September 7, 2021 –
As the economic competition between the United States and China intensifies companies find themselves caught in the crossfire. Western companies hesitate to offend China and possibly lose access to China’s “super-large market.” They are accused of having “corporate Stockholm Syndrome.” At the same time, they must be careful of crossing the national security redlines imposed primarily by the United States. Milton Friedman argued that a company’s only responsibility is to its shareholders. Recently companies have accepted that they have certain social responsibilities; do they also have national security responsibilities?
On September 7, 2021, the U.S. Department of Defense (DoD) Strategic Multilayer Assessment (SMA) program hosted a speaker session with Dr. Paul Krugman (Distinguished Professor of Economics, Graduate Center of the City University of New York; Columnist, New York Times) as part of its SMA INSS/PRISM Speaker Series.
The economic trend of globalization and the rapid development of global logistics which developed during last four decades will likely slow or even digress. Dr. Krugman commented that hyper globalization of the world economy peaked during the mid-2000s. While many people attributed the global economic crisis with slowing economic globalization, inward looking policy changes in developing countries had the largest impact. These inward looking policy changes, economic nationalism, and national security related economic factors are likely to keep another surge of economic globalization from occurring, even after the current global pandemic is over. If the global economy shrinks, the United States’ and China’s economies will be able to survive because of their massive production industries; however, developing economies that rely on exporting raw or natural material will likely suffer.
Dr. Krugman commented that the global service industries had been predicted to increase as a result of the globalization of economics. This predicted trend never occurred. However, a new trend of individuals working from home because of the COVID-19 pandemic has occurred. While this has not immediately impacted the globalization or de-globalization of economic activity, the inability to create person-to-person relationships will likely impact future economic deals. Dr. Krugman emphasized that policy changes to protect national security interests, like protecting supplies of rare earth minerals and smaller developing economies is important for the USG going forward. Also, China’s emergence as a global economic leader coupled with its authoritarian regime could change the future landscape of economic geopolitics.
Dr. Paul Krugman is an American economist who is the Distinguished Professor of Economics at the Graduate Center of the City University of New York, and a columnist for The New York Times. Dr. Krugman is the recipient of the 2008 Nobel Prize in Economics.