Mentor’s Comment:  Democracies in the West are facing a crisis marked by increasing polarization, mistrust in institutions, and rising populism, leading to more insular policies. Economist Dani Rodrik’s “political trilemma” suggests countries can only have two of three things: global economic integration, national sovereignty, and popular democracy. Despite globalization, nations have imposed trade barriers, limiting its benefits.

Today’s editorial examines the growing polarization, distrust in institutions, and the rise of populism, which are driving countries towards more insular policies despite globalization. This topic is relevant for GS Paper 1 on Society and GS Paper 2 on Polity in the Mains exam.

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Let’s learn!

Why in the News?

What was once just a concept in academic studies is now happening around the world, with its effects being more noticeable in Western countries than in others.

How has globalization impacted sectors and populations in Western countries, fueling populism?

• Job Losses in Manufacturing: Outsourcing of jobs to lower-cost countries has led to job losses in traditional sectors like steel and textiles, especially in regions like the U.S. Rust Belt, fueling populist sentiments. Eg: The U.S. steel industry decline and its role in Donald Trump’s 2016 campaign.
• Economic Inequality: Globalization has widened the gap between prosperous urban elites and struggling rural populations, contributing to resentment and populist support. Eg: The Brexit vote, with economically disadvantaged areas pushing for leave due to perceived inequality.
• Cultural and Identity Concerns: The movement of people and ideas has raised fears of cultural dilution, driving anti-globalization and nationalist rhetoric. Eg: The rise of far-right parties in Europe, like the National Rally and AfD, focusing on immigration and national identity.

How have China and India managed their economies through selective globalisation?

• Controlled Foreign Investment: Both countries selectively allow foreign investments in specific sectors while restricting or limiting them in others to protect strategic industries. Eg: China has encouraged foreign investments in manufacturing but tightly controls foreign ownership in sectors like media, telecom, and finance. India has similarly promoted foreign direct investment (FDI) in industries like technology but has been cautious in sectors like retail and defense.
• Export-Oriented Growth: Both nations have prioritized export-led growth, using globalization to access international markets while maintaining strong domestic industrial policies. Eg: China’s “Made in China” strategy focused on becoming the global manufacturing hub, while India’s “Make in India” initiative aims to boost domestic manufacturing for export.
• Government Control Over Key Sectors: Both countries retain significant government control over critical sectors, such as banking, energy, and infrastructure, to safeguard national interests. Eg: China’s state-owned enterprises (SOEs) dominate key industries like energy and finance, while India has state-run companies in sectors like oil, railways, and defense.
• Selective Trade Agreements: China and India have negotiated trade agreements that protect domestic industries while opening up others for global competition. Eg: China joined the World Trade Organization (WTO) in 2001 but protected its agricultural sector with subsidies. India has been cautious in committing to trade agreements that might undermine its domestic sectors, like agriculture.
• Managing Political and Economic Sovereignty: Both nations maintain tight political control, limiting the influence of external forces on domestic governance and policy-making. Eg: China tightly controls its political landscape and restricts foreign influence through measures like the “Great Firewall,” while India enforces its sovereignty by regulating foreign content in media and restricting foreign NGOs in sensitive areas.

What consequences have Western democracies faced from balancing free trade, self-determination, and democracy?

• Economic Inequality and Job Losses: Free trade has led to the outsourcing of manufacturing jobs to lower-cost countries, resulting in job losses and economic insecurity for certain segments of the population. Eg: In the U.S. and the U.K., industrial regions like the Rust Belt have seen significant declines in manufacturing jobs due to globalization, contributing to growing economic disparities.
• Rise of Populism and Nationalism: As global competition increased, many voters felt left behind by globalization, leading to the rise of populist and nationalist political movements that prioritize national sovereignty over international cooperation. Eg: Brexit in the U.K. and the election of populist leaders like Donald Trump in the U.S. were fueled by sentiments of reclaiming national sovereignty and resisting the perceived negative impacts of globalization.
• Erosion of Trust in Democratic Institutions: The challenges of balancing democracy with the pressures of globalization have caused frustration among citizens, leading to diminished trust in democratic institutions and the political establishment. Eg: In France, protests like the “Yellow Vest” movement reflect public dissatisfaction with economic policies seen as favoring global markets over local welfare, questioning the legitimacy of institutions and their responsiveness to the people’s needs.

Way forward: 

• Balancing Globalization with Domestic Welfare: India must ensure that globalization benefits are equitably distributed, addressing economic insecurity and preventing resentment. Eg: Support local industries and vulnerable sectors through skill development and welfare programs.
• Strengthening Democratic Institutions: India should make democratic institutions more responsive to public concerns, ensuring inclusivity and addressing inequality. Eg: Engage citizens in policymaking to ensure economic policies benefit all.

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