Is Globalization Beating a Hasty Retreat?

A new world order is dawning—one in which the West is no longer dominant, capitalism (at least the American version) is out of favor, and protectionism is on the rise. So argues Roger Altman, Deputy Treasury Secretary under President Bill Clinton and now chairman of investment banking boutique Evercore Partners (EVR), in the July-August issue of Foreign Affairs. "The geopolitical consequences [of the crisis] are now coming into view and they will be profound," writes Altman. The era of laissez-faire economics is over, and statism, once discredited, is making a comeback—even in the U.S. Also out of vogue is globalization: "Much of the world now sees it as harmful."

Global trade is set to fall this year, for the first time in more than two decades, while capital flows to emerging markets are projected to decline by more than half from 2008; commodity prices, with the exception of oil, are in the dumps. That's all taking an especially hard toll on developing nations. The World Bank figures that more than 50 million people living in developing countries will sink back into absolute poverty this year. But one country has come through relatively unscathed: China, thanks to its financial system, which is insulated and not highly leveraged. Beijing also boasts an estimated $2.3 trillion hoard of foreign reserves—by this measure, it's the wealthiest nation on earth. (Foreign Affairs)

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