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Think Again: Globalization

By Moisés Naím

March/April 2009

Forget the premature obituaries. To its critics, globalization is the
cause of today's financial collapse, growing inequality, unfair trade,
and insecurity. To its boosters, it's the solution to these problems.
What's not debatable is that it is here to stay.

HENNING KAISER/AFP/Getty Images
Rising tides: Is globalization still lifting these boats?
"Globalization Is a Casualty of the Economic Crisis."

No. That is, not unless you believe that globalization is mainly about
international trade and investment. But it is much more than that, and
rumors of its demise—such as Princeton economic historian Harold
James's recent obituary for "The Late, Great Globalization"—have been
greatly exaggerated.

Jihadists in Indonesia, after all, can still share their operational
plans with like-minded extremists in the Middle East, while Vietnamese
artists can now more easily sell their wares in European markets, and
Spanish magistrates can team up with their peers in Latin America to
bring torturers to justice. Globalization, as political scientist
David Held and his coauthors put it, is nothing less than the
"widening, deepening and speeding up of worldwide interconnectedness
in all aspects of contemporary social life"—and not just from one
Bloomberg terminal to another.

Around the world, all kinds of groups are still connecting, and the
economic crisis will not slow their international activities. In some
cases, it might even bolster them.

Global charities, for instance, will face soaring demand for their
services as the economic crisis greatly expands the number of those in
need. Religions, too, will benefit, as widespread hardship heightens
interest in the hereafter. At a time when cash is king and jobs are
scarce, globalized criminals will be one of the few, if not the only,
sources of credit, investment, and employment in some places. And
transnational terrorists will not be deterred by a bad economy. The
collapse of the credit-default swap market didn't prevent 10 Pakistani
militants from wreaking havoc in Mumbai in November.

It's true that private flows of credit and investment across borders
have temporarily plummeted. By the end of 2008, for example, U.S.
demand for imported goods fell drastically, shrinking the country's
trade deficit by almost 30 percent. In China, imports dropped 21
percent and exports nearly 3 percent. Last November, capital flows to
emerging markets reached their lowest level since 1995, and issuance
of international bonds ground to a halt.

But as private economic activity falls, the international movement of
public funds is booming. Last fall, the U.S. Federal Reserve and the
central banks of Brazil, Mexico, Singapore, and South Korea launched
$30 billion worth of currency arrangements for each country designed
to stabilize their financial markets. Similar reciprocal deals now tie
together central banks throughout Asia, Europe, and the Middle East.

Yes, some governments might be tempted to respond to the crisis by
adopting trade-impairing policies, imposing rules that inhibit global
financial integration, or taking measures to curb immigration. The
costs of doing so, however, are enormous and hard to sustain in the
long run. What's more, the ability of any government to shield its
economy and society from outside influences and dangers has steadily
evaporated in the past two decades. There is no indication that this
trend will be reversed.

Globalization is such a diverse, broad-based, and potent force that
not even today's massive economic crash will dramatically slow it down
or permanently reverse it. Love it or hate it, globalization is here
to stay.
"Globalization Is Nothing New."

Yes it is. Historians such as A.G. Hopkins have argued in recent years
that the wave of globalization that surged in the 1990s is just a
continuation of a long-term process that started as far back as when
migrating pre-modern human communities first encountered each other.
They also note that the steamship revolutionized transportation as
much or more than the advent of containerized cargo shipping and that
the printing press, the telegraph, and the telephone were technologies
as disruptive in their day as the Internet. In short, there is nothing
new under the sun.

Still, the current wave of globalization has many unprecedented
characteristics. As Internet access penetrates the most remote corners
of the globe, it is transforming the lives of more people, in more
places, more cheaply than ever before—and the pace of change is
accelerating faster than we can hope to chronicle it.

Today's globalization is also more individualized than ever. The
telegraph was most intensively used by institutions, but the Internet
is a truly personal tool that allows Spanish women to find marriage
prospects in Argentina, and South African teenagers to share music
files with peers in Scotland. Contemporary globalization is also
different in that the speed at which it is integrating human
activities is often instantaneous and almost costless. Moreover, the
quantitative change in each of globalization's components—economic,
cultural, military, etc.—is so enormous that it creates a qualitative
change. This alone has opened possibilities that are completely
new—and also consequences that humanity has never seen before.
"Globalization No Longer Means Americanization."

