As the global recession deepens, the big question is whether we will see a repeat of the protectionist and nationalist policies that marked the Great Depression era.
In the US, President Obama had to temper down Congress’s Buy American provisions to ensure that that the US stance is not misinterpreted. But he is under pressure to consider greater forms of protectionism.
The UK Prime Minister Gordon Brown addressed the US Congress yesterday, and tried to support a pro-globalization position. But he is also under pressure. Anti-immigrant sentiment is rising in Britain. Demonstrations have taken place even against fellow workers from other EU countries.
Both Obama and Brown may be sheltered a little bit, for they don’t face immediate elections.
India is heading for elections next month. While the major parties, Congress and BJP, are pro-openness, fallout from the global slump may begin to empower the Bahujan Samaj Party, which draws more from the poorer classes and the lower castes. If BSP gets a bigger share of the electoral pie (which I think it will), then Indian policy will be under pressure to extend protection of the poor. Deficit spending will rise there as well.
It is unlikely that India will become protectionist. But it will have to diversify, because no matter how rosy its industry associations are sounding, FDI will continue to fall for the foreseeable future.