Thirty years after Berlin Wall's fall, US has own protectionist agenda
Economy / 8 January 2019, 09:30am / Kabelo Khumalo
JOHANNESBURG –This year marks the 30th anniversary of the fall of the despised Berlin wall in November 1989: an event that gave birth to the current globalised economic order. The wall was more than a physical barrier but a symbolic separation between communism and capitalism. The wall had separated West and East Berlin since 1961.
The fall of the wall had a far greater global economic impact than people appreciate. It was a victory of capitalism over communism, of the market system over state control.
The fall of the Berlin Wall followed by the collapse of the Soviet Union in December of 1991 also saw significant incorporation of great parts of what have then christened the Second and Third Worlds into the universal economic community.
Many scholars have correctly termed the 1990s the “decade of globalisation” as the protectionist dogmas of the past centuries finally lost their grip on international affairs and trade.
In the twilight of the 1970s, China had begun a journey to move from “Socialism with Chinese characteristics” to “state capitalism with Chinese characteristics”. The transition saw rapid economic growth and a plunge in poverty levels in mainland China.
The fall of the Berlin wall had an impact on South Africa's transition from apartheid into a democracy. It allowed the West to take a firmer stand against the apartheid regime.
Today, the global economy is again facing headwinds of a special kind. US President Donald Trump is on a march to reshape the global economy, not to benefit the whole world but for the exclusive benefit of the US.
The world's biggest economy is currently experiencing a government shutdown over Trump's insistence that the country builds a $5.6billion (R78bn) wall to prevent migrants from entering the country illegally. Trump wants to erect the mooted wall on the US-Mexico border.
This insistence feeds into the protectionist agenda he has advocated for in multiple domestic and foreign platforms: America first.
What in fact Trump is trying to build is not a barrier to keep illegal immigrants out but to leave a long-lasting symbol of the protectionist agenda he has unashamedly advocated for.
Donald Trump has also sparked a trade war with the world's second-biggest economy in China through trade tariffs that dampened global trade for the better part of last year.
Ironically and to the detriment of the US’s leadership role in the world, since becoming president, Trump has attempted to return the universal economic order to pre-1989 protectionist flux.
In his last address to the nation in January of 1989, President Ronald Reagan told Americans and the world of the dangers of building walls. “We're exporting more than ever because American industry became more competitive and at the same time we summoned the national will to knock down protectionist walls abroad instead of erecting them at home.”
Reagan knew well what he was talking about. In 1987, two years before the Berlin wall came tumbling down, he had famously told then-Soviet Union leader Mikhail Gorbachev to “Tear down this wall”. Reagan also knew the benefits of a healthy international trade. When he took office in 1981 the US was experiencing a recession. By the time he left office eight years later, the economy was booming and his administration had created 19 million new jobs.
The full extent of Trump’s protectionist streak on the global economy is yet to be revealed. However, last year gave glimpses of the negative impact it would have on international trade and sentiment.
William Nordhaus, Sterling Professor of Economics at Yale University, has written extensively on the “Trump doctrine of International Trade".
According to the Nobel Prize winner, “The Trump Theory of Trade has four strands at variance with modern economic analysis: overlooking the gains from trade, focusing on the trade deficit, ignoring the changing nature of trade, and disdaining the need for co-operation in international affairs.”
With the trade spat between the US and China showing no signs of abating and with Trump intent on reshaping the global economy, he might yet sully global economic prospects in 2019 and beyond.