Globalization in Retreat
Further Geopolitical Consequences of the Financial Crisis
Roger C. Altman
ROGER C. ALTMAN is Chair and CEO of Evercore Partners. He was U.S. Deputy Treasury Secretary in
It is now clear that the global economic crisis will be deep and prolonged and that it will have far-
reaching geopolitical consequences. The long movement toward market liberalization has stopped, and a
new period of state intervention, reregulation, and creeping protectionism has begun.
Indeed, globalization itself is reversing. The long-standing wisdom that everyone wins in a single world
market has been undermined. Global trade, capital flows, and immigration are declining. It also has not
gone unnoticed that nations with insulated financial systems, such as China and India, have suffered the
least economic damage.
Furthermore, there will be less global leadership and less coordination between nations. The G-7 (the
group of highly industrialized states) and the G-20 (the group of finance ministers and central-bank
governors from the world's largest economies) have been unable to respond effectively to this crisis, other
than by expanding the International Monetary Fund (IMF). The United States is also less capable of
making these institutions work and, over the medium term, will be less dominant.
This coincides with the movement away from a unipolar world, which the downturn has accelerated. The
United States will now be focused inward and constrained by unemployment and fiscal pressures. Much
of the world also blames U.S. financial excesses for the global recession. This has put the U.S. model of
free-market capitalism out of favor. The deserved global goodwill toward President Barack Obama
mitigates some of this, but not all of it.
In addition, the crisis has exposed weaknesses within the European Union. Economic divergence is rising,
as the three strongest EU nations -- France, Germany, and the United Kingdom -- have disagreed on a
response to the crisis and refused pleas for emergency assistance from eastern Europe. The absence of a
true single currency has proved inhibiting. And the European Central Bank has emerged as more cautious
and less powerful than many expected.
Such lack of strength and unity in the West is untimely, because the crash will increase geopolitical
instability. Certain flashpoint countries that rose with the oil and commodity boom, such as Iran and
Russia, will now come under great economic pressure. Other, already unstable nations, such as Pakistan,
could disintegrate. And poverty will rise sharply in a number of African countries. All this implies a less
The one clear winner is China, whose unique political-economic model has come through unscathed. This