Summary:
Dani Rodrik sees plenty of evidence (presidential electoral campaign, housing crisis, energy and food prices, ...) that the current globalisation model, originating in the 1980's and 1990's and characterized by an agenda of deeper liberalisation and economic integration, is unsustainable. There has been a remarkable turnaround in the intellectual climate, and globalisation's enemys are no longer simply protectionists and anarchists, and globalisation's cheerleaders ought to realize that. The confrontation over globalisation has clearly moved well beyond the streets to the columns of the financial press and the rostrums of mainstream think tanks. If globalisation is to survive, it will need a new intellectual consensus to underpin it. (Published: 13/07/08)
Notes:
- globalisation has already collapsed once:
- 1914: WWI; end of gold standard era
- economic globalisation
- has enabled unprecedented levels of prosperity in advanced countries, and hundreds of millions of poor workers in China and elsewhere in Asia
- but: rests on shaky pillars
- shaky pillars
- national markets: tend to be supported by domestic regulatory and political institutions
- global markets: only "weakly embedded"
- no global anti-trust authority
- no global lender of last resort
- no global safety nets
- no global democracy
- i.e. global markets suffer from weak governance, and therefore from weak popular legitimacy
- urgent need to discuss these issues
- heightened by recent events
- US presidential electoral campaign:
- highlighted the frailty of the support for open trade in the world's most powerful nation
- sub-prime mortgage crisis:
- has shown how lack of international coordination and regulation can exacerbate the inherent fragility of financial markets
- has exposed the downside of economic interdependence without global transfer and compensation schemes
- rising oil prices
- have increased transport costs
- analysts wondering whether the outsourcing era is coming to an end
- looming disaster of climate change
- may well be the most serious threat world has ever faced
- who are globalisation's enemies?
- no longer the violent anarchists, self-serving protectionists, trade unionists, and ignorant, if idealistic youth
- doubts, questions, and scepticism
- Paul Samuelson: reminding his fellow economists that China's gains in globalisation may well come at the expense of the US
- Paul Krugman: arguing that trade with low-income countries is no longer too small to have an effect on inequality
- Alan Blinder: worrying that international outsourcing will cause unprecedented dislocations for the US labour force
- Martin Wolf: writing of his disappointment with how financial globalisation has turned out
- Larry Summers ("Mr Globalisation"): musing about the dangers of a race to the bottom in national regulations and the need for international labour standards
- clearly constitutes a remarkable turnaround in the intellectual climate
- what they want is not to turn back globalisation
- but: to create new institutions and compensation mechanisms – at home or internationally – that will render globalisation more effective, fairer, and more sustainable
- their policy proposals are often vague (when specified at all), and command little consensus
- but: confrontation over globalisation has clearly moved well beyond the streets to the columns of the financial press and the rostrums of mainstream think tanks.
- important point for globalisation's cheerleaders to understand
- they often behave as if the "other side" still consists of protectionists and anarchists
- Today, the question is no longer: "Are you for or against globalisation?" The question is: "What should the rules of globalisation be?"
- first three decades after 1945 were governed by the Bretton Woods consensus
- a shallow multi-lateralism that permitted policy-makers to focus on domestic social and employment needs, while enabling global trade to recover and flourish
- this regime was superseded in the 1980's and 1990's by an agenda of deeper liberalisation and economic integration.
- That model, we have learned, is unsustainable. If globalisation is to survive, it will need a new intellectual consensus to underpin it.
- The world economy desperately awaits its new Keynes.
