Back in time: Third Regime


By the 1980s most countries developed a new outlook: they abandoned isolationism and instead turned around to look at the world with a new sense of eagerness as they prepared to trade outside their national borders. This outwards-oriented approach gave rise to the theme of globalisation which increased international trade in goods, services, capital and people.

A monumental shift in the world economy took place when China moved away from a communist system following Mao’s death in the early 1980s. Farmers could cultivate their own land, factories could sell anything they produced and private businesses began to flourish. This continued continued throughout the 1990s where privatisation and international trade gained popularity. As manufacturing jobs across the world turned to China’s cheap labour, the country quickly found itself at the centre of the global labour market. Other countries followed suit and took significant steps to facilitate globalisation. In 1989 the Berlin Wall came down and allowed Eastern Europe to join the race for capitalism. This event facilitated the creation of the European Union, which unified the economies of 28 countries and created the biggest trade bloc in the world. At the same time the United Kingdom under Margaret Thatcher embraced globalisation and consumerism to the maximum. On the other side of the pond, U.S., Canada and Mexico, established the North American Free Trade Agreement to facilitate international trade and investment across the three countries. Furthermore, Ronald Reagan’s concoction of lower taxes, free market and fewer price controls launched the U.S. into a period of international economic expansion.

Globalisation brought out the good in nations (but inevitably also the bad, which will be discussed later on). New themes of market-oriented liberalisation emerged in trade, finance and people. The market landscape took a sudden turn as industries were privatised and capital controls were abolished. These developments helped curb the high levels of inflation that originated throughout the 2nd Regime; consumer price inflation of industrial countries fell from 12% in 1980 to less than 3% percent in 1986 and remained constant throughout the 1990s. The financial landscape also experienced significant restructuring by supporting cross-listing of securities, portfolio diversification and 24hrs trading at exchanges world wide. Capital was allowed to move freely across international borders. Globalisation also fuelled free movement of people. Those who were motivated to look for better opportunities now had the possibility to expand their horizons.

A natural downside to all these benefits? The rise of inequality. Free markets have an unfortunate tendency to reward those who have the right assets to pursue globalisation. Everyone else that does not meet the requirements is forced to sit on the sidelines. To add to the problem, globalisation and free movement create increased competition – in order to stay relevant and in-demand one must continue developing their skills. For those that do not have the opportunity to so are at a serious disadvantage in this new system.

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