Riots in England, downgrade of the US sovereign debt by rating agencies, growing sentiments of protectionism the world over and the falling stock markets, all indicate a chaotic world that at the moment, is feeling quite directionless. As a layperson with some knowledge of history and the economic and financial cycles, I feel like we are headed for a world that will increasingly become a difficult place to navigate, invest in and live in.
Thanks to information technology, end of the cold war and globalization, the past few decades have seen the world become a smaller and smaller place. When you order an I-Pad sitting in your home in India, using your US credit card, it gets shipped from China to a destination of your choice anywhere in the World. This is possible because it is all backed by complex IT systems installed for a US company by non-US people and the willingness to send manufacturing outside the US (and hence share revenues). The keyword here is really willingness to share, and not so much globalization. A non US company sees an opportunity in the worldwide market this kind of globalization can offer but has also accepted the fact that all of this will mean sharing technology, revenues and systems with non US companies and people.
Similarly globalization of any other kind, whether it is agricultural import-export or free movement of students across borders, all implies a willingness to share in exchange for wider revenue opportunities. Capitalism and free market also imply the same spirit. There is willingness to let go off protectionism in exchange for faster growth and greater opportunities. In other words deregulation has been the mantra the world over in exchange for growth.
But the events of the past few years are now beginning to show the uglier side of this deregulation. While greater gain and faster growth all sound very nice, what we perhaps are forgetting in all of this is the fact that people will be people. The moment there is a threat to their territory they will do anything to protect it and also given a chance, it is very rare that someone will let go of the opportunity to make money if it is easy and legal but is harmful to other people. In other words selfishness and greed are basic to most humans and deregulation it seems has brought into being circumstances where greed caused so much destruction that we are now being forced to become selfish and fight for our territories.
So when the markets crashed in 2008, suddenly all the software jobs being sent to India began to irk the US citizens who were very happy till then with the falling prices of their IT systems thanks to cost optimization offered by off shoring. And come to think of it what caused the crash but the fact that because of excessive deregulation of the US financial system greed was allowed to run rampant. A few clever people in top banks came up with a way to spin money using temporary gains but leaving millions of people in a lurch for the long term. Greed caused a system to fail and left people with no choice but to become selfish and start protecting whatever little they were left with.
So while I am unable to comment on where the raging debt crisis in Europe can take us and how the US will deal with its increasing debt, it does look very likely to me that the common man of most countries will want to feel protected against effects from outside economies and may even fight against globalization. The riots in UK seem to be just the few stirrings of this. So maybe the history of the world is really just a cycle of openness followed by chaos followed by a period where everybody closes up to recoup till they feel comfortable sharing again.
It is human nature to want to explore, grow and seek new gains, and that gives rise to systems like globalization and free economies. But if we forget that these systems are driven by people and not just policies written on paper, it is also perhaps inevitable that these systems will fall victim to the same greed and selfishness again and again and be replaced by an era of chaos and loss of faith.