Things seemed bright and chirpy prior to 2008. While consumerism and homeownership became more and more important for the Americans, living an American dream had its charms for the innumerable people in the developing world. Property prices were booming, spreading virally across economies, and bank lending across borders was vivacious. More rightly, globalisation was in full swing.
And then the 2008 crisis happened; was it the lull before the storm? The global economic weather, which had been sunny and mild, suddenly turned cold when the housing bubble collapsed, and the American rule for capitalism was seriously challenged for being materialistic.
Since then, the scaling back has not ended. The ambitious slogans like ‘the world’s local bank’ of HSBC and, ‘the whole world in one bank’ of Citi are completely opposite of what their current strategy is.
Banking sector stability, the fuel to the economy, fizzled out quite swiftly, after affects of which are still being felt: the giants in the banking industry have been scaling backwards through reduced global lending, shrinking geographic presences and dwindling portfolios.
Such acts of retrenchments and focused growth strategies definitely signal to the opposite of globalisation: de-globalisation. While some economising was unavoidable and much needed due to over-indebtedness of the banks, it is generally also believed that such cutbacks are leading to more aggressive forms like imbalances, protectionism, re-regulation, and eventually de-globalisation.
The focus is shifting from global to local. Surely these are signs of entrance into the de-globalisation phase where countries are still laden with debt: where ineffectiveness of fiscal and monetary policies of the developed world is endangering the future, much of the investment in the developing world is being financed thorough credit.
Financial regulations that are ought to assuage the financial strain and prevent the reappearing of 2008 crisis are making the journey to renewing credit offtake bumpy at the same time. With all this, down goes competition, a legit and important driver of globalisation.
When talking locally, the retrenchment strategy by the foreign banks lately in Pakistan can be seen as a stab on competition and innovation. With local and international headwinds, the steps taken by the global policy makers to whether continue on the road to de-globalisation, or mend policies that bag the advantages of an entangled world, is anybody’s guess.
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