Mediating Conflict in a Deglobalized World
By Ambassador David L. Carden
There is disagreement among economists and geopolitical strategists as to the future of economic globalization, which has resulted in unprecedented peace and economic growth since World War II. Those who predict that it has slowed, or is coming to an end, include Blackrock CEO Larry Fink; Oaktree Capital Management co-founder Howard Marks; Elizabeth Braw, an author and resident fellow at the American Enterprise Institute; and Peter Zeihan, an author and intelligence analyst at Stratfor. Others assert globalization “isn’t going anywhere.” For present purposes, it doesn’t matter who is right. What matters is that the world is unprepared to manage any significant erosion of globalization's benefits. Steps should be taken now to position countries to mediate the increased conflict that likely would result.
Economic globalization was the consequence of trade liberalization following the Bretton Woods Agreement in 1944. The agreement was a direct response to fascism, which is based on the premise that conflict between and among nations to obtain natural resources is inevitable, and to communism, which is premised upon the inevitability of conflict between and among classes. The liberalization of global trade facilitated by Bretton Woods was based upon a different premise—that conflict is not inevitable if nations get what they need from one another.
The dramatic rise in trade and wealth since Bretton Woods, and the relative absence of conflict between and among states following World War II, has proven the wisdom of its premise. But even as the number of deaths due to warfare between states has been in decline since the agreement, intrastate conflict has been on the rise, largely due to non-state actors such as criminal organizations, militias, and terrorist groups. Roughly 80 to 90 percent of all conflicts since World War II have been within, rather than between, states. The reasons for this are many, including the breakdown of the rule of law and corruption. It also has been observed that domestic political realities sometimes trump economic well-being.
As a result of Bretton Woods, most countries are now heavily dependent upon trade, and face an increased risk of intrastate conflict during periods of low trade openness. The extent of their dependence, and their vulnerability to deglobalization and conflict, is reflected in the so-called “trade to GDP ratio,” which quantifies the importance of and openness to trade in a nation’s economy. The ratio is derived by dividing the aggregate value of a country’s imports and exports in a given time period by its gross domestic product for the same period. It usually is expressed as a percentage, effectively reflecting how much a country’s economy has globalized. The higher the percentage, the more global the economy. In 2022, the average trade-to-GDP ratio for the world was 63 percent, an increase from 20 percent in 1970.
The trade-to-GDP ratio necessarily reflects the degree to which a country is economically vulnerable to tariffs and other trade barriers. It also suggests how vulnerable countries are to politicians who seek to benefit politically by falsely blaming economic downturns on outsiders, migrants, or minorities. Populist politicians have long used such claims to make the case for mass deportations, persecution, discrimination, and even war. One example is the Nazi Party’s response to the economic depression in Germany following the stock market crash in 1929, which it used to prioritize national self-sufficiency (autarky). This led inevitably to its expansionism.
Predictably, some of the most developed nations have the highest trade-to-GDP ratios. But even some of the least developed countries, as measured by the United Nations index, and those considered “fragile and conflict affected,” have a trade-to-GDP ratio of 50 percent or higher. Ratios this high make economies vulnerable to higher unemployment, lower per capita income, increased poverty, a reduction in tax revenues, and the need to accept higher levels of debt to pay for public services.
The reasons for deglobalization are plentiful, including politicians responding to populist backlash. Those that globalization has “left behind” are increasingly supportive of populist politicians who fan the embers of their anger. Such politicians propose “remedies” including tariffs and repatriation of migrants. Indeed, the rise of populism is itself an indication that globalization is weakening. Trump’s populism is a case in point. He plans to impose tariffs of 10 to 20 percent on all foreign goods, and a 60 percent tariff on goods from China, to mollify his followers. These tariffs would be a “sales tax” on American families, estimated to add additional costs of around USD 1,770 to USD 2,600. They would also reduce imports, causing an economic downturn among economies reliant upon the U.S. market. Other countries have also adopted protectionist trade policies, most notably China and Germany.
President-elect Trump may think that the United States is in a position to weather the economic storm caused by deglobalization because it is the largest economy in the world, and because trade plays a relatively small role in its economy, increasing American GDP only by 2 to 8 percent. The U.S. trade-to-GDP ratio in 2022 was only 27 percent, far below the average of 64 percent for members of the Organization for Economic Cooperation and Development. But even so, the U.S. Chamber of Commerce estimates that 40 million American jobs depend upon trade. According to the International Trade Commission, approximately 10 million of these jobs depend upon products the United States exports. These exports almost certainly would be reduced by tariffs imposed by foreign countries in retaliation for any imposed by the United States.
Thus, the world, including the United States, is vulnerable to deglobalization. History tells us just how vulnerable it might be. The Smoot-Hawley Tariff Act, passed by the U.S. Congress in 1930, increased the price of imports into the U.S. by 20 percent. As a result of the Act, and retaliation by other countries, international trade contracted by 66 percent between 1929 and 1934. This not only deepened the Great Depression, but also contributed to a catastrophic rise of nationalism abroad, including in Nazi Germany. The effects of any tariffs imposed today likely would be worse, given that so many countries depend on exports, and the world’s economies are even more dependent upon natural resources and food imports.
