How Globalization Ends in the West
The developed world cannot absorb the number of people and the amount of capital that wants to enter. If they do not have restrictions on the movement of people and capital, their own citizens are priced out as their nation turns into a resort for wealthy foreigners. Population controls are already starting, but immigration into the West may become near impossible within a generation and many foreigners currently living in the West may even be deported if they fail to assimilate.
More surprising is how the West is adopting policies seen in many smaller countries and investment/tourism hot spots, such as rules against foreigners owning property. The West has about 12 percent of global population today and that share is falling as Africa’s population is expected to quadruple this century, from 1 to 4 billion. Meanwhile, 2.5 billion Indians and Chinese will eventually be able to compete with Europeans and Americans for their homes and schools.
Buying restrictions in cities such as Vancouver and Toronto is caused by 1X buying power. As China becomes a middle income country and India’s development accelerates, this will grow to 10X or more. Maybe in the short-term pressure will alleviate because China’s housing bubble will burst, either via home prices or a currency collapse. A similar issue with Japan existed in the 1980s, but the Japanese housing bubble did burst and Japan’s population peaked at a fraction of the West’s. Japan’s impact also came when it reached economic parity with the West. Even if China suffers a massive financial crisis, China and India will eventually exert economic power that is at least 10 and possibly 20 times more powerful than Japan in the 1980s.
Almost a year after Vancouver, ground zero of Canada’s housing bubble inflated with Chinese “hot money”, implemented a foreign buyer tax, and just weeks after Toronto’s housing bubble officially went nuts as prices soared 33% Y/Y, prompting economists such as David Rosenberg to demand a government intervention, Ontario’s Liberal government has finally cracked down on foreign buyers and according to CBC will join Vancouver in slapping a 15% tax on home purchases by non-resident foreigners, while expanding the province’s existing rent control system to cover all tenants.
Up next will be cultural controls. France is probably a good example of the types of policy environment that will develop across the West in the coming decades.