashion, countries should instead issue debt in their national currencies, which are inherently backed by state assets, and issue them with the greatest possible maturity. 

Why Do We Care About Debt?

Yet all this begs the question, why are developing nations allowed to take on unsustainable levels of debt? Well, lenders are incentivized to issue non-viable loans in order to attempt to collect interest, repossess collateral, or exert future political or economic influence. For example, between 1980 and 2017 banks collected 4.2 trillion in interest alone from developing countries. To put this in perspective, this is a greater sum than all the aid given to developing countries in that same period. As well, creditors almost always have more intimate knowledge of the market and the associated risks than debtors. The asymmetrical information and power relationship between creditors and debtors is reminiscent of the gambling colloquialism: the house always wins. With this in mind, it’s curious that the narrative surrounding debt distress is that of shame and irresponsibility on the borrower, rather than on the creditor. Blame should be leveled against creditors, Western, Chinese, or otherwise, that make non-viable loans. 

And still there is another underlying premise here to reconsider: What’s so wrong with high levels of debt anyways? High levels of indebtedness, along with lower levels of growth, are becoming the global norm, especially in developed countries. The debt to GDP ratio in France is 98%, in the U.S. it is 104%, and in Japan it reaches an astronomical 237%. These debt figures are greater than most African countries that are considered highly indebted. For example, Djibouti, which is considered at risk for high debt distress by the IMF, has debt at just 77% of GDP.  

Developed and developing countries are treated differently with regards to debt for a number of reasons. In developed countries there is a greater sense of consumer confidence in the government’s abilities to pay back their debts. Developed countries often issue debt in their own currency, and most of the debt is held domestically rather than abroad. Regardless, allowing some countries to hold significant debts freely, while assigning stigma to others, reinforces existing inequalities within the global financial system. A double standard such as this may ultimately impede development and cooperation much more than arbitrarily selected benchmarks for “high debt distress.”

May 5, 2021 0 comment
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EconomicsGlobalizationInternational Trade

Globalization: its discontents and untapped potential

written by Kosi Ogbuli

The world continues to change in ways that make turning inwards and shutting the door virtually impossible, as is often said, we are more connected than ever. After World War Two, a consensus was formed that a convergence on liberal democracy would lead to a stable international political order. As the Soviet Union withered and the Cold War ended, U.S. President George H. W. Bush called for a “new world order,” a “Pax Universalis” founded on liberal values, democratic governance, and free markets. Pax Universalis or more accurately, Pax Americana brought staggering development, wealth and prosperity…relatively. In a panel titled Governing Globalisation, the economist Dambisa Moyo, otherwise a well-known supporter of free trade, forthrightly asked the audience to accept that “there have been significant losses” from globalisation. The integration of several billion workers into the global economy has pushed down labor’s share of income and pushed up the share flowing to company profits. The latter has provided an important prop to global equity markets, but the former has sparked the emergence of far-right political movements. Brexit, and the emerging Trumpism reiteration of isolationist policies are rallying the resurgence of economic nationalism. Now we stand at a crossroads, shaped by a tug of war between economic fundamentals and policy threats, with individual livelihoods and growing inequity the continuous fallout. Globalization, which champions open markets and democratic governance has instead suppressed the global south and replaced democratic governance with corporatism. Corporatism in turn has normalized the outsourcing of jobs from countries such as the United States, destabilizing those entering and fighting to maintain a modest way of life.

How did globalization come to this? 