It never did. For some critics, globalization has been little more
than an American project aimed at expanding U.S. economic, military,
and cultural dominance. Yet, since the 1980s, Japanese sushi has gone
as global as Latin American telenovelas or fundamentalist Islam, while
massive inflows of Hispanic immigrants have had a huge impact on U.S.
society.

Indeed, it is hard to defend the proposition that globalization is a
one-way street designed to spread American values and interests around
the world. The changes wrought by globalization have enabled new and
improbable rivals to dispute America's hegemony in a wide variety of
sectors. Al Qaeda and the Taliban have proven to be resilient
adversaries for the mighty U.S. military. Their international
mobility, funding sources, and recruiting prowess are greatly enhanced
by the forces that drive globalization: ease of travel,
transportation, and communication; economic liberalization; and porous
borders. The sovereign wealth funds from Asia and the Middle East that
have displaced American banks, the successful challenge that Indian
filmmakers and Latin TV producers have mounted against Hollywood's
leadership in the global entertainment markets, and the success of
Chinese manufacturers are also rooted in a world shaped by two decades
of rapid economic growth and globalization.

The United States has greatly benefited from globalization. But it has
hardly been alone in doing so.
"Great Power Politics Are Back."

They never went away. We only thought they did.

Back in the 1990s, the dominant view of globalization held that
booming business ties between countries were the best antidote to war.
International commerce was seen as a strong countervailing force
against nationalistic impulses. Thanks to revolutionary innovations in
information technology, communication, and transportation, distance
and geography were perceived to be less important in shaping
international politics and economics. Power, it was thought, would
inevitably shift from governments to the private sector and
nongovernmental organizations.

These ideas, popularized in articles and books with titles like The
End of History, The Death of Distance, and The Lexus and the Olive
Tree, gained wide acceptance during the 1990s. Then came the attacks
of Sept. 11, 2001. Minimalist government went out of fashion and
demands mounted for the state to provide security at any cost. The
financial crisis has amplified this trend. Laissez-faire is out and
activist governments are in; deregulation has become a four-letter
word and the cry for more government control of the financial sector
is universal.

Now that the world economy has tanked, globalization skeptics say the
value of commercial ties as a prophylactic against conflict has
weakened along with it. And with the return of stronger governments,
they say, traditional power plays between rival countries are bound to
intensify. Evidence for this view abounds, from resurgent nationalism
in Russia, Asia, and Latin America to the obvious role of history and
geography in fueling the conflicts in the Middle East and South Asia.
Such examples, they argue, show that the stabilizing effects of
economic globalization are vastly overstated.

But claims about the return of strong governments and nationalism are
equally overstated. Yes, China might team up with Russia to
counterbalance the United States in relation to Iran, but meanwhile,
the Chinese and U.S. economies will be joined at the hip (China holds
more than a trillion dollars of U.S. debt and the United States is the
main destination for its exports). Russian Prime Minister Vladimir
Putin's tough talk about restoring his country's international
standing and challenging America's leadership will be hard to sustain
given that Russia's economy is one of the most damaged by the
financial crisis, and the oil revenues that enabled its newfound
influence are dwindling. Venezuelan President Hugo Chávez is inviting
foreign oil companies back.

The bottom line: Nationalism never disappeared. Globalization did not
lessen national identities; it just rendered them more complex. Even
in a Bill Gates era, today's Otto von Bismarcks still wield great
power. Globalization and geopolitics coexist, and neither is going
anywhere.
"Globalization Is by and for Rich People."

Go tell the Indians. Or, for that matter, the Chinese, or the emerging
middle classes in Brazil, Turkey, Vietnam, and countless other
countries that owe their recent success to trade and investment booms
facilitated by globalization. Until the financial crisis broke out in
2008, the middle class in poor countries was the fastest-growing
segment of the world's population.

This trend will undoubtedly slow, and in some countries it will be
tragically reversed as the crisis pushes back large numbers of people
into the ranks of the poor. But the fact is that in the past two
decades, a significant number of poor countries succeeded in lifting
tens of millions out of poverty thanks to globalization. In China, for
example, the poverty rate fell 68 percent between 1981 and 2005.

China and India are the paradigmatic examples. Unfortunately, they are
also paradigmatic examples of countries where abject poverty coexists
with obscene wealth. In poor and rich countries alike, economic
inequality has become a major concern and globalization, especially
the freer trade it produces, often gets blamed as the source of
widening income disparities. It's maddeningly hard, though, to prove
that globalization actually produces inequality. We don't even know
whether inequality in the world is going up or down.

