Globalization - some bad consequences

The prevailing thinking is that globalization improves the economic wellbeing of the people in the world. Not enough attention is paid to its negative consequences.

One such consequence is the export of the harmful effects of low interest rate to other countries. During the past two decades, Japan had very low interest rates. Speculators borrowed large sums in Japanese currency to speculate in assets in other economies, leading to asset inflation. This has been named as the "carry trade".

Now, the US Dollar has become the currency to borrow for the "carry trade". It has led to the stock and property market bubbles in Asia. Some countries have decided to impose control over the flow of currency to prevent their assets from excessive escalation.

If we want to get back to more stable economic growth, we have to open our eyes and see what is really happening, rather than rely on thinking that globalization, free market and global competition are good. They may be good in some respects but they have negative consequences, which may outweigh the benefits.

Tan Kin Lian