It all begins with the concept of economic nationalism. Economic nationalism should be understood as a set of practices to create, bolster and protect national economies in the context of world markets. The rise and institutionalisation (globalization) of economic nationalism in the 20th century was a product of economic crisis, nationalist movements and enlarged states. Globalization in essence was to ensure that the integration, complexity and extent of the world’s economy meant that a reversal of global trade policies would entail an economic Armageddon. Globalization sought to rid the global socio-economic model of protectionism by introducing open market flow, foreign investment, and integrated development policies through organizations and multilateral agreements. The United States, the global hegemon at the helm, espoused the idea that all countries should unequivocally move towards democracy as it would be the only way to benefit from this “new world order” of globalization. Nations of the “developed world”, irrespective of their governance ideology all took part in this system. As China, the EU, Russia and other regional powers integrated these policies, embolden corporations outsourced their producing capacity to “lesser developed” parts of the world. This hybrid of corporatism and capitalism was packaged in a politique commonly referred to as neo-liberalism. Globalization, relatively, increased trade and the standard of living, and resulted in national capital markets becoming increasingly integrated. The establishment of factories, plants, and offices by corporations in emerging countries brought significant numbers of people out of poverty.In large part globalization during Pax Americana, seemed to be unblemished and positioned to define socio-economics for years to come, until 2008. 

The global financial crisis was a turning point, as it struck at Pax-Americana’s twin foundations of liberal democracy and free-market capitalism. The 2008 global financial crisis exposed the danger of financialization or the creation of massive fictitious financial wealth, and of the hegemony of neoliberalism, based on self-regulated and efficient markets.  Slow economic recovery, failing states, wealth inequality and rising unemployment provided a perfect platform for political leaders to appeal for nationalism as the solution to political and economic ills.  With the onset of Covid-19, the fragility and flaws of global supply chains further placed focus upon the extractive trade policies of developed markets, leaving emerging markets in perpetual servitude. Frankly, globalization has made the rich richer while making the poor poorer. As of 2019, OXFAM reported that the world’s 2,153 billionaires have more wealth than the 4.6 billion people who make up 60 percent of the world’s population. The multinational corporations borne from globalization have a growing list of offenses from social injustice, unfair working conditions (including slave labour wages, living and working conditions). Yet globalization posits that we should lay our trust in corporatism as the solution to emerging global issues. Ironically, the current administration is amongst the main proponents of economic nationalism to salvage the crumbling globalist institutions it helped build. 

So, what’s next?

Given its enormous potential for economic gains, it would be a waste to categorically repudiate the phenomena of globalization. However, it must be acknowledged that globalization under Pax Americana has been a projection of the corporatism that has perpetuated the socio-economic inequities present in the West. We are already too connected with the rest of the world to just shutter our doors. Looking back at how we got here can provide us lessons to globalize in a way where the world benefits, not just a handful of big companies. 

Jakarta is an illuminative case for understanding urban resilience towards the tide of globalization. The Kampungs (urban villages) are slums within the megacity with disproportionate rates of poverty and hardships in comparison to the rest of the capital. The Indonesian capital began to undergo reconfiguration for the socio-ecological project of ‘urban resilience’ to flooding through large urban infrastructures, land reclamation projects, and notably, forcible eviction of kampungs. Thus, kampung residents endured associated transformations such as eviction, land reclamation, and uneven access to basic and flood mitigation infrastructure. With development being a central tenet of globalization, a program established by the Jakarta governor, Anes Baswedan married urban development with effective community investment. The Community Action Plan (CAP) was a program of the governor to organize the Kampungs in Jakarta and ensure community involvement in the development of these areas as part of the greater cosmopolitan development efforts. As Jarkata endeavors to develop its cosmopolitan center as it becomes greater integrated in regional and global trade, the dynamics of the slum transition correlated with the uncontrolled growth of urbanization. However, Through the program, the principles of accessibility, freedom, and participation are prioritized in managing the villages while empowering the community to stay in proximity to the benefits of urban development and the influx of global connectedness.The veil of globalization has been lifted and we have seen its ugly truth, but at least we are connected enough now to build a better world. The CAP program in Jakarta offers optimism as how to flip the paradigm that defines the flow of capital from the bottom to the top. Globalization has opened up our world in ways that ensure we can all benefit and thrive. Community based development of infrastructure and economic activity will provide millions of people with the capital to benefit in global markets. Governance that invests in people more important than investment in corporations will enjoy dividends sparsely enjoyed by a great majority of the world. We should see globalization as the exposure to a world of opportunity, not for the few already successful but for the many that have the means to push globalization to its full potential.

September 9, 2020 0 comment
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