When economists Pinelopi Goldberg and Nina Pavcnik recently examined
the connection between globalization and inequality, they could not
establish a causal link between the two—even after surveying all the
major studies on the subject and examining the best available data. In
2008, economists Sudhir Anand and Paul Segal published the results of
their equally ambitious survey of recent research on global
inequality. They, too, failed to establish a clear trend. "It is not
possible to reach a definitive conclusion regarding the direction of
change in global inequality over the last three decades," they wrote.
On the other hand, the evidence that absolute poverty has sharply
declined during the same time frame is overwhelming.
"Globalization Has Made the World a Safer Place."

Not really. It's true that in the past 20 years, the number of armed
conflicts between countries has plummeted. Even accounting for the
wars in Iraq and Afghanistan, the amount of armed conflict in the
world is at an ebb not seen since the 1970s. One study found that
between 1989 and 2003, only seven wars between nation-states broke
out. The likelihood that any given country was embroiled in a conflict
was at its lowest point since the 1950s.

The problem is that other forms of conflict and violence have soared.
The number of people killed or injured by terrorists has gone from
about 7,000 in 1995 to more than 25,000 in 2006. Very often, these
terrorist attacks are either directly carried out by foreigners or
planned, funded, and coordinated by networks that operate
internationally. Violent crimes are also going up in many countries,
especially the poorest ones. Often, these high crime rates result from
the activities of international criminals, mainly narcotraffickers.
These days, more beheadings are taking place in Mexico than in Iraq or
Afghanistan. Many European countries are reporting higher crime rates
as a result of the expanded presence of international criminal gangs
in their midst. One could also add the spread of contagious diseases
and nuclear proliferation to the list.

Today's world may be at a lower risk for total annihilation than it
was when rival superpowers armed with large nuclear arsenals
threatened each other with mutual assured destruction. But we now live
in an age where a large and growing number of actors empowered by
globalization have the potential to cause large-scale damage and
substantial loss of human lives. (The fading memory of an era when the
fate of the planet hinged upon Soviet bureaucrats, rather than rogue
Pakistani scientists, seems quaintly comforting in 2009.) As the
economic crisis deepens, desperation might lead to heightened
violence, and some governments might be more tempted to exploit
international conflicts to distract their impoverished populations
from their dire situations at home.
"The Financial Crisis Is a Symptom of Globalization Run Amok."

No, you just think it is. Longtime antiglobalization activists such as
Naomi Klein may feel vindicated by the present state of affairs,
faulting villains on Wall Street and in world capitals for promoting a
form of "disaster capitalism" that has spiraled out of control. Yes,
globalization has multiplied the number of problems that no
organization or country can solve on its own: not just international
economic crises, but also nuclear proliferation, illegal migration,
transnational crime, pandemics, and more. The need to collaborate in
solving collective problems is as obvious as the difficulties in
achieving solutions. The world's multilateral institutions are Cold
War holdovers more often described as "dysfunctional" than
"indispensable."

But they are indispensable, and with the world in crisis mode, demands
to shore up global governance have increased. But no matter how many
high-level commissions, think-tank reports, books, and articles on the
subject, these efforts have not yielded urgently needed drastic
changes in multilateral institutions, international law, rules, and
coordinating mechanisms.

One reason for the lack of progress: There's still no clarity on how
to overcome the obstacles that have long blocked any major reforms.
Most proposals for a global governance structure built for the
globalization era rest on the assumption that what has been missing is
the political will of the world's most powerful countries, notably the
United States. This approach fails to address the obvious fact that
collaborating with others often means relinquishing power, a
concession that does not come easily to sovereign nations.

This does not mean that countries ought to cede power to a world
government or to an all-powerful, supranational entity that will rule
over world affairs. It is precisely because such an institution is not
possible that governments must collaborate with one another more
effectively. Yet that is a goal that has proved very elusive.

Unfortunately, it is highly likely that the efforts to minimize the
costs of globalization, steer international integration, solve
international crises, and better manage the global commons will
continue to fall short. Whether the issue is climate change or
terrorism, loose nukes or avian flu, the gap between the need for
effective collective action at the global level and the ability of the
international community to satisfy that need is the most dangerous
deficit facing humanity.
For more frontal assaults on the conventional wisdom, visit FP's Think
Again Archive.