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Kim Du Toit
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Saturday, March 18, 2006Et Tu Francé?
Morgan Stanley's Stephen Roach has some interest thoughts on the current state of globalization.
I found this to be especially interesting:
"Economics and politics are on a dangerous collision course. As the forces of globalization strengthen, the drumbeat of protectionism is growing louder. Made in France, the European strain of protectionism reflects a newfound nationalism that strikes at the heart of pan-regional integration. Made in America and exacerbated by fear of the “China factor,” a different strain of protectionism plays to the angst of middle-class US wage earners. Whether the threat is perceived to be from the inside (Europe) or the outside (the United States), the responses of increasingly populist politicians are worrisome, to say the least. French Prime Minister Dominique de Villepin is seeking to protect “strategic” industries from foreign ownership. In the US, it’s not just resistance to foreign takeovers, with bipartisan support building in the Senate to impose steep tariffs on China. All this harkens back to the demise of an earlier globalization that many date by the enactment of the infamous Smoot-Hawley Tariff Act of 1930 — a political blunder that may well have been key in turning a US stock market crash and recession into worldwide depression. Like the circumstances over 75 years ago, the current global trade dynamic has played an increasingly important role in boosting the world economy. Protectionism and the contraction in global trade it would trigger puts all that at risk."
Although Mr. Roach's comparison of the current wave of populist, bipartisan, protectionism to the 1930's is in my opinion, flawed. Yet I can't help but to agree that what we are witnessing is a pattern of populism that will have historic implications in Europe.
I'm not so worried about the American kind because:
a) I've seen worse.
b) Culturally, Americans are much more keen on competition than is Europe - Smoot-Hawley not withstanding.
Messer. de Villepin actions as of late are profound and disturbing to the concept of a European Union, yet it is hardly getting noticed on this side of the pond.