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Has globalization outdated?

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Globalization still has all of its ingredients but over the period of time, the globe has been shifted to take advantage of this transnational, multilateral and borderless system, thereby the countries used to be at advantageous side sliding into less advantageous position which makes them aggrieved of that system.

Globalization is erroneously labeled as the product of western endeavors. Conversely, All the nations contributed to achieve this in their domains. Alexander’s expedition to Persia and then to the subcontinent from Macedonia had spearheaded globalization. The invention of the wheel literally augmented the pace with which this system started to transcend the borders, but it was also accompanied by the invention of Zero to expedite it. As zero was invented in the subcontinent and then traveled to the Arab world with the conquest of Sindh by Arabs, and by employing this novel zero, Al Khwarizmi developed algebra. All these events contributed to globalization. It’s not over yet. The great invention of printing in dynastic China eons before the emergence of the Gutenberg press in France. This press had extricated the European from dark ages to the age of enlightenment, which was the start of globalization. The invention of gunpowder and tools in dynastic China had also contributed in its domain. All these inventions that triggered the system were invented by different nations which alluded something else.

Now, it’s become evident that globalization was never been given by a single nation as often deemed as the western gift, contrarily, globalization is the Global heritage, as the Global world contributed to it from sinic civilization to Muslim civilization and from Muslim civilization to ancient Greek civilization. Global east also contributed as much as the global west did. Therefore, globalization was the international heritage, which should have a certain date of birth.

Now it’s expedient to define a single moment which could be deemed as the birth of globalization to avoid the confusion. Paul Kennedy, asserted in his book entitled ” The rise and fall of the great powers”, that 1501 was the watershed moment of human history and the start of globalization. After diving deep into the evidence of the contribution to globalization from all over the global world, then one can better deal with the question why globalization is often deemed as the Western heritage. It’s now imperative to deal with this.

All the progress in human history after 1501 was achieved by the global west solely. Since all the aspects of globalization that was witnessed by the world were bestowed upon the world by the West, which over the period of time, monopolized the forces of globalization thereby it’s become the Western heritage despite the fact established hitherto. Up till now, the west had achieved the monopoly, it was the high time to reap the harvest.

So, from 1453, when it was the beginning of the age of enlightenment and from 1492, the age of exploration, Portuguese navigator, Vasco da gama, discovered the routes from Western Europe to the East by the way of cape of good hope, and in 1498, an Italian explorer, Christopher Columbus’ voyages were followed the same suit. Ruefully, these discoveries were not lucrative for the natives of the newly explored place as the explorers deemed themselves as the superior in terms of techniques and prowess to navigate, they started to colonize the different parts of world to extract the great fortunes the aboriginals would have had. It can also be marked as the beginning of colonialism.

Over the period of time, the explorers colonized central, latin and north America. On September 31,1599 charter was granted by the queen of Great Britain to the EIC, the Red dragon harboured on the subcontinent in 1608. These 800 men eventually created an empire till 1757 after the Battle of Plassey. In this time frame, the west was witnessing the emergence of enlightenment, science, reason alone with the beginning of the industrial revolution. Nonetheless, it’s quite safe to assert that the industrial revolution was emerging while callously extracting and exploiting the natural, human and other resources from their colonies. As renowned Shashi tharoor claimed in his book inglorious empire that India’s share of global GDP plummeted from 23 per cent when they entered India to only 4 per cent by the time they left.

At that time, it was both advantageous and inevitable for the globalizers or better called the colonizers to unbridledly extract that resources to keep the industry manufacturing; the wheel, running. To legitimize this callous exploitation, Adim smith’s theory of laissez faire, free trade market economy and free flow of goods was sufficient. Meanwhile, after the American declaration of independence in 1776, all were in favor of the west till 2008 and with the boom of globalization coupled with the industrial revolution in 1908.

