It seems to me…
“It has been said that arguing against globalization is like arguing against the laws of gravity.” ~ Kofi Annan.
Globalization is arguably the most important factor currently shaping the world economy. Unfortunately, previously consistent long-term increases in globalization, defined as the free movement of goods, people and money across borders, appears to be slowing[i]. 2012-2013 global trade growth was less than global GDP growth throughout the world for the first time since the end of World War II.
The process of globalization has been underway for centuries but recent technological innovations in communication, transportation, and information management have accelerated its pace into a force with incredible capacity to interconnect the world in ways never previously possible. The primary effects of economic globalization probably are irreversible as the welfare of nations becomes increasingly interdependent. Globalization is the absence of imaginary walls and fences that countries had erected bringing all of us closer together and making us understand that we are all a part of a single entity living in different cultural circumstances. The effect is not restricted to just finances; it also has affected the cultural, social, psychological, and political state of the world.
Globalization brings increased employment opportunities to less developed countries as developed countries outsource jobs to them by allowing each country to do what it does best. Outsourcing can lead to resentment within the originating country when production moves to new locations as it frequently reduces employment within less efficient employment categories.
While globalization is mostly beneficial, it unfortunately primarily benefits investors and upper-level managers increasing economic inequality. There also can be rising socio-economic insecurity mainly due to the rapid transition period currently underway in many countries. Financial market instability across the globe can result in large socio-economic and human costs.
Free market theory suggests that markets will regulate themselves through the competing pressures of supply and demand and resource availability but the largest multinationals are sufficiently powerful that they are able to manipulate markets solely for their personal benefit.
In the past the U.S. always has seemed willing to consume all the world could produce but average individual income has not increased following the recession of 2009 and consumer spending remains at a reduced level, Europe remains mired in a debt crisis and will require at least five more years to recover, and emerging economies, including China, are having their own problems and experiencing significantly reduced growth rates. Global economic integration therefore has either slowed or reversed as many corporations are reconsidering their supply and production chains and possibly returning them to their home country. 21 percent of U.S. manufacturing firms with sales of $1 billion or more are re-shoring and 54 percent are actively reconsidering it[ii].
The current international economic system of commerce and trade has resulted not only in economic growth but also significant armed conflict reductions. It is possible for this stability, sometimes described as the “Western international order”, to follow one of two possible future scenarios. Asia, the location of three of the world’s four largest economies within the next decade, could either embrace today’s current open, rule-based system or, alternatively, become increasingly nationalistic, focus on narrow self-serving interests, and pursue mercantilism[iii].
Unfortunately, opposition to free-trade extensions is not only from a China motivated to pursue their own narrow interests but also from the U.S. where congressional conservatives oppose anything favored by President Obama and liberals who no longer support free trade policies. While not in the best interests of our country, conservative opposition is more understandable than that of liberals who attempt to claim they are modern, future oriented, and open but instead demonstrate the increasing influence of special interests.
Trends are disturbing as indicated by complaints to the World Trade Organization concerning protectionism, intellectual-property theft, and increased trade barriers. Global markets that have been converging for the last thirty years are starting to be diverging along national and sectional lines. The expectation is for increased economic volatility in coming years.
That’s what I think, what about you?
[i] Foroohar, Rana. Globalization In Reverse, Time, 7 April 2014, p28.
[ii] Boston Consulting Group. More Than a Third of Large Manufacturers Are Considering Reshoring from China to the U.S., http://www.bcg.com/media/PressReleaseDetails.aspx?id=tcm:12-104216, 20 April 2012.
[iii] Zakaria, Fareed. Time To Put Trade Above Politics, Time, 3 March 2014, p24.