By Farkhund Iqbal
Capitalism needs to change, it’s been warped by billionaires and selfish democratically elected politicians, well-known economist Shaun Rein said while in a exclusive interview with “The Reporters”
There will be a tug of war between the globalists and anti-globalist forces over-who gains sway – but it is clear that Globalization will never be the same, he maintained.
The Reporters: World War I and the global economic depression in the early 1930s ushered in the demise of a previous era of globalization. Now, the modern globalization cycle has faced a series of blows since the financial crisis of 2008-2009: a European debt crisis, Brexit, and the U.S.-China trade war. The rise of populism in many countries further tilts the balance toward home bias. How these factors have affected the globalization and now, what is the future of the globalization after the Covid-19 pandemic?
Shaun Rein: I am very worried about the risks of a hot war between the US and China. When humankind historically was confronted by poverty and fear, war, racism and genocide inevitably arose. Our institutions and safeguards put in place after WW2 like the United Nations has been cast away by Trump and his protectionist, ultra-nationalist policy.
In an election year, Trump and odious US politicians like Arkansas Senator Tom Cotton are looking to scapegoat China for their own ineptness in dealing with covid-19. This has given rise to populist racism and rage in the US.
All it takes is one incident, perhaps an accidental one, in the south China, between US and China warships for populists to force politicians to go to war.
Globalization is not dead, however. Big business still want it as it searches for profits and are pragmatic but elected officials want to end it. There will be a tug of war between the globalists and anti-globalist forces over- who gains sway – but it is clear that Globalization will never be the same.
Tourism and seeing the world will slowly rebound once covid-19 is over and so will global business, but supply chains will split – companies need to set up plan b and plan c supply chain strategies. Companies like Apple can no longer put most of their supply chain in China without any backups.
We are telling clients to invest in new factories on Vietnam and other new manufacturing hubs while maintaining their China ones.
The Reporters: Will the COVID-19 pandemic accelerate a change that had already begun: a move away from U.S.-centric globalization to a more China-centric globalization or as a result of flight to safety and the apparent riskiness of developing economies, the world will try to continue to be over-reliant on the U.S. dollar for financing and trade?
Sahun Rein: I traveled to almost 40 countries in the year before covid-19 struck. It is clear more and more countries in Africa, Southeast Asia and even Europe are gravitating towards China’s orbit.
China has economic influence combined with a stable, pragmatic leadership. Countries know what they are getting with President Xi and China – the good and bad.
Trump has shown himself not to be a credible partner. He will attack and criticize allies like Canada, members of his own Republican party, and even members of his own cabinet like former secretary of state Rex Tillerson.
He has held up funding for the WTO during the world’s worst pandemic since the Spanish Flu. No one can trust Trump nor his successors. American prestige had been greatly diminished while China’s has only risen.
The Reporters: After the havoc and catastrophe of the Covid-19 some economists are raising questions about the future of Capitalism. How do you see the future of this system which has become the religion of our age?
Shaun Rein: It’s clear that capitalism needs to change. Generally I believe in free trade and capitalism but it’s clear it’s been warped by billionaires and selfish democratically elected politicians, especially in the US. It is unconscionable that 30 million Americans for example lost their jobs in the first month after covid-19 hit the US.
Greedy companies cut employees in order to maintain shareholder value. Millions are going hungry – from good lines in Switzerland to Kenya to the US. It’s clear that there needs to be greater worker protections and better social safety nets.
Capitalism is great but too much greed is not.
The Reporters: Economic growth institutions such as Central Banks, the IMF and the World Bank – have been criticized for growth policies that inadvertently led to greater inequality in recent decades, and now it is estimated that the Covid-19 will further increase the inequality. What they can do to fix this issue or will be further criticized?
Shaun Rein: Growth inequality is rising but we can’t forget that capitalism has raised billions out of poverty on the past 20 years. Capitalism works. But there needs to be a gentler form of capitalism, one where workers are protected even if it means slower overall economic growth.
I’m not sure countries will be able to adjust and reform their economies easily especially in the US where there is such a chasm between the Republicans and Democrats. The divide and anger there and unwillingness to compromise could spell disaster for the US and the world.
We need a stable and prosperous America for the rest of the world to grow. I fear we are in for a tough decade ahead and violence, akin to a civil war, or uprising will hit the US and slow a global recovery.
We might need new institutions, perhaps more regional ones as Trump’s America is not willing to compromise in the UN, World Bank.
The Reporters: In the era of Covid-19, do you think that our globe is lacking a real leader (country, international organization) to lead and protect us from the severe affects?
Shaun Rein: While China will emerge as the global superpower post covid, President Xi and China don’t have the standing to be the voice of the world. I am not sure Xi wants that – he wants to represent China and not be the leader of the world like Reagan or Clinton tried to be.
In general China’s value system and ideological differences means there still will be great distrust in China across many parts of the world.
But the US can’t regain its position of moral righteousness. Even if Biden wins the presidency, the rest of the world won’t forget the racist, nationalist strain coursing through America during the Trump presidency
The result is our moral leaders will emerge from intellectuals, businessmen and god save us celebrities
Shaun Rein is the Managing Director of China Market Research Group (CMR) and author of ‘End of Copycat China’, ‘End of Cheap China’ and ‘The War for China’s Wallet: Profiting from the New World Order’. He regularly appears on CNN, BBC, NRP, Marketplace, CNBC, PBS and MSNBC for his economic commentaries. He also contributes for New York Times