Globalisation and the Financial Crisis

Globalisation is a very difficult subject to avoid at the moment. It is not only Occupy Wall Street protesters, left-wingers and anarchists that are making it a key topic of debate, nearly all politicians and political leaders argue about it as well. The Institute for Public Policy Research, led by Lord Mandelson, recently published a report on the subject arguing that we are entering a third wave of globalisation. The report argues that the first wave was defined by colonialisation, the second wave by deregulation and liberalisation of global markets, and the third wave will lead us into great interdependence.

However, not everyone agrees that globalisation is real. Anthony Giddens argues that there are sceptics, typically on the political old-left, who claim that globalisation is a myth used by ‘free-marketeers’ to dismantle welfare states and increase the power of the capitalism. Giddens argues that this is not true and that we are moving into a world of increasing interdependence, but not just economically, but socially, culturally and technologically as well.

I think Giddens is right here, that globalisation is a reality, and that interdependence will increase, however globalisation is very unequal and that in the future instead of being Western led, the East will play a key role in globalisation.

The financial crisis offers an interesting perspective on globalisation. General consensus is that the crisis was triggered by defaults on sub-prime mortgages originating from the US government back mortgage lenders Freddie Mac and Fannie Mae. This caused huge repercussions around the globe, which are still being felt today as Greece seems in danger of defaulting and most other developed economies struggling to achieve growth. However the emerging economies, and particularly China, although affected, still continue to grow strongly.

This would appear to offer evidence that the economic system is not globalised as if it was surely GDP in China would have fallen along with other countries? China was affected and did have to alter some policies, including lowering interest rates. Furthermore people in emerging economies have had to deal with rising food and oil prices, as well as other commodities. However the impact of the crisis on non-Western societies has generally not been as great as the effect on Western societies, particularly in terms of dealing with sovereign debt crises. In some instances, such as Qatar, countries have actually benefited in a way from the credit crunch.

Therefore it appears that although globalisation is very real, and there is independence amongst nations, the idea that the financial crisis was a globalised phenomenon that has bought the whole global economy to its knees is another example of Western-centric thought. In the future the situation may be very different, as Western economies stagnate and emerging economies become the economic powerhouses globalisation may come to mean something very different to people in the West.