The geopolitical ructions of recent weeks pose a new level of threat to the infrastructure of globalisation. Conflicts, actual and potential, in Ukraine, the Middle East and elsewhere are also now a real risk to economic recovery.
The shooting down of the Malaysia Airlines Flight MH17 last month was a symbol of globalisation in enforced retreat. There could be no more obvious indication that global commerce is under attack than this revelation that civilian air traffic is vulnerable. The multiplication of economic sanctions following Moscow’s actions in Ukraine pushes Russia closer to autarky. Meantime, the low-key US response to these challenges weakens stability and predictability, the underpinnings of economic interdependence. If confidence in the infrastructure of globalisation wanes, the free flow of capital, goods and services across boundaries will be impaired.
These geopolitical frictions come against the background of a retreat into parochialism precipitated by the financial crisis. The collapse of Lehman Brothers demonstrated that there was no mechanism for cross-border unwinding, or resolution, of international financial institutions. Despite efforts to enhance international regulation, the reality is that national governments have rushed to protect their own banks.