The new globalization
As we enter a new year and a new decade, is our country equipped and prepared for the challenges of a rapidly transforming world under a new and different phase of globalization now transpiring?
Last year’s World Economic Forum dubbed it Globalization 4.0, or the fourth wave of globalization, noting peculiar circumstances and trends surrounding it quite unlike the previous waves the world has seen.
The first wave of globalization, although it wasn’t called as such, happened in the late 19th and early 20th century. At that time, technological advances in transportation via steamships and railways made it so much easier to move people and commodities across the continents, leading to a surge in cross-border trade.
The share of world trade in global GDP rose from 6 percent in 1800 to 14 percent in 1914. Foreign direct investments accounted for a full half of total investments in Britain in the early 1900s, whereas the same ratio was only 6 percent for the United States, Germany and Japan in the early 2000s.
By this measure, these economies were much less globalized than Britain was a century before. Two world wars ended that first wave, and led to economic stagnation.
The postwar recovery from 1945 onward brought about the second wave, this time aided by wide application of the internal combustion engine in land, sea and particularly air transport, especially with the development of jet engines.
World trade saw a renewed surge, and nations worked toward further liberalizing trade and established a coordinated global financial system.
The establishment of the World Trade Organization, coupled with further technological advance, this time prominently in information and communication technology, ushered in the third globalization wave in the 1990s. The new technologies under this globalization wave have given it a measure of inevitability, such that countries wishing to block it simply cannot.
One sees this in some governments’ futile efforts to regulate information received by its citizens through the internet or satellite television, or largely vain efforts (including ours) to curb the smuggling of commodities, and even of people (i.e., human trafficking). Eliminating cross-border crimes like terrorism, illegal drug trade and money laundering have also become next to impossible.
Meanwhile, freer movement of inputs and intermediate goods across borders had made global value chains the prominent driver of world trade.
“Made in the World” (rather than “Made in China” or “Made in the USA”) has become the more appropriate label for many products now formed out of components and services sourced from multiple countries. By 2000, world trade made up half of global GDP, and by 2008, trade in intermediate goods far exceeded that in final goods and primary inputs. World poverty also dropped sharply from 41 percent in 1981 to 20 percent in 2005.
In the Philippines, countless Filipino lives have improved from the gainful employment of family members overseas, or in business outsourcing firms and electronics companies that have flourished here at home.
The same globalization has widened the choice of commodities and lowered and stabilized prices, especially of basic commodities, that Filipino consumers now enjoy.
In its latest Economic Policy Monitor focused on the “New Globalization,” the Philippine Institute for Development Studies (PIDS) notes how the global financial crisis of 2008 provoked a slowdown in world trade.
Cosmopolitanism and international cooperation have been replaced by nationalism and confrontation, and the recent rise in populist leaders has been part of this new twist.
Extreme positions of hatred, violence and ignorance are finding wider audiences with the proliferation of social media, threatening to unravel the social fabric in dangerous ways.
PIDS notes that the new globalization is marked by (1) economic restructuring, (2) worsening inequality, (3) dampened international cooperation on “global public goods” like communicable disease control, counterterrorism measures and climate change mitigation, and (4) weakening of social cohesion and trust.
We will focus on some of these trends in subsequent columns.
