**Globalization Isn’t Over. It’s Changing.** **By Peter Coy, The New York Times, April 11, 2022**
**...**
**The chart shows that the volume of world trade is higher than ever. To be sure, the global economy is also bigger than ever. To account for that, the following chart measures world exports as a share of output. It shows that globalization has been flat in recent years and dipped sharply in the pandemic year of 2020 but is still well above its level of a few decades ago [a stable channel of 26% - 31% of world GDP from 2005 through 2022 with minor ups and downs]...**
**Another aspect of globalization is foreign direct investment, which is cross-border purchases of factories, real estate, companies and so on and excludes portfolio investment such as purchases of stocks and bonds. The chart below shows that it rebounded in the first half of last year, after a soft period. [> $800 billion in 2021, up from ~$500 billion in 2018 - 2020]...According to the Organization for Economic Cooperation and Development, China was the No. 1 recipient of foreign direct investment in the first half of 2021, with the United States second and Britain third. ...**
**International migration and travel, which are another form of globalization, are still on the rise. And if countries reshore production, they may need more immigrants to do the additional work, especially if they have low population growth...** [end quote]
Globalization developed due to efficiencies. The trend toward globalization is still growing. Reshoring may improve security of supply and enhance national security, but the added costs would be inflationary.
It’s not the end of globalization even if the buyers and sellers are reorganized.
The benefits of globalization were supposed to end war. It would be impossible to invade a neighbor to seize resources, weather the economic and political sanctions for doing so, and still come out financially ahead vs. peacefully participating in the global marketplace. Russia is testing this theory. Will the rest of the world make the financial pain to Russia severe enough to prove the “theory of globalization” correct? We’ll see.
Bringing jobs home, and keeping the supply chain close should help undo some of the damage of 40 years of “trickle-down” economics. Middle-class wages stagnated for more than a generation while few benefits of globalization flowed to the average worker, and more money got shoveled to the top of the economic pyramid.
The benefits of globalization were supposed to end war. It would be impossible to invade a neighbor to seize resources, weather the economic and political sanctions for doing so, and still come out financially ahead vs. peacefully participating in the global marketplace. Russia is testing this theory. Will the rest of the world make the financial pain to Russia severe enough to prove the “theory of globalization” correct? We’ll see.
Paul Krugman had a column on this topic written prior to the latest imbroglio. He noted that Europe’s dependence on gas from Russia could lead to problems because globalization only prevents war if you assume all the actors are rational and acting in their own economic best interests, labels that don’t seem to apply to Putin.
<Middle-class wages stagnated for more than a generation while few benefits of globalization flowed to the average worker, and more money got shoveled to the top of the economic pyramid.>
The average worker (3rd quintile) did benefit during the past 50 years, especially women workers. The lowest 2 quintiles were stagnant.
Benefits of globalization flowed to every consumer due to lower prices. Regardless of whether the consumer was working or not. People in deep poverty are hurt more by inflation.
Bringing low-paying outsourced jobs back to high-paid U.S. workers will benefit those workers and the Macro economy if their spending is enough to tip the balance. But prices will inevitably rise which will hurt all consumers, especially the poor.
Google “Poverty in the United States: 50-Year Trends and Safety Net Impacts.” It’s a PDF file so I can’t post a link. Loads of data.
“Middle-class wages stagnated for more than a generation while few benefits of globalization flowed to the average worker, and more money got shoveled to the top of the economic pyramid.”
Probably true, but when taking a global view what constitutes middle-class or average worker?
intercst: Will the rest of the world make the financial pain to Russia severe enough to prove the “theory of globalization” correct? We’ll see.
I commented to an Indian friend about the countries who were neutral (or outright trading with Russia), and specifically India.
He sent this video which was uploaded back in December 2021.
He said Indians have a long memory.
Sunmary: In 1971, India (Hindus) were conflicting with Pakistan, and threatening nuclear. The US and Britain, took Pakistan side, and tried to use naval force to force India to accede to Pakistan.
Who blocked the US and British navies?
Yep. Russia.
The West also tried to block India getting nukes. Russia supported India’s right to develop their own tech.
And today, April 12, the US is AGAIN threatening India to not trade with Russia. A Reuters headline for today:
US to Modi: Buying more Russian oil is not in India’s interest.
This is similar to US and Mexico interactions, IMO.
Mexicans, too, have a long memory.
As do the other anti-US factions in the former Latin American banana republics.
The touted Globalization was really China Most Favored Nation, focus on getting access for US corporatations to the 1.5B people market… IGNORE other countries… or, rather continue the previous domineering actions toward other “less favored nations”.
Maybe “globalization” was an Edward Bernays’d figment of our western imaginations?
The last paragraph reminds me of King Belshazzar summoning Daniel to his banquet to tell him what the mysterious “hand of God” writing on the wall meant. Or, if I did not know better, Krugman hopped aboard Mr. Peabody’s Time Machine set for 2022:
Angell was right to describe the belief that conquest pays as a great illusion. But the belief that economic rationality always prevents war is an equally great illusion. And today’s high degree of global economic interdependence, which can be sustained only if all major governments act sensibly, is more fragile than we imagine.
I just got a globalization related email. An English friend married to a Venezuelan woman who live in Spain with one of their daughters spent several months in San Francisco visiting their younger daughter. In San Francisco they all three generations (parents, grandparents and grandchildren) got covid but not too bad because they had their covid shots.
Globalization might shrink and swell but you can’t put the genie back in the lamp. Over half a millennium so far.
The Captain
one distant cousin left Germany for South Africa in 1936. Now I have cousins in Kenya, Israel, and Australia. Tracked down with the help of Google!
Unfortunately I don’t know how to locate this info using Google. Years ago I read a lot of Stuart Kauffman’s output. One factoid that stuck in my mind is that the more connections a network has the more the network tends to disorder. In Complexity life is described as existing between Order and Chaos with perfect order being death. What we are seeing is increasing chaos in the globalized economy. As sanctions and tariffs take their toll globalization should shift towards order. Just a thought.
