Kissinger’s Ramo: Is Globalization Running Backward?

Wednesday, 21 Nov 2012 08:01 AM

By Michael Kling

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For years, global trade has increased briskly, about twice as fast as economic growth. But for the last two years, world trade has slowed so much it's prompting some experts to wonder if globalization is running backward, writes Joshua Cooper Ramo, vice chairman of Kissinger Associates, for Fortune.

In some areas, trade growth has fallen below gross domestic product growth. Importantly, investments in overseas assets, he says, have dropped from over 50 percent in 2008 to close to 40 percent.

The trend worrisome, according to Ramo. While trade connects nations, protectionism does the opposite, he warns, quoting a French economist who said: "When goods don't cross borders, armies will."

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

Surprisingly, although the United States has benefited immensely from world trade, two-thirds of Americans believe more trade is bad for the country.

A major shift is under way: The rise of the inside. The inside is in, and the outside is out.

"We find everywhere signs of a world turning inward and of an era when the inside will define success and deliver growth — for companies, for nations, even for your career," Ramo writes.

Several factors are prompting a shift to all things local, including steep increases in fuel costs and prices for air and sea freight, the 2011 Japanese earthquake and tsunami that exposed weaknesses in the global supply chain and cheaper energy from shale gas that lowers costs of state-side manufacturers. A general feeling that we've lost privacy is also a factor, Ramo says.

"There's no question that success in the networked future will come from the inside out," Ramo asserts.

The major question is how we will adjust to this new world. History has shown that countries that don't adjust do not survive.

Protectionism — often disguised as patriotism or security defense — puts the U.S. economy at risk, Doug Guthrie, dean at the George Washington University school of business, writes in an article for U.S. News & World Report. In particular, Guthrie protests the U.S. government's allegation that Huawei, a Chinese tech firm, is a tool of China's state-sponsored espionage

U.S. government officials, he says, are "completely out of step with the realities of global capitalism today. The approach of U.S. policymakers to globalization has been parochial and antiquated."

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

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