False requiem for globalisation

Global economic integration won't slow down for long

Despite predicted economic depression, the Covid-19 pandemic will not spell the end of globalisation. The momentum of global economic integration won't be slowed for long and the drive for international connectivity from developing countries will quickly see international travel and trade resume. 

A lot of people who should know better are giving the last rites to the global economic integration (globalisation) we have enjoyed since the Second World War. I think that they are wrong, both in the prediction that globalisation is bound to go into reverse and in the relish with which its demise is being embraced. Much of this debate is also ahistorical. There was a pretty globalised world in 1913. It had its ugly side in the Empires; but three decades of de-globalisation with violent nationalism and war are not a happy precedent.

I wrote a book about ‘globalisation’ 25 years ago. I argued that it was, in general, beneficial and had contributed generously to the post-war rise in living standards. But I worried that there was a weak link-politics-which is still overwhelmingly national. The result has been that international governance is weak and lags behind the economics, creating instability and opportunities for populists to exploit.  At the time I was writing, there was too much talk of ‘the end of history’ and ‘the end of geography’. Hubris was bound to lead to nemesis, and has. But it is far too soon to accept that the process must now go backwards.

Globalisation is complex, with different dimensions that each tell a different story. To start with the most visible: people movement. Last year saw an all-time peak in cross border travel and there will be a sharp fall this year for obvious reasons. Subsequently, there will be a move - rightly- to cut back on unnecessary travel for environmental reasons but there will also be hundreds of millions of previously poor Asians and Africans who will want to see the world. I would be amazed if travel hasn’t returned to previous peaks within five years.

Globalisation is complex, with different dimensions that each tell a different story.

Migration for work or settlement has run into growing resistance both in traditional labour importing countries like the USA and the less open countries of Europe and Asia, contributing to the belief that globalisation has run its course.  But Trump’s wall is not the last word on migration. Nor Brexit. No sooner has our government brought in legislation to give expression to what the ‘will of the people’ was thought to be in 2016 than the public mood has swung in the opposite direction. In a period of economic depression, there will inevitably be depressed migration. But it will resume with recovery. And whatever happens to the ‘pull’ factors the ‘push’ will grow and grow, from Africa especially.

Trade is a different story again. Trade in goods expanded at roughly twice the pace of world output from WW2 until 2010.  The pandemic may knock off a third of the value of trade this year.  Even before Covid  protectionism had surfaced especially in the USA (and not only due to Trump; the Democrats are  onside on this issue at least). All the signs are that Trump intends to ignore the history of a century ago and return to escalating trade warfare with China and perhaps the EU. So far, however, the rest of the world has been reluctant to follow suit perhaps understanding all too well where it would lead. Crucially, however, trade in goods is becoming less valuable than trade in services: finance, consultancy, education, IT.  There is no reason to believe that this trade is in retreat and the pandemic’s accelerator effect on remote conferencing and learning may have sped it up.

For many, the defining characteristic of globalisation is the multinational company with its global supply chains, cosmopolitan senior management and tax domicile on some obscure island in the Caribbean.  Foreign investment is expected by UNCTAD to fall 30/40% this year overall. Some argue that after Covid and the conflict with China, there will be massive re-shoring of business with the multinationals coming ‘home’. But this was predicted also after Fukushima and didn’t happen. Those companies worried about over-exposure to China look as if they are finding new off-shore locations like Vietnam and India. After all, lockdown has been equally disruptive from suppliers down the road who have closed as from those at the other side of the world. Another argument sometimes heard is that genuine global companies are losing ground to nationally-based state capitalists like Rosneft, Aramco, Emirates, Guandong Power or Embraer. But it is striking that state capitalism is flourishing in ‘sunset’ industries like oil. The global growth companies-Apple, Face-book, Google, Huawei, Ten Cents and Ali Baba- are still very much in business.

Where globalisation is in trouble is because governance arrangements - the rules and institutions overseeing it - have broken down.

Another dimension of globalisation is in the form of cross-border financial flows. In the short run, cross-border flows have fallen sharply in the wake of expected, serious, Covid-related, economic damage in emerging markets. But that is likely to be a short retreat until confidence and growth is restored. Argentina for example is now on its 9th debt default since its independence 200 years ago. The punters keep coming back for more.

I have just skimmed the surface. Globalisation in a narrow economic sense is reinforced by cultural exchange accelerated by social media, U-tube, Netflix and Spotify. Globalisation takes many forms: Bollywood films shown throughout Africa and the Middle East; Brazilian soaps in Russia; A Korean film winning the Oscars; Scandi crime novels; Argentine Tango; Reggae; Chinese musicians winning international music competitions; World Cup football; the Olympics; the Nobel prize; scientific research networks.

Where globalisation is in trouble is because governance arrangements - the rules and institutions overseeing it - have broken down: corruption in FIFA; Trump’s war with the WHO and WTO; Brexit. But for the most part, regional or global governance is holding reasonably well from the thousands of technical standard setting bodies- which set the rules for shipping , aviation, post and telecoms, the Internet, manufacturing quality control and general inter-connectivity-to financial bodies -like the IMF, Bank of International Settlements, World and regional banks- the bodies overseeing the global environmental commons and the big, overarching bodies like the UN and the European institutions. Those who predict or want a de-globalised world have a lot of unpicking to do.

And what is the alternative?  A world of self-sufficient enclaves like North Korea? or Bhutan before the world was allowed in? or survivalist redoubts in the Rockies? Or, more likely, retreating to the world of warring nation states which prevailed a century ago?


Watch Vince Cable debate The Rise and Fall of Globalisation and China: Ally or Threat at HowTheLightGetsIn 2020 Online 22-25 May. An online event link nothing before. Get tickets here

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