For the past two hundred years we have witnessed an increase in global trade and a decrease in relative trade costs. However, it has not all been smooth sailing with more than a handful of trade wars breaking out over the centuries. The comic names of many of these trade tiffs – the Battle of the Bananas, the Pasta Spat, Chicken Friction – belies the animosity that is invariably associated with such disputes. Of the trade tensions that have arisen, by far the most dramatic and dire are those associated with the two world wars.
Economic nationalism asserts itself at times of financial crisis and tends to manifest itself in the form of rising trade barriers and restrictions on immigration. We see this in the geopolitics of the first part of the 1900s, especially the inter-war years from 1919 to 1938, eventually leading to the eruption of World War II. Albeit on a lesser scale, we see this type of sentiment and hostility emerging again today as the United States and Europe become home to anti-immigration movements and resurgent nationalism that has followed the fallout of the 2008 financial crisis. We see it, too, in the xenophobic attacks on foreign shop owners in South Africa which keep erupting.
In trying to make sense of challenging times, when alternative voices vie for attention, it is important to bear in mind that narrative always follows, it does not lead. And those with the most dramatic stories to sell are typically those who have taken the most creative license.
Resilience is defined as the ability to quickly recover from setbacks. It connotes toughness and flexibility. And it is a quality that is lacking in South Africa’s economy. As the headwinds of protectionism and emerging market risk aversion have hit investor sentiment, the economy has been sent packing.
The South African economy does not have the kind of sound foundation that can easily withstand such circumstances, nor the flexibility to respond quickly when this type of challenge arises. The policy flipflops and posturing we have witnessed of late only serve to further weaken the economy. As South Africa finds itself in a period of negative growth for the second time in a decade, we would do well to remember the lesson of history: that success comes to those who are prepared to share it.
Listen to CE Dr Adrian Saville in conversation with Bruce Whitfield from Radio702 regarding the five things you need to know about coping with the recession