A Global Retreat As Economies Dry Up
Thursday, March 5, 2009
SINGAPORE This shimmering city-state was the house globalization built. When world trade boomed, Singapore's seaport at the crossroads of East and West became the Chicago O'Hare of freighters and supertankers. Singapore Airlines took off despite serving a country with no domestic air routes. Nearly everything manufactured here is made for export. One out of every three workers is a foreigner.
But as the world enters a period of deglobalization, Singapore is a window into the reversal of the forces that brought unprecedented global mobility to goods, services, investment and labor. With world trade plummeting for the first time since 1982, the long-bustling port has become a maritime parking lot in recent weeks, with rows of idled freighters from Asia, Europe, the United States, South America, Africa and the Middle East stretching for miles along the coast. "We're running out of space to park them," said Ron Widdows, chief executive of Singapore-based NOL, one of the world's largest container lines.
Thousands of foreign workers, including London School of Economics graduates with six-digit salaries and desperately poor Bangladeshi factory workers, are streaming home as the economy here suffers the worst of the recessions in Southeast Asia. Singapore is an epicenter of what analysts call a new flow of reverse migration away from hard-hit, globalized economies, including Dubai and Britain, that were once beacons for foreign labor. Economists from Credit Suisse predict an exodus of 200,000 foreigners -- or one in every 15 workers here -- by the end of 2010.
Singapore's exports collapsed by a stunning 35 percent in January, mirroring much of the rest of Asia. The export boom here was tied to credit-fueled buying sprees in the United States that stopped abruptly and may take years to return, if ever. Manufacturers are grasping for a Plan B. But none of the options -- mining domestic markets, or trying to tap consumers in still-growing China and India -- offers a truly viable solution. Adding to fears of a years-long depression for exports is a rising tide of trade protectionism in countries including neighboring Indonesia.
The scene in this port city -- along with a glimpse inside two of its reeling neighbors in export-dependent Southeast Asia -- illustrates the ebbing of a golden age of trade, innovation, wealth accumulation and poverty reduction through globalization.
"The collapse of globalization . . . is absolutely possible," said Jeffrey Sachs, a noted American economist. "It happened in the 20th century in the wake of World War I and the Great Depression, and could happen again. Nationalism is rising and our political systems are inward looking, the more so in times of crisis."
A Transformation Stalls
The world remains as interconnected as ever through telecommunications, the arts, culture and the Internet. The Oscars this year saw foreigners capture most of the major awards. But experts say the once-steady advance of economic globalization that changed the lives of millions is facing an at least temporary pullback through financial retrenchment and resurgent economic nationalism. It threatens to set the clock back by years.
World trade has quadrupled since 1982. But some see that exponential growth as just another part of the biggest credit bubble in world history. That bubble is now bursting. In four months, port traffic has fallen by double digits not only in Norfolk, Long Beach, and Savannah, but in Pusan, Hong Kong and Bremerhaven. Air hubs from London to Singapore that saw traffic soar as the world became more linked through business, investment and trade are seeing a sharp reversal of fortune. In January, global airline passenger traffic fell 5.6 percent; air cargo nose-dived 23.2 percent.
As exports crash worldwide, factories from China to Eastern Europe are shuttering. The World Bank estimates the crisis will trap at least 53 million more people in poverty in the developing world this year. Last week alone, $1 billion fled emerging markets -- the largest weekly loss since October, according to Merrill Lynch. Some of the hardest hit are migrants and foreign contract workers. Malaysia is expelling 100,000 Indonesians as part of a new policy to put Malaysian workers first as the recession sparks job losses. In Britain, strikes broke out nationwide to protest the hiring of foreigners at one the country's largest refineries even as thousands of Eastern European immigrants headed home anyway because they could not find work.
Remittances -- the financial lifelines sent home by foreign workers -- are falling from Latin America to Central Asia. The drop has been so sharp in Kyrgyzstan, which relies on remittances for 27 percent of its gross domestic product, that the U.N. World Food Program was asked to rush in emergency food aid in November for the first time since 1992. "This is a new income hit to people who can afford it the least," said Josette Sheeran, the program's executive director.
Juggernauts like China still maintain huge cash reserves. But other nations are sinking. Investors are fleeing South Korea so fast that its short-term debt may surpass dwindling reserves by the end of this year. Multilateral lenders last week announced a $31 billion rescue package for teetering Eastern Europe. But analysts say its credit-starved banks and companies may need as much as eight times that to avoid a domino effect of corporate defaults. The European Union -- once a model of how to all but erase national borders -- faces a severe test of unity over how, or whether, to bail out member states on the verge of collapse.
Western governments, through bailouts and nationalizations, are exerting profound new influence over banks and multinationals that helped sow the seeds of globalization throughout the developing world. But the message being sent by the West now is that there's no place like home for job creation and investment. In France, President Nicolas Sarkozy offered a $5 billion lifeline to French automakers, then promptly called on them to use only French-made parts and relocate their factories in Eastern Europe back to France. In the United States, President Obama's 2010 budget would tighten taxation on U.S. companies with operations overseas, limiting incentives to do business abroad. In Britain, bailed out and nationalized banks are being told to offer loans to Britons first.