WESTERN MNCs HAVE WEAKENED GLOBALIZATION BY TAKING SIDES

News: Recently McDonald’s closed its outlet in Moscow. This could be bad news for the global economy.

Why this move of MNCs is against globalisation?

Firstly, It reflects that MNCs are not neutral, furthermore, it is being advertised as corporate virtue signaling or their good moral values. It has undermined the argument that companies are geopolitically neutral. Present MNCs have gone against the examples set by MNCs of the 1990s and 2000s. They never cared about domestic criticism for their political neutrality in foreign countries.

Secondly, Policymakers will now perceive foreign companies as extensions of foreign governments: For instance – what will be the difference between TikTok and Huawei (seen as instruments of the Chinese state) and other Western firms such as YouTube (acting in accordance with US’s foreign policy).

Third, This can lead to limiting foreign investments: This will compound the challenge of global economic recovery in light of the US-China trade war and the pandemic.

Fourth, This can lead to a situation of Economic Balkanisation: restricting access to technology, energy, food. Along with greater regulations of critical sectors such as defense, finance, telecommunications, media.

Global cooperation in tackling climate change, energy transition, and combating pandemic will become much harder.

Need for globalization:

A world dominated by economic nationalism cannot escape political conflict. The free movement of goods, capital, people, ideas have actually helped in maintaining world peace. Globalization helps by giving countries what they want, without the use of force.

What should India do?

India must champion the cause of global economic reconnection. It should focus on high economic growth for national interest, by:

1. Positioning itself as a stable, secure, prospering economy to attract foreign investors.
2. Creating a middle path between impoverishing autarky and risky laissez faire.
3. Promoting competition and preventing market domination.
4. Broadening trade with energy and defence suppliers to mitigate political coercion.
5. “Bubbles of trust” with countries of common interest and values can help manage geopolitical risks.

Source: This post is created based on the article “R Western MNCs have weakened globalization by taking sides”, published in Live Mint on 14^th March, 2022.