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Retreat or a New Wave of Globalisation?

The present world economic juncture

Whereas the prominent globalisation critic Walden Bello already sees the “retreat of globalisation” – 15 years after its advent –, the World Bank in its most recent report, Global Economic Prospects (see note), believes that a new globalisation wave is about to hit and the decisive issue is how to manage the globalisation of the next 25 years. Yet the protagonists, notes Rainer Falk, have more in common than generally assumed.

 

On the surface, their positions could scarcely diverge more. However the contradiction weakens when one considers that proponents and critics each use different concepts of globalisation. The anti-globalisers usually identify globalisation as “neoliberal globalisation” or a new, more internationalised phase of capitalist development whereas the others mean increasing cross-border economic integration facilitated by both accelerating international flows of trade and investment and the rapid development of so-called new technologies. Whereas there are – without any doubt – indicators of a crisis of “neoliberal globalisation” (for example the recent retreat of many countries from the IMF), there is no indication whatsoever of a substantial slowdown or decline in global economic integration – quite the contrary.

* Short-term economic slowdown
In the short-term we will witness – even in a historical perspective – above average global economic expansion with growth rates in the South twice as high as in the North and output growth again being exceeded by the increase in international trade and investment (>>> World Economic Perspectives in 2007). The picture is somewhat dulled by the frequently cited global imbalances (double deficits in the USA, primary commodities prices, etc.) which have not yet become an open crisis even if everyone says that they cannot be maintained indefinitely. Also according to the new UN report, World Economic Situation and Prospects (see note), there is a real risk of chaotic adjustment even if that does not necessarily mean that the US economy slides into recession.

However, the UN authors – like others – forecast a slight slowdown of the global economy in 2007 – caused above all by a decline in the US as a result of cooling off in the real estate market (down to 2.2% growth) and weaker growth in Europe (approx. 2%) which had risen more than generally expected in 2006. The augurs also prophesy continued robust expansion in the South for 2007 (approx. 6%) with peaks in East Asia (7.6%), China (10%) and South Asia (7%). Even the taillights of the world economy, the LCDs, are currently growing at an average of about 7%.

* Long-term global integration
It is much more difficult of course to prepare long-term scenarios. Hence the World Bank’s main thesis that world economic growth will be higher between 2006 and 2030 than it was between 1980 and 2005 almost automatically provokes criticism, especially as it predicts a 3.1% annual rise in per capita income in the developing countries – despite population growth. Rising incomes, the World Bank says, would lead to halving of absolute poverty (from 1.1 billion to 550 million people with income below US$ 1 per day) and shape the formation of a global middle class with approximately 1.2 billion people by 2030 in the Third World alone.

In this scenario, globalisation is driven by the new economic powerhouses in the South and above all by a new dynamic in trade in services whereby unanticipated technological advances could even further accelerate the process. As far as the scenario’s susceptibility to crisis is concerned, the Bank can point to the fact that over the past 25 years the long-term globalisation trend was not stopped, not even by periodic interruptions, whether by recessions or more dramatic events such as the debt crisis, the demise of the Soviet Union or the tragedy of 11 September 2001.

Despite the optimism, the World Bank does not lose sight of all the risk factors that could intervene. According to the Bank, three factors place globalisation under permanent stress: growing inequality in and among nations, rising tensions in the labour markets and increasing environmental pressure. Even the World Bank can no longer ignore these factors. Recently a new study by the UN WIDER institute shows rising global inequality: only 2% of the world’s population own more than half of the world’s wealth (see note). Inequality and more aggressive competition in the labour markets have sparked a new globalisation debate among the world’s leading economists. Moreover, since former World Bank chief economist Nicholas Stern issued his report on climate change, also the international environmental policy debate has entered a new phase.

* The management of globalisation
According to the World Bank, it is just because of these “stress factors” that careful management of the next globalisation phase is crucial. However what the Bank proposes here (more development aid, more trade liberalisation and new institutions to protect the Global Commons) is so vague and weak that one has to ask “why bother?”. Much more specific and without ignoring the obstacles, the UN report favours the establishment of a new international mechanism for macroeconomic policy co-ordination. Nonetheless, even that would not be sufficient to “humanise globalisation” – an idea which is once again being discussed in many progressive circles.

For radical critics like Walden Bello, "globalisation with a human face" may be nothing but an illusory attempt to steer the “corporate-driven” globalisation in a “social democratic” direction. Yet it is worth noting that even Bello sees the major issue today as how to manage the retreat of neoliberal globalisation to avoid chaos and war as followed the first globalisation wave from 1815 until the outbreak of World War I. Of course, there are substantial doubts as to whether we are (again) at a comparable historic juncture. Yet it is worth noting that the misleading thesis of a desirable “de-globalisation” is no longer mentioned in this context. Could it be that after the retreat of neoliberal globalisation a new phase of globalisation will follow in which the main issue is to correct its worst errors?

Notes:
* James B. Davies/Susanna Sandström/Anthony Shorrocks/Edward N. Wolff, The World Distribution of Wealth, 70 pp., WIDER: Helsinki, 5 December 2006.
* Walden Bello, Globalization in Retreat, in: Foreign Policy in Focus, Washington DC, 27 December 2006.
* UN DESA, World Economic Situations and Prospects 2007, 177 pp., United Nations: New York 2007.
* World Bank, Global Economic Prospects 2007: Managing the Next Wave of Globalization, ca. 180 pp., The World Bank: Washington DC 2006.

Posted for subscribers: 22 Jan 2007
Posted as free content: 4 Feb 2007

Recommended citation: Falk, Rainer (2007), ‘Retreat or a New Wave of Globalisation?’, World Economy & Development In Brief, Issue 1/Jan-Feb (www.wdev.eu)







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