The destiny of the Global economy: Transition, recession, or the end?
The global economy has been heavily debated as there is a lack of consensus as to its meaning, emergence, extent, and future. For the past century, there is a push and pull on globalization, decolonization, and world war-divided countries, after which an acceptance of the common economic ideology of capitalism united the world. Globalization made the world economically and culturally alike (Agnew, 2001) as countries adopted free markets and trade liberalization to integrate into the global economy. In turn, there is an increased mobility of goods, capital, resources, and information powered by technology and fueled by consumers’ yearning for cheap and a variety of products (Ohmae, 1995). However, today, developed countries' protectionism and huge inequality among nations threaten the global economy. This could be a sign of decline, a change, or an end. To judge the global economy’s future requires a comprehensive understanding of the history and current issues of globalization.
The emergence of globalization is debatable but the beginnings and evolution of global trade are definite. International trade has long existed as early as the 1st century BC when luxury goods from China first appeared in Rome. Though the Silk Road is not the start of globalization as the value of exports was relatively small and middlemen were involved in the exchange of goods, it had established global trade links between Europe and Asia. In the 7th-15th century, both religion and trade spread in the Arab world. Islamic merchants controlled Indian and Mediterranean trade and expanded too far east Indonesia. The main focus of trade is spices which remained a luxury product hence globalization did not happen but the spice sea route and silk road between the East and the West existed. The scientific revolution in the 15th century propelled a truly global trade when colonizers integrated new lands into their economies. Even though trade became more global, it does not represent a truly global economy as trade remained small compared to total GDP, global supply chains are limited to colonies (Vanham, 2019) and it is more exploitation than trade.
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Given these facts, the global economy as we know it is not totally new as there an existing global trade flows and networks long before the term globalization emerged. Friedman (1999) argues that “what is new today is the degree and intensity with which the world is tangled together into a single global village, the huge number of people and countries able to participate in today’s global economy and information networks, and to be affected by them”. Developing countries, too, have been increasingly part of global trade (Brahm, 2002). Indeed, previous international trade has changed people’s lives, the way countries evolved and shaped the global economy, the same way globalization is changing the world today. The idea of irreversible globalization stands up in many ways (Mărginean, 2018). The only difference is that technological advancement and global trade institutions strengthened the extent of globalization.
The industrialization of western economies sparked modern globalization. Innovation in communication and transportation enhanced interconnectedness and intensive economic globalization as evidenced by an increase in trade, investment, and migration, and the spread of western culture in parts of Asia and Africa. There is also a greater level of institutionalization such as regulation of migratory flows, economic interactions governance by international financial institutions, and the emergence of international political institutions (Held et al., 1999). Trade slowed down and nationalist trade policies became popular. Although some argue that this indicates de-globalization, the story of globalization, however, was not over. The end of World War II marked a new wave of globalization (Vanham, 2019).
Contemporary globalization intensified cooperation on many levels with the unique combination of various forces characterized by unprecedented global flows, interactions, and networks in all social domains, regionalization, westernization, territoriality, democratic governance, and differentiated patterns of migration (Held et.al, 1999). Giddens (1999) & Dickens (1998) also perceived globalization as revolutionary: political, technological, cultural, and economic spheres are creating global shifts. Despite being integrated or globalized in many aspects, skeptics argue that globalization is exaggerated and that we do not have a fully global economy but an international economy that responds to it (Hirst, P. & Thompson, G., 1992). Data would show otherwise, the internet has changed the way people interact and do business, popular culture is on the rise, international NGOs blossomed and international governmental bodies such as WTO are making leaps.
Globalization they say is on steroids as global exports accelerate to about a quarter of the global GDP and trade rose to about half of the world GDP in 2000 (Vanham, 2019). Undeniably, globalization has opened up new and extensive opportunities for worldwide development; however, developing countries are lagging behind. The lack of technology and technical knowledge makes it difficult for some countries to compete in the global economy. Developed countries with strong governance and information and communication technologies certainly have a competitive advantage. Some contend that developed nations are the winners of globalization and even call globalization as a new form of imperialism. But why are they moving towards protectionism?
The anti-globalization sentiments are a result of inequality, immigration, and labor market issues. The Brexit and Trump elections are turning points in globalization. The 2008 global financial crisis and migration crisis have slowed down globalization and created a negative impact on developed economies (Mărginean, 2018). The rising unemployment, sectoral devastation in many traditional industries, and intensifying international competition inculcated fear in advanced economies (Gordon, 1994). The rise of China and the balance of power between East and West have also led to protectionist policies. However, to go against the currents of globalization is weak, if not pointless (Gordon, 1994). The collapse of communism is a testimony that protectionism is not the solution. Communist countries such as China rose by opening up to the global market and embracing free trade. To move in the opposite direction is a mistake, as globalization continues having survived global depression, world wars, and financial crises in the past.
The history of economic globalization clearly depicts transitions (new wave of globalization) and declines (de-globalization), but it never died (Mărginean, 2018). The globalization cycle of James (2009) clearly captures this scenario, wherein when something bad happens people blame too much interaction and withdraw from the global setting. The shock is often affiliated with financial collapse but the global economy evolved with it. Therefore, it will exist even if the USA leaves WTO, as much as, the EU will survive even without the UK. Whether we deem globalization as good or bad, reversible or not, new or old, the global economy, just like other life forms evolves. Now the world is entering a new kind of globalization with complex value chains, a digital economy, and a balance of power between the US and China (Vanham, 2019). The recessions are part of transitions, but it never ends.
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