After 2008, the Globe has started to shift therefore the West that was once at the advantageous side seems slipping to the less advantageous side. Globalization is the same as the principal forces remain unaltered but what has been changed is who will be more advantageous than the others.

In the last fifty years, Global East, more precisely after the end of colonialism from 1945, emerged to take the benefits from globalization, evidently, the rise of Japan from ashes, Hong Kong, Singapore, Malaysia, China and India. The indicators like GDP, industries, production and infrastructural development corroborate the assertion. This world order is surely not acceptable to the west who reckon globalization as their heritage therefore it should always be favourable to them. Surely it is a flawed aspiration.

Due to this discontentment, the West has recently been mired in the quagmire of populism, hyper nationalism, inter alia, Brexit. In the form of these appearances, the west has been shrugging the shoulders from the responsibility of the damage they have done to the environment, to the nations and to the Global world by exploitation and extraction.

Now logically it comes to mind why globalization has turned on to the west. Drivers behind making the west wary of it are like the improvement in the living standards of people, dwindling number of the working class which have always been the inevitable for prosperity and development. Demands for increasing the wages, leaves, and for better working conditions, and stringent environmental restrictions, all these made the west less advantageous of globalization. The forces of it are ineluctable and irrevocable.

As of today, humanity has been exposed to the existential threats and Global problems which need Global solution. As the recent apocalyptic pandemic, COVID 19, more recently the resurgence of AIDS, malaria, and monkeypox, and the worsening climate change, all these threats know no boundaries, therefore it’s the need of hour to draft the system for concerted effort which ought not knows borders as well.

Succinctly, globalization is the global heritage which alludes that no single nation, civilization or region is entitled to reap the harvest of it at the expense of others exploitation. The recent shifts in the global world order, the Global East has become more advantageous than the global west which makes the letter wary of the promises of globalization. Therefore we have recently witnessed the rise of inward marching, Brexit, trumpism, hyper nationalism and others. But it’s established that the principal forces of globalization are inevitable and invincible. The Global problems the world is exposed to are direly need the global solutions instead of scattered, individual, national or regional ones.

I'm Muhammad Ansar Abbas, graduated from UET lahore as a transportation engineer. Currently pursuing MPHIL from university of the Punjab lahore.

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Economy

Baltic reality: High inflation and declining of living standards

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The Baltic States’ economy is in bad condition. The latest estimate from the EU’s statistics body shows that Eurozone inflation is continuing to soar to record highs.

The Baltic countries continue to be the hardest hit. These states in particular are experiencing the highest levels of inflation in the Eurozone. Thus, inflation in Latvia and Lithuania hit 22.4 per cent and 22.5 per cent respectively. Estonia also has seen inflation rise year on year from 6.4 per cent in September 2021 to 24.2 per cent in September 2022. The more so, the Baltic States continue to see soaring energy and food prices which lead to declining standard of living.

The Bank of Lithuania has published its latest economic forecast and revised gross domestic product (GDP) growth projections for 2023 from 3.4% to 0.9%.

Statistics Lithuania also reports that in September 2022, the consumer confidence indicator stood at minus 16 and, compared to August, decreased by 5 percentage points. The decrease in the consumer confidence indicator in September was determined by negative changes in all of its components.

According to SEB bank economist Tadas Povilauskas, the number of poor people in Lithuania will increase. Living standards will be affected by rising food and energy prices. The current price of natural gas is too high and the economy cannot “go” with it. It is evidently that energy prices shocks have far-reaching effects on Lithuanian economy and population.

The main cause of such state of affairs is deteriorated relations with Russia. Russia has lately been the EU’s top supplier of oil, natural gas, and coal, accounting for around a quarter of its energy.

The conflict in Ukraine and political confrontation between Russia and the West has exacerbated the energy crisis by fuelling global worries it may lead to an interruption of oil or natural gas supplies from Russia. Moscow said in September it would not fully resume its gas supplies to Europe until the West lifts its sanctions.

