Globalization has been a buzzword for much of the last thirty years. It’s been used to describe the present state of economics and future state of everything. It’s been, if not said explicitly, then generally understood that the world will only become more globalized. In reality, globalization is as much a variable condition as it is multifaceted and poorly defined. Globalization is both a condition of economic interdependence and the effect it has on the human condition. Taken together these aspects define globalization and provide the incentive to maintain international cooperation. Globalization, therefore, is not only here but will never go away.
Foreign Policy writer Pankaj Ghemawat (2009) argues that the locally sourced nature of everything from finance to how we interact with the internet undermines the notion of globalization, however this view is a bit narrow. Consider that one could travel to nearly any country in the world and see the familiar sight of power poles and power lines. One could likely buy a cigarette in most of these places as well. Even if locally provided are not the global availability of electricity and tobacco indicative of a globalized world? Noam Chomsky (2015) seems to think so when he argues that one of the great benefits of globalization is that he could phone a friend virtually anywhere in the world. This interconnectivity, he says, is the very definition of globalization. Whether people choose to connect with others is irrelevant. The important fact is that the integration exists to do so.
Even with the nearly ubiquitous availability of electricity, tobacco, and companies like Starlink bringing internet to the world, globalists contend that more integration is required. As economics writer Martin Wolf (2004) puts it, “The failure of the world is not that there is too much globalization, but that there is too little” (p. 4). Harvard economics professor Jeffrey Frankel quantifies this sentiment by pointing out that, “globalization would have to increase another sixfold…before it would literally be true that Americans did business as easily across the globe as across the country” (Frankel, 2000, Judging by the Globalization 2000 Standard of Perfect International Integration section, para 2). These sentiments should not be taken to mean that globalization doesn’t exist. As mentioned earlier, globalization is a macro-economic condition that changes over time. Mr. Frankel (2000) points out that the first half the twentieth century saw both a boom in global growth and a return to protectionist policies. A similar give and take has existed with regional trade. The World Trade Organization (2021) cited three instances of regionalization originating in the 1950s, 1980s, and the present day (p. 26). It’s notable that globalization as it’s been thought about, has existed between the second and third periods of regionalization, suggesting a cyclical relationship. Even if analysts like former Foreign Policy writer Moises Naim (2009) contend that today’s globalization is fundamentally different from prior eras, the progression toward globalization is undeniable. The relationship between regional and global policies may be cyclical but it’s not terminal for either.
The narrative around global finance tells a similar tale. In his arguments suggesting the world is less globalized than people think, Mr. Ghemawat (2009) points out that:
[T]he total amount of the world’s capital formation that is generated from foreign direct investment (FDI) has been less than 10 percent for the last three years for which data are available (2003–05). In other words, more than 90 percent of the fixed investment around the world is still domestic (The 10% presumption section, para. 2).
However, Noam Chomsky (2015) argues that it’s specifically the growth of foreign capital that proved detrimental to developing economies. To sort this out, a more recent look at the data is required. According to McKinsey & Company (Lund et al., 2017), “From January 2007 to December 2016, banks divested at least $2 trillion of [foreign] assets…more than half of the total by European banks” (p. 4). This could be correctly read as a pullback from international markets, but McKinsey analysts suggest that banks were cleaning up unprofitable assets which has resulted in healthier balance sheets (pp. 3, 4, 13). Over the same period, FDI and equity as a percent of total cross-border capital flows increased from 36% to 69% (p. 9). McKinsey doesn’t break down the percentage of FDI vs domestic funding, however they do mention that 27% of equities and 31% of bonds are owned by foreign investors (p. 6). Clearly, we see a significant international presence in financial markets and a substantial increase since Mr. Ghemawat’s article ran in Foreign Policy. These findings also lend support to Mr. Chomsky’s base assumptions that foreign investment has grown dramatically with globalization. Regardless of the conclusions, the growth in global finance would be difficult to unwind completely and is therefore likely to persist at some level even if regional trade continues to grow.
The human cost of globalization is certainly open for debate, and these conclusions may sound like value judgements that have little to do with the binary assessment of whether globalization will continue; however, positive human outcomes form a basis for popular support. It is essential as Harvard University professor of international political economy Dani Rodrik puts it, that government and market economies work together to ensure a broadly beneficial outcome for their citizens (Pearlstein, 2011). Mr. Wolf (2004) echoes this sentiment, writing, “We need more global markets, not fewer, if we want to raise the living standards of the poor of the world” (p. 4, para. 2). Perhaps most conclusively, in research done by Gapminder, Hans Rosling (2007) demonstrates a linear relationship between child mortality and the overall wealth of a nation. He notes that as nations invest in the health of their people, wealth increases in tandem. In other words, a healthy population is a more productive population.
It's important to point out that the human cost of globalization is not all upside. Mr. Naim (2009) cites the rising levels of international crime and terrorism as one drawback of increased interconnectivity, while Mr. Chomsky (2015) alleges that “for most of the [Mexican] population [NAFTA] was awful” (6.42). Furthermore, the Center for Global Development (Clemens, 2015) concluded that the wage disparity between Mexican and American workers has grown since NAFTA’s implementation, not diminished. The rise of global crime is tough to argue, however the economics of trade offer a more optimistic outlook. According to the Council on Foreign Relations (Chatzky et al., 2020), since NAFTA’s implementation, Mexico’s farm imports to the United States have tripled while hundreds of thousands of auto-manufacturing jobs have been created. Finally, Rosling (2007) argues that world health and wealth are generally levelling off. That is, globally we are becoming wealthier and living longer across every region. Certainly, increased jobs and life expectancy are great incentives for the nations of the world to share in economic prosperity, while the proliferation of international crime is an ongoing area of opportunity for all states.
In summary, globalization is a macro-economic event that, while subject to periods of decline and expansion, is unlikely to ever have an end. Moreover, while global finance has continued to grow, the increasing health and wealth of the world’s population provides strong incentives for countries to maintain global ties. It is therefore unlikely that countries could or would want to unwind from the global system. In short, the world is too interconnected to ever deglobalize.
References
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