Global Economic Nationalism
is upsetting the
in once stable
By Juliann Walsh
Nationalism is erupting across the globe.
Economic nationalism not only has an impact domestically but presents significant risks for the global economy as well. Political risk research firm The Eurasia Group cites “independent America” as a top risk for global stability and warns that 2017 will see a “geopolitical recession” that marks “the most volatile political
environment in the postwar period, at least as important to global markets as the
economic recession of 2008.”
Add to that the way other nations are turning inward and sealing their own
borders in response to stalled economies, a surge in refugees or a shift in the way
terror attacks are carried out by individuals, often inspired by social media.
In Europe, Britain voted to withdraw from the European Union, a.k.a. “Brexit.”
In South America, Venezuela closed its borders with Brazil and Colombia.
All of this inward focus has the potential to create what the Eurasia Group calls
a “G-Zero world” — a world with no global leader.
With no clear political leader, there’s also no unifying voice on security, trade
or social values. There’s no coordinated response on climate change, capital flows
or the internet.
With no superpower setting the agenda and global uncertainty about rising
economic nationalism, the world order could fall into disarray.
“The established norms of the past 50 years quickly eroded,” said Dan Riordan,
president of political risk, credit and bond insurance at XL Catlin.
“It didn’t start last week. It started over a period of time but we’re definitely
reaching a different dynamic and that’s creating a lot of uncertainty,” he said.
Governments adopting nationalistic economic policies may renege on
foreigners’ contracts, leaving businesses to foot the bill or renegotiate deals.
Some countries, such as Venezuela, have already seized property from foreign-
owned businesses, namely natural resources such as oil, in the name of “the
Global institutions may lose clout or be victimized by political retaliation.
The ripples of economic nationalism are creating worldwide uncertainty. Along
with that comes emerging economic and political risks that may defy traditional
forecasts and that may happen at a rapid-fire pace never before faced by risk
“So many of the tools the risk manager is using today are mostly useless
because of the complexity we have right now,” said Dante A. Disparte, founder
and CEO of Risk Cooperative.
Disparte attributes the global rise in economic nationalism to several factors.
There’s greater global income inequality; a growing dependency on individual
commodities for government revenues; too many countries hitching their
economic fortunes to China; and oil-producing countries that work outside
proscribed multilateral agreements, he said.
“Broadly speaking, multinational corporations find it hard to cope with this
kind of rise of economic nationalism,” Disparte said.
Multinational systems, such as the World Bank and World Trade Organization,
have been sources of stability in the world. If individual nations shun these global
systems to work directly with some countries while leaving others out, there may
be a rise of tit-for-tat reprisals, Disparte said.
It could lead to increasing political incidents and international investors being
harmed as a way of sending a signal to those policymakers, he said.
“Don’t be surprised if the consequences become much more severe,” he said.
Trade embargoes, the expropriation of assets, freezing accounts — these
tools that the U.S. and Europe keep in their arsenals when trying to send a
signal to another country — can be sent back in a return volley. Companies will
be the ones that will pay the most direct price, as will consumers and society,
The paradigm shift from globalization to nationalism is creating a lot of
uncertainty, as well as growing concern about currency risk and political violence
“So many of the tools the
risk manager is using today
are mostly useless because
of the complexity we have
—Dante A. Disparte, founder and CEO, Risk