New and creative responses will be needed to manage the impact of deglobalization and to avoid or minimize the conflict it could create. Designing and scaling such responses will be a challenge. Past failures to respond to economic challenges, most notably in Europe in the 1930s, and the resulting rise in populism and conflict, make clear that there is no easy answer.
But there is a place to begin. It will be essential to deepen the conversation around the challenges of deglobalization by including and informing those most impacted. Inclusion, not the exclusion typically practiced by populists, will be needed. The following would be necessary:
identifying what is to blame for the stresses and economic downturn affecting specific countries and communities;
researching and analyzing the long-term economic, social, and political consequences if countries fail to manage deglobalization successfully;
creating physical and virtual venues to host and broadcast robust conversations concerning the challenge;
developing prescriptions on how to minimize the impact of deglobalization and oppose any of the simplistic and politically-motivated approaches proposed by populist leaders.
Representatives of diverse community groups, non-governmental institutions, civil society, and the private sector all would need to be involved.
But who, or what, could do the research and analysis necessary to inform the necessary conversations? Universities are one possibility. They are well positioned to inform and host such conversations, and propose responses that will be trusted by the communities they can and should serve. A good example of this approach in action is The Center for Rural Engagement (CRE) at Indiana University, on whose advisory board I chair. The CRE is assessing and helping to develop responses to various stresses in communities throughout southern Indiana. It does not expressly include analyzing and quantifying the potential impact of deglobalization on the economy of southern Indiana—but it could, and should. It stands as an example of what might be done by existing and newly-established institutions and organizations around the world to research deglobalization and to help develop national and regional responses and solutions.
Multilateral organizations, especially those which have a network of regional universities such as the Association of Southeast Asian Nations (ASEAN)—or the OECD, which has a robust research capability—are another possibility. They already are assisting scores of member and non-member countries.
But there is an additional problem that must be addressed. The perceived conflicts inherent in societies across the globe are themselves impediments to the collective action necessary. This is because some believe conflict cannot be managed without focusing on the “moral diversity” of stakeholders, including the allegedly different interests of nations. Such stakeholders, it is argued, hold disparate “worldviews” based upon their differences, including those related to culture and religion.
I heard a version of this argument regularly when I served as the U.S. Ambassador to ASEAN. “Asian values” were adopted in the Bangkok Declaration of 1993, which took a “culturally relativistic” approach to human rights. The Declaration included the importance of “loyalty and respect for leaders.” As such, the “values” inevitably protect their interests and those of an Asian elite. Some have characterized Asian values as “double-speak” designed to suppress human rights and freedom of speech. It has been observed that some governments have used them to advance their purposes.
The relativistic approach premised upon allegedly different “worldviews” such as “Asian values” needs to be evaluated more objectively by the people whose lives are most affected by the approach to governance they allegedly justify. It is important to ask whether such differences in values actually exist, or whether they are a fiction designed to manipulate people into supporting political and religious leaders whose primary interest is in maintaining power, not in solving their problems. A case could be made that the leaders of Israel, Iran, Hamas, and Hezbollah manufacture alleged “ideological” distinctions between and among people for their own purposes, and at the expense of the people over whom they rule.
The research and analysis needed to manage the causes of domestic conflict, including the possible effects of deglobalization and the prescriptions that will be required to avoid them, must focus instead upon what people have in common and the idea that they want the same things. We need institutions and venues to help them focus on what is causing their suffering, and what can be done about it.
But even if we had such venues, would they work? There is reason to believe they could. In his seminal work, Moral Man and Immoral Society, Reinhold Niebuhr observes that groups, including nations, will inevitably protect what they see as being in their self-interest. But he also wrote, "[as] individuals, men believe that they ought to love and serve each other and establish justice between each other.” Whether this impulse can be scaled remains to be seen. Much depends on whether it can be. Cross-border challenges may give rise to an expanded concept of what individuals, and groups, see as being in their self-interest.
If globalization, and the well-being it has created, is to be saved from the assault of those who want to exclude and divide people for their personal political and economic purposes, we will need to explain the real reasons for our current and future economic challenges, and what can be done about them. Informing and enabling the conversations to do so is the best chance we have of scaling people’s impulse to act justly, and morally, toward others. In a world of diminishing wealth and resources, and increased conflict, it’s a chance we have to take.
David L. Carden served as the first resident U.S. ambassador to the Association of Southeast Asian Nations. He is the author of Mapping ASEAN: Achieving Peace, Prosperity, and Sustainability in Southeast Asia and has written for Foreign Policy, Politico, the SAIS Review of International Affairs, the Guardian, the South China Morning Post, and Strategic Review, among others. He also is a mediator and serves on the Board of the Weinstein International Foundation, which promotes the use of mediation around the world.
Mediation is by Alpha Photo and is licensed under CC BY-NC 2.0.
