The Rise, Fall and Reorientation of Globalisation

The Disillusionment And Ever-Changing Nature Of An Idea That Once Overtook The World

D. H. Kang

A COIN ALWAYS HAS TWO SIDES. SOME MAY SAY EVEN THREE. Globalisation was once heralded as the absolute pinnacle of economic phenomena. But times have changed. Many of its greatest supporters are its greatest critics. Let’s talk about globalisation’s ascension and decline, and its future.

Before anything, I think it would be rather inappropriate for me to throw around a buzzword like “globalisation” without first explaining what it is. As the name suggests, it refers to interactions of people, governments, and corporations internationally. Strictly speaking in terms of economics, globalisation involves transactions of goods, services, data, technology, and the economic resources of capital.

Let me take you on a journey through space and time. Half a dozen years ago, many economists began to discuss an apparent trend; that globalisation no longer brought the benefits that it once did. Indeed, at the January gathering of the World Economic Forum in Davos in 2017, the apparent attitude had changed from one of placidity to one that was abound by a significantly heavier atmosphere, with defensiveness and self-reproach mixed within usual rhetoric. Christine Lagarde, the former head of the IMF dropped a hammer that many noticed but were too afraid to say. She asserted that there were clear detrimental effects of globalisation, such as job losses and depressed wages, and many nations would benefit from changing their economic stance. Truly, globalisation slowly wasn’t shaping out to be what it was supposed to be.

But even outside of these “big dog” meetings that I’m sure not many have heard of, at the time there was, and there still is much protectionist rhetoric against free trade that everyone has willingly or unwillingly witnessed. Donald Trump bellowed, “Americanism, not globalism, shall be our creed,” at a Republican convention in July 2016. This trend has also been reflected in far-right movements in Europe, which, alongside their stricter immigration policy (like the Alternative for Germany), advocate against the free movement of goods in order to protect national sovereignty over their nation’s markets. Many also see globalisation as a threat to identity preservation, and much of the rhetoric in these nations revolves around seeing themselves as the victims and losing out in this trade. Other nations, like Australia and China too have decreased their international trade as of late.

There is some truth in these words. Since the 1970s, data shows that lower-skilled European and American workers have endured a drastic decline in the real value of their wages. Some economists argue that much of the insecurity is due to technological change, where machinations provide cheaper labour, and hence crowd-out the job availability for these workers and drive down their wages. But globalisation too is partly to blame, say economists like Turkish economist Dani Rodrik. Workers in developed countries are required to compete with workers in developing countries for labour, having to accept increasing concessions in wages and conditions; businesses could simply outsource their labour where it is cheaper, as many transnational companies, like Nike have done.

This harm is notably two-fold as it can be bad for developing nations, too. Globalisation opened the door for exploitation within economically weaker nations, and the notorious phenomenon of “brain-drain”, where many talented workers who could become the pillars of various industries in these developing countries leave for developed countries in favour of better working conditions and pay. Many industries in these nations also tend to be dominated by pre-existing companies from overseas, making it difficult for home-grown industries to establish themselves, especially in Latin America, the Middle East, Africa, and Asia. Hence, they have utilised protectionist policies to increase trade barriers, replacing imports with domestically produced goods in order to combat this. While this has worked better in some places like East Asia and much of Latin America, other nations like Argentina have not been so well off. After they increased their tariffs on imported goods too steeply, their factories cost more to set up than the value of the goods they produced – an undesirable result.

There are also clearly significant negative externalities in the form of environmental degradation when labour is outsourced to developing countries with an inability and unwillingness to implement stringent environmental regulations.

To be completely honest with you, my readers, my original intention was simply to provide a viewpoint on the ramifications of globalisation that has led to its decline. But while researching, I came across an intriguing article by Erik van der Marel, on how potentially globalisation isn’t in decline, but rather just adapting to the status quo. “Old trade” has certainly declined, involving the exchange of merchandise. In fact, it has done so ever since the 2008-9 Global Financial Crisis. Following the COVID-19 crisis, trade in goods has declined even further, by 2%, according to the World Bank. But within its weakening embers, a new globalisation of digital services, ideas and other intangibles has overtaken the world, that continues to grow as we speak. As our world changes, and computers and machinations provide increasingly convenient opportunities to access information and labour, the digital revolution has exposed major economic opportunities for collaboration and trade of ideas, data, and intangible opportunities. Even though it’s not what it once was, globalisation still looks like it’s going to be around for a while – so let’s continue to keep up with it.

Two graphs showing the rise in trade of digital goods and services.