Backlash against globalisation breeds protectionist popularism

The world is changing, with old certainties being challenged and new challenges for business to grapple with – and that’s even before the post-Brexit landscape becomes clear, writes Nick Allan

The obvious challenge in writing about business and politics post-Brexit is that the specific terms on which the UK will leave the European Union are still very unclear. What is clear, however, is that the world is changing significantly for multinational businesses. The sometimes grudging consensus that the free market, capitalist, globalised model is the way to greater prosperity and political freedom is now no longer accepted in many countries where such views were the norm but a few years ago.

The most overt manifestation of political change is the resurgence of a breed of populist and nationalist politicians promising to roll back global trade agreements and stop immigration or, in the case of the UK, exit the single European market. In the US, both main presidential candidates rail against the iniquities of NAFTA and other such trade agreements as they seek to reassure voters of their commitment to protectionist policies. 

Globalisation has only worked for the elite

Almost a decade after the 2008 global financial crisis, many voters in both developed and emerging markets perceive that globalisation has worked exceptionally well for a high-flying,  global elite and for many middle-income countries in Asia, but not for them. And in countries where voting is either a charade or non-existent, the inequalities of unfettered capitalism are ‘proof’ of the benefits of benevolent one-party rule and the managed economy, no matter what future challenges may lurk in the Chinese banking system.  

The backlash against ‘globalisation’ plays well politically to many different audiences. For the poor in less developed economies, it is part of an economic colonialism that exploits them. For blue-collar workers in the West, it has hollowed out the middle class and job security. As technology and automation continue to drive productivity and the erosion of old certainties, younger workers find themselves trapped in the ‘gig economy’, with few rights and very limited job security. 

The lure of new halcyon days plays well to many electorates, with a deluge of information and misinformation adding further fuel to the fire. In many countries, a heady mix of economic, political and personal insecurity has taken hold. History shows that nationalism and populism thrive in environments characterised by uncertainty. This is the world we are in now. 

A more connected world

Like it or not, the world is more integrated and connected than ever before. Global businesses are genuinely just that, while growing megacities exert influence and economic power often far beyond their shores. Recent referendums and other votes clearly show that enthusiasm for globalisation and open markets stills burns bright in diverse, multicultural cities and in parts of East Asia. Global trade, and economic links and dependencies between nation states are nothing new. What is more recent is their extent and the growth of corporations that can be genuinely described as global. 

For some, this is a reason to be optimistic that the gains of the past few decades of economic growth will not be sacrificed on the altar of short-term politics. Economic self-interest should act as a brake on the more fanciful isolationist policies, or so the argument goes.

But recent events give little reason for optimism. The unforeseen by-product of the information age is the arrival of the ‘post-truth’ era. Bedroom conspiracy theorists are able to undermine global news organisations, and the wisdom of crowds is taken as reliable evidence. The erosion of print media and the ubiquity of news sources mean that people can choose to experience their understanding of politics entirely through the prism of like-minded people. Indeed, the majority of people under the age of 30 in the US get their news from social media. This self-affirmation is key in eroding critical debate, while also preventing the reaching of consensus. 

Rise of nationalism and populism

By its very nature, political nationalism rarely concerns itself with the positive aspects of globalisation. The benefits of nation-building, co-ordinated and intelligent responses to threat, and international rapprochement are all pushed aside by the tribal nature of populism, which gives easy answers to complex problems and exploits the rhetoric of blame. It is a demon that can be hard to contain once unleashed. James Carville’s famous Clintonian maxim “it’s the economy, stupid” seems to have lost some of its resonance of late in the face of more emotive and simpler arguments that are often based in the politics of identity. 

Global businesses need to adapt and wake up to the return of both national boundaries and nation state-level accountability across all the countries in which they operate. They should concern themselves as much with the risks they face in developed markets, where political and regulatory risks seemed clear and manageable, as they do those in the far-flung frontiers of their global portfolios. 

Politicians now have very clear incentives to denounce the recent past and offer a new and more reassuring vision of the future, which often looks like an airbrushed version of the past. In this new world, global businesses will need to do more to emphasise their local contribution, and their enthusiasm for paying local taxes and employing national citizens. Globalisation is not dead, but it does need an adrenalin shot and a new suit. 


Nick Allan is the chief executive, Europe & Africa at Control Risks and will be speaking at the European CEO Conference.