Despite some recent reversals, there is evidence that globalisation is on the march again … For most of the 1990s and 2000s, it seemed almost inevitable that the world would become ever more integrated and borders ever less bothersome. The crash of 2008, which spread havoc around the world faster than any previous financial crisis, called that assumption into question. Headlines about the world becoming flatter and more interconnected gave way to talk of balkanised financial markets, stalled trade talks and growing popular nationalism. Some economists have predicted another era of "deglobalisation", similar to the interwar years of the last century. – The Economist
Dominant Social Theme: Nothing wrong with interconnected markets. They ought to be celebrated.
Free-Market Analysis: Such articles as the one excerpted above on globalization seem dishonest to us. The article deems globalization an unmitigated good but makes no distinction between the globalization of governance and the globalization of the marketplace.
Nothing wrong with marketplace globalization. But how can globalized regulation, globalized taxation and globalized monopoly central banking be part of a positive trend?
Yet internationalism remains a powerful elite theme, perhaps the strongest of them all.
Globalisation's advance has never been inevitable or smooth; nor, despite some backward steps since the crash, has it ended. That, at least, is the conclusion of the latest DHL Global Connectedness Index, published earlier this month. Two economists, Pankaj Ghemawat of New York University's Stern School and Steven Altman of IESE Business School compiled it using data from 140 countries, which account for 99% of the world's GDP and 95% of its population. It shows that, after a big post-crisis drop, the trend of growing global interconnection resumed last year. Globalisation is back.
There are many definitions of globalisation, and the index uses one that is fairly all-embracing. It encompasses four main types of cross-border flow: trade (in both goods and services), information, people (including tourists, students and migrants) and capital. It tracks not just the depth of international connections (how much activity crosses borders), but also their breadth (how many different borders are being crossed) and their direction (how do outward and inward flows compare). The authors found that the depth of global integration, probably the most straightforward definition of globalisation, fell sharply after 2008, by nearly one-tenth. Yet since then it has recovered strongly. By 2013 it was well above its pre-crash peak.
By contrast, the breadth measure continued to slide in 2013, and is now nearly 5% below its peak. In other words, there are more cross-border connections being made, but with fewer places. This may reflect the growing popularity of bilateral trade deals in the absence of big multilateral liberalisations. Another factor may be Western firms' slow response to the growing weight of emerging economies. In 2013 emerging economies generated only 17% of the profits of 100 of the biggest firms based in rich countries, even though they accounted for 36% of the world's GDP. The ten countries that globalised most in 2013 are all emerging markets, most of them in Latin America and the Caribbean.
… The globalisation of information, measured by such things as the number of cross-border phone calls and Skype usage, slowed after the crash but did not fall, and accelerated again in 2013. Capital flows remain below pre-crisis levels, however. Trade in goods and services plunged in the aftermath of the crash, rebounded a bit, and then started sliding again, when measured by value (volumes are rising, albeit sluggishly).
We can see from the above that globalization is treated as a kind of godsend. Presumably the idea is that expanded cross-border business creates all sorts of potential for profitability and wealth expansion.
The article goes on to mention disapprovingly that there is "evidence that protectionism is growing." However, the article counters that trend with the cheery observation that a "WTO plan to dismantle barriers to trade" is now moving ahead, the first in 20 years.
Too bad, in our view. The dysfunction of the WTO, regularly bemoaned in the mainstream media, was yet another benefit of the 2008 crisis. Whatever mischief WTO negotiators wanted to initiate was stymied by a general unwillingness of trading partners. Predictably, it seems, this particular "good thing" has come to an end.
Another unfortunate trend that The Economist sees positively: The trend of trade negotiators to build "coalitions of the willing rather than waiting for a global consensus." Such an approach means smaller, often regional rather than global trade pacts, but progress on less ambitious deals is easier to arrive at.
The article concludes by warning that the legacy of the Crisis of 2008 is populism and anti-globalism. "Political pressure to retreat from the world builds slowly but is also slow to dissipate. That seems to be the case this time too, in many European countries at least, where populist parties are still growing in strength, even though the local economy has stabilized."
Not so fast. From where we stand, such populism is to be welcomed because what The Economist calls "globalism" is basically the most dysfunctional kind of regulatory capitalism. What good is global trade when it advances the repressive elements of modernity?
If the private sector were driving globalism, there wouldn't be much to complain about from a free-market perspective. But inevitably, it is government and politicians that write trade treaties (and generally create market policies) and they tend to afford some economic elements far more advantages than others.
Another term we could use in referring to the modern globalist trend is "technocratic." Globalization is increasingly supported by endless official forums in which the bureaucrats of 20, 50 even 100 or more countries get together to lubricate commerce via government stratagems.
Treaties, cross-border trade and other elements of international capitalism recognize and enshrine a mercantilist status quo. As stated, they recognize and expand monopoly central banking, regulatory oversight and increasingly repressive fiscal policies. This is no way to build a freer or more robust business infrastructure.
Business people ought to be the ones building the new globalism, as free as possible of fiscal and monetary considerations. The Crisis of 2008 was very obviously brought about by too much government, too many regulations and most importantly, too much money.
Impossibly low interest rates and money printing generally creates business cycles – and in 2008 the business cycle reached a disastrous low. Why then ought we to think that the same procedures and players that created the 2008 crash are the ones to be trusted with expanding globalism?
This article in The Economist uses "globalism" as a description of international connectedness. But George Orwell's world was connected, too. A more global world may indeed be good for business and prosperity but not one that enables the current technocratic authoritarianism to flourish worldwide.
Surely the world needs to be run by the Invisible Hand of competition, not moderated by the heavy hand of government force.
We return to our initial observation that this is dishonest reporting. By simply describing the globalist trend without investigating its construction and support, The Economist gives us the idea that marketplace internationalism is the inevitable outcome of expanded commerce.
But in fact, the outcome in this sad world is often one of repression and worse. The Economist and its writers need to check their premises.