Prime Minister Narendra Modi was absolutely correct when he identified protectionist trade and foreign policies as grave threats to international trade and world peace. Modi delivered a vital speech at the World Economic Forum in Davos, Switzerland, on 23 January 2018 that everybody should pay attention to.
“The forces of protectionism are raising their heads against globalization,” Modi said. “Their desire is to not only save themselves from globalization – but to reverse the natural flow of globalization altogether.”
He correctly noted the dangers from such anti-globalization sentiments extend far beyond trade. More importantly, Modi alluded to the potential danger to world peace from such sentiments.
“Many societies and countries are becoming more and more insular,” Modi said. “The downsides of these types of attitudes and misplaced priorities are no less significant than the threats posed by climate change and terrorism.”
Returning to the Pre-World II Order
What Modi is warning of is a return to the protectionist order of the 1920s and 1930s that preceded World War II. After World War I, the world economic order broke down into a number of rival trading blocs.
The new order deliberately excluded some nations; such as Germany and the Soviet Union, and gravely short-changed others such as Japan. Eventually, leaders such as Hitler, Stalin, and the Japanese militarists became convinced that the way they could acquire economic resources or markets was through military force.
During the 1930s, Japan invaded China in an effort to control resources and markets. That put it on a collision course with the United States that led to the Pacific War. By 1941, Hitler had become convinced the only course of economic expansion for Germany was to invade the Soviet Union. The Fuhrer took that action after his effort to conquer the British Empire and seize its economic resources failed.
After World War II ended in 1945, Stalin was convinced that the only way to ensure economic security for the Soviet Union was to occupy Eastern Europe and invade Manchuria. This sparked the Cold War, which lasted for 45 years and nearly caused nuclear war on a number of occasions.
Even though it is often ignored today, it was economic fragmentation; and fear of being shut out of the global markets, that provided a rationale for Nazi, Japanese Imperialist, and Soviet aggression. “Economic security” became a justification for militarism, imperialism, conquest, and colonialism.
A Dangerous New Economic Order
The world is obviously far from such economic fragmentation, but the contours of a dangerous new economic order that might reduce large areas of the globe to colonial status are there.
A potentially disastrous development for India is the development of a Chinese-American trade bloc. Such a trade zone is more likely now that President Donald J. Trump has pulled the United States out of the Trans-Pacific Partnership (TPP). Another menace is a protectionist European Union that will exclude non-European products.
A potential threat is the evolution of the TPP into an anti-American and anti-Chinese trading bloc. The United Kingdom is already investigating the possibility of joining the TPP. UK involvement in the TPP would provide a strong incentive to exclude rival manufacturing powers such as the United States.
The lines of a destructive economic war between trading blocs are already being drawn. It would be in the interest of manufacturing nations with limited natural resources like the USA, China, and the EU members to keep prices for commodities as low as possible. The interest of TPP members such as Australia, Canada, Chile, and Malaysia is to keep prices for such resources as high as possible.
The Dangerous New Economic Conflict
Such a conflict might not lead to war, but can greatly increase misery and poverty in many nations. Worse, as the situation in the 1930s proves the economic insecurity created by protectionism can rationalize aggressive foreign policies that lead to war.
The danger in the 21st Century would not be all-out World War like that in the 1940s, but of low-level conflicts. These might involve cyberwarfare, drones, tariffs, state sponsorship of terrorism, propaganda campaigns, sabotage, and meddling in elections.
A good example of the kind of conflict we can expect is the current dispute between the United States and Russia. There is no possibility of war, but relations have soured and the two countries are trading sanctions and allegations of interfering in each other’s political systems and staging cyberattacks.
Avoiding such conflict and ensuring free trade must be the primary goal of international relations. Modi is right to take the lead in efforts to defuse such conflicts. Hopefully, other world leaders will follow his example and seek a humane alternative to protectionism.