Page 18 - Nuvama | IC Report 2023

• DE-GLOBALISATION • DEREGULATION • DEBT • DEMOGRAPHY • DEMOCRACY

But deeper global integration meant subordination of domestic policy objectives to international
goals. This ultimately led to weakening of democratic accountability and alienation of the voters.

65
Exhibit 4:
Global trade
flattening out 60

55
(I% of GDP) 50

45

40
35
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

World trade openness (share of trade in GDP)
Source: Feenstra et al. (2015), Penn World Table 10.0
Note: World trade openess is exports plus imports as a % of GDP
Pandemic and the Ukraine War: Challenging just-in-time supply chains
The pursuit of global efficiency has rendered countries precariously interdependent. Global just-in-
time supply chains meant that, at times, countries were left at the mercy of not-so-friendly – or even
hostile – nations to ride out a crisis.
The pandemic and the Ukraine war brought this to the fore. For example, over the years, Germany
increased its energy dependence on a hostile Russia. Similarly, the pandemic showed that the US
was highly dependent on not-so-friendly China to meet basic and essential needs such as masks
and PPEs. Just before the pandemic, China accounted for nearly 50% of the PPE (personal protective
equipment) imports of the US and Europe as per The Peterson Institute for International Economics.

Monetary system under strain: Dollar hegemony on borrowed time?
The global monetary system anchored on the dollar is also under strain. Historically, the dollar hegemony
De-dollarisation stood on two legs. First is the dollarisation of energy markets, i.e. monopoly pricing of energy in dollars,
of energy and the second is the recycling of the dollars by large net exporters (Japan, China and Korea, among
markets could others) back into US treasuries (USTs).
be unfolding
As regards the first, the US-Saudi relationship forms the bedrock. The US guaranteed security and
stability of the Saudi regime through military/security aid while the Saudis priced oil in dollars and
purchased USTs with their surplus dollars. However, US-Saudi relations, while not at a breaking point,
have soured a great deal of late.

16