It is obviously that the conflict in Ukraine dramatically worsened the situation on the markets, as Russia and Ukraine account for nearly a third of global wheat and barley, and two-thirds of the world’s exports of sunflower oil used for cooking. Ukraine is also the world’s fourth-biggest exporter of corn.

According to Euronews, the prices of many commodities – crucially including food – strained global supply chains, leaving crops to rot, caused panic in many European countries, including the Baltic States.

High inflation has become the direct consequence of sanctions imposed on Russia. As for the Baltic States, the lack of wisdom to find compromises and blindly following the European Union’s decisions have lead to declining standards of living. The desire to punish such huge state as Russia played a cruel joke on the Baltic States. It will be difficult to explain the population why they should turn down the heating in homes, schools and hospitals over the winter.

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Policy mistakes could trigger worse recession than 2007 crisis

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The world is headed towards a global recession and prolonged stagnation unless fiscal and monetary policies holding sway in some advanced economies are quickly changed, according to a new report released on Monday by the UN Conference on Trade and Development (UNCTAD).“There is still time to step back from the edge of recession,” said UNCTAD chief Rebeca Grynspan.

‘Political will’

“This is a matter of policy choices and political will,” she added, noting that the current course of action is hurting the most vulnerable.

UNCTAD is warning that the policy-induced global recession could be worse than the global financial crisis of 2007 to 2009.

Excessive monetary tightening and inadequate financial support could expose developing world economies further to cascading crises, the agency said.

The Development prospects in a fractured world report points out that supply-side shocks, waning consumer and investor confidence, and the war in Ukraine have provoked a global slowdown and triggered inflationary pressures.

And while all regions will be affected, alarm bells are ringing most for developing countries, many of which are edging closer to debt default.

As climate stress intensifies, so do losses and damage inside vulnerable economies that lack the fiscal space to deal with disasters.

Grim outlook

The report projects that world economic growth will slow to 2.5 per cent in 2022 and drop to 2.2 per cent in 2023 – a global slowdown that would leave GDP below its pre-COVID pandemic trend and cost the world more than $17 trillion in lost productivity.

Despite this, leading central banks are sharply raising interest rates, threatening to cut off growth and making life much harder for the heavily indebted.

The global slowdown will further expose developing countries to a cascade of debt, health, and climate crises.

Middle-income countries in Latin America and low-income countries in Africa could suffer some of the sharpest slowdowns this year, according to the report.

Debt crisis

With 60 per cent of low-income countries and 30 per cent of emerging market economies in or near debt distress, UNCTAD warns of a possible global debt crisis.

Countries that were showing signs of debt distress before the pandemic are being hit especially hard by the global slowdown.

And climate shocks are heightening the risk of economic instability in indebted developing countries, seemingly under-appreciated by the G20 major economies and other international financial bodies.

“Developing countries have already spent an estimated $379 billion of reserves to defend their currencies this year,” almost double the amount of the International Monetary Fund’s (IMF) recently allocated Special Drawing Rights to supplement their official reserves. 

The UN body is requesting that international financial institutions urgently provide increased liquidity and extend debt relief for developing countries. It’s calling on the IMF to allow fairer use of Special Drawing Rights; and for countries to prioritize a multilateral legal framework on debt restructuring.

Hiking interest rates

Meanwhile, interest rate hikes in advanced economies are hitting the most vulnerable hardest

Some 90 developing countries have seen their currencies weaken against the dollar this year – over a third of them by more than 10 per cent.

And as the prices of necessities like food and energy have soared in the wake of the Ukraine war, a stronger dollar worsens the situation by raising import prices in developing countries.

Moving forward, UNCTAD is calling for advanced economies to avoid austerity measures and international organizations to reform the multilateral architecture to give developing countries a fairer say.

Calm markets, dampen speculation

For much of the last two years, rising commodity prices – particularly food and energy – have posed significant challenges for households everywhere.

And while upward pressure on fertilizer prices threatens lasting damage to many small farmers around the world, commodity markets have been in a turbulent state for a decade.

