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The future of globalism stands at a crossroads

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There are mounting developments in world affairs that threaten to disrupt the progress of globalism. Britain decided to leave the European Union in a national referendum held June 23. Consequently the world’s major stock markets tumbled and the pound plummeted. British Prime Minister David Cameron stepped down to take responsibility for the Brexit vote. Theresa May, his successor, formed a new Cabinet designed to carry out the exit policy.

In retrospect, the EU has long been considered the model for regional integration and also a major driving force to help establish globalism around the world. So a string of difficult negotiations will likely ensue over Britain’s withdrawal. Some of the other EU members might follow suit. The wheels have begun to spin backward.

Meanwhile, the U.S. presidential race is being held against the background of expanding income gaps and mounting discontent among poorer Americans.

Such dissatisfaction among voters threaten to turn U.S. politics more inward-looking and diminish the American role in international affairs. The United States might become unwilling to ratify the Trans-Pacific Partnership and begin to contribute less to global security. The U.S. middle class is shrinking, and the prevailing public sentiment is getting more confrontational.

China is making expansionary moves in the South China Sea and the East China Sea on the strength of its economic power and military buildup. An international arbitration tribunal ruled against China’s land reclamation in the South China Sea, but Beijing has rejected its decision. While the U.S., Japan and South Korea are increasingly alarmed by China’s moves, Beijing is maintaining a hard-line stance and is attempting to create a fait accompli on the back of its economic strength.

Russia, capitalizing on the declining influence of the Western powers, is also trying to expand its sphere of influence. Having brought the Crimean Peninsula under its control, Moscow is trying to expand its influence over Ukraine and intervening in Syria.

In addition, the risk of nuclear proliferation is growing, as North Korea’s activities show, while terrorist activities, such as those staged by the Islamic State group, are intensifying.

The first and foremost cause of these developments that run counter to globalism is the multi-polarization of the international community. The progression of globalization is leading to a leveling of economic activities and multi-polarization is taking place in the international social structure. In such a situation, it is becoming increasingly difficult to achieve a consensus regarding governance in the international community. At the U.N. Security Council, it is already hard to reach agreements between the U.S. and European powers on one hand and Russia and China on the other, giving rise to higher governance risks.

In the management of economic affairs, it is also getting harder to reach agreement on effective steps as the primary responsibility for building a consensus — previously held by the Group of Eight major powers — has shifted to the Group of 20. In addition, the development of multi-polarization has caused some countries’ international influence to wane, tempting other nations to resort to egoistic behavior. Such tendencies are seen in the behavior of Russia and China. Other examples include the actions taken by Greece and Spain that caused the euro crisis.

The second cause is the waning of domestic political discipline among the world’s major countries. Primarily, politics should be responsible for ensuring people’s security, encouraging economic growth and enhancing public welfare while asking the people to shoulder the burden when necessary. Recently, however, some political parties have tended to put priority on taking power and resorting to populist policies to curry favor with voters.

Third, there is an increase in market risks. In the world economy, demand has generally stayed stagnant and the power of innovation is waning. The U.S. economy is showing some recovery, but uncertainties linger over the course of its monetary policy. The EU economy is on a downtrend due to its financial uncertainties and the impact of the Brexit vote. In Japan, structural reform is not making progress and growth remains sluggish despite the stimulus measures taken under Abenomics. In China, efforts to trim the excess capacity of the primary resources industry is not moving forward and the country’s transition to “new normal” economic growth is under threat.

The populist political tendencies among major powers is impeding the appropriate control of market activities, resulting in the creation of excess liquidity. That is making the world economy more speculative and uncertain, while turning the economic policies of the major powers more inward-looking.

Under these circumstances, globalism stands at a crossroads. Globalism is an international regime that was attained with the fall of the Berlin Wall as a turning point, beyond the waves of nationalism that dominated the world from the 19th to the 20th century and the East-West ideological divide in the second half of the last century.

It was widely hoped that the world would maintain peace through cooperation among the major powers while respecting democracy, the rule of law and human rights, promoting economic growth through market mechanism, free trade and liberalized corporate activities, and enhancing human welfare through protection of the environment, improvement in living conditions, propagation of medical care, elimination of poverty and spread of education. Globalism is the ideal of the world.

The survival of Japan, which relies on other countries for resources, food and markets, and depends on collective security for its defense, cannot be ensured without globalism. It’s now time for Japan to make efforts to fortify the foundation of globalism by explaining to the world its significance and presenting a concrete vision.

Shinji Fukukawa, a former vice minister in the Ministry of International Trade and Industry (now the Ministry of Economy, Trade and Industry) and president of Dentsu Research Institute, is a senior adviser to the Global Industrial and Social Progress Research Institute.