Will Economics and Nationalism Collide?

Philip Stephens of the Financial Times believes globalization has brought us to a perilous moment:

A perilous collision of ideas, by Philip Stephens, Financial Times:  Every now and then we are reminded that the onward march of globalisation is not preordained. Today’s world is more interdependent than it has ever been. ... Yet globalisation is rekindling nationalism. The two may yet collide. Thus far the process of change has belonged to the west. It has been shaped by the economic strength and liberal market philosophy of the US ... The benefits have seemed self-evident.

No longer. Economic power is shifting fast to the emerging nations of the south. China and India are replacing the US as the engines of world economic growth. The next phase of globalisation, ... will most likely have an Asian face. Americans and Europeans will not find it comfortable. We can already see the beginnings of the backlash as the rising powers begin to spend their new-found wealth. Mittal Steel, the global company headed by the Indian entrepreneur Lakshmi Mittal, has launched a multi-billion pound bid for Arcelor, Europe’s largest steelmaker. The hostility to the proposed takeover in France, Luxembourg and Spain has been edged with ugly xenophobia. Bad enough that an outsider wants control of one of Europe’s biggest industries. But an Indian?

We see something of the same in the hostile reaction among politicians in Washington ... to the takeover of P&O by Dubai Ports World. ... No-one blinked at the idea of a British company running American ports. But Arabs? The US decision a little while ago to bar a Chinese takeover of the oil company Unocal was dressed up in the same spurious language of national strategic interest. ...

There is more of this to come. As the countries of what we used to call the south get richer they will seek greater access to the technology, intellectual property and business assets of the north. Chinese and Indian companies will want to buy big brands. If they are prepared to pay the market price, why not? ...

I have often heard it said that economic interdependence is a sure safeguard against great-power conflict. How could the US and China go to war over Taiwan when their prosperity is so intertwined? The next phase of globalisation, though, will confront established powers with the reality of relative decline. We have reached a dangerous moment.