Although the UN-brokered Black Sea Grain Initiative has significantly helped to lower global food prices, insufficient attention has been paid to the role of speculators and betting frenzies in futures contracts, commodity swaps and exchange traded funds (ETFs) the report said.

Also, large multinational corporations with considerable market power appear to have taken undue advantage of the current context to boost profits on the backs of some of the world’s poorest.

UNCTAD has asked governments to increase public spending and use price controls on energy, food and other vital areas; investors to channel more money into renewables; and called on the international community to extend more support to the UN-brokered Grain Initiative.

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Economy

‘Sanctions Storm’: Recovery After the Disaster

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After the start of the special operation in Ukraine, a “sanctions storm” hit Russia; more sanctions were imposed against Russia in a few months than against Iran in decades. But a catastrophe did not take place, and the stage of stabilization came.

Indeed, almost all the weapons in the sanctions arsenal were used one after another: commodities exchange was suspended in some sectors, export and import controls were put in place, restrictions on air and sea transportation were introduced. The sanctions have spread to the investment and financial sectors, paralyzing many transactions with the West and complicating them with the East. An image impact came from the mass withdrawal of foreign business from the Russian market—not directly caused by the sanctions, but demonstrating “over-compliance,” excessive submission to them.

In the public mind, the destabilizing wave created the impression of the end of the story of the market economy in Russia, an impending catastrophe. But the catastrophe did not happen. The stage of stabilization has come, and it is important to use it correctly.

What to do?

In the near future, the Russian authorities and business will have to solve three groups of interrelated tasks. First, they must provide the domestic market with necessary goods, and restore value chains by the use of alternative partners. Second, they need to establish reliable financial mechanisms for working with these partners. Third, it is necessary to look for new growth points for the future, industries in which dependence on the West was critical. It is important to work out the possibilities: for new partners entering the markets and for attracting investors from friendly countries, as well as trying to integrate into new value chains.

Partners, first of all, include China and India. The southern direction is also not unpromising—to begin with, this includes Iran and Turkey, as well as a search for investors in the Arab world and the development of logistics routes through the Middle East. Nevertheless, in all areas, the key obstacle is the threat of secondary sanctions by the United States and the EU—which means that the second task becomes the main one: building a safe infrastructure for financial cooperation.

China remains Russia’s first trading partner—but despite the strategic partnership on the political level, large Chinese companies and banks that are active in the international market are suspending cooperation with Russia, fearing secondary US sanctions. In these conditions, it is important to work on explaining the nuances of the sanctions policy for Chinese business, creating secure payment channels that do not depend on foreign banks or on the dollar and the euro, and developing profitable package offers. Beijing seeks to use the opportunities opening up in the Russian market to occupy the vacant niches and strengthen the yuan in international payments, which means that its interest in finding a common solution is high.

A similar situation is developing in the Indian market, with the difference that Indian business is more connected than Chinese business with America, and its awareness of doing business in Russia is lower. As a consequence, Indian companies and banks integrated into the global economy will comply even more closely with sanctions restrictions, despite their interest in developing ties with Russia. Accordingly, even more active informational work is needed to establish Russian-Indian business ties, as well as the creation of a secure settlement mechanism. India already has similar experience, from doing business with Iran. In particular, UCOBank was formed to trade with it in rupees. Similar structures can be created in the Russian direction.

If the necessary channels are laid, both China and India can not only replace some Western goods in Russian markets, and ensure purchases from the Russian energy, agricultural, and military-industrial sectors—preserving their prospects for business—but also become zones of qualitative economic growth. Chinese partners can become a support in the development of bilateral cooperation in the fields of electronics and digital technologies (including 5G), and Indian, in pharmacology and high-tech agriculture. It also makes sense for business to look at these countries from the point of view of the development of green technologies in energy and agriculture, and the introduction of ESG practices, since these countries are also interested in this.

From our partner RIAC

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