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Globalization. Bridges have been built for more than 4,000 years, linking regions together and opening routes for trade and people to pass through. From humble brick arches to mega concrete structures. They`ve all played a role in Globalization.
The supporters of globalization argue that improvements in communication and transportation have created a more open, tolerant, and peaceful world. In the last 100 years, it has resulted in massive growth for global trade as economies, people, and cultures gradually integrated. But Globalization hasn`t been without its drawbacks and the Russian invasion of Ukraine has helped to push international relations to a breaking point. The chief economist of the International Monetary Fund said: “The worst is yet to come, and for many people, 2023 will feel like a recession”.
Pierre Olivier Gourinchas said “Globalization has delivered, that`s the first thing we should realize. It`s lifted hundreds of millions of people out of poverty. It`s allowed the rise of emerging markets. It`s on the back of a process of integration into the global economy.”
The roots of success according to historians, date as far back as the 1st century BC to the old Silk Road. It transported luxury goods such as Gold, silver, and of course silk between China and Rome, the two great Civilizations at the time. Then came the spices trade as Islamic Merchants dominated the Indian Ocean and Mediterranean Sea routes.
By the end of the 15th century, the Age of Discovery had begun with its slave trade. The appalling exploitation of Africans helped European explorers conquer and integrate new territories, such as the Americas into their economies. The first waves of Globalization really began at the end of the 18th century with the British Industrial Revolution, which through improved manufacturing and transportation, saw huge growth in global exports.
The two world wars ushered in a new era dominated by the United States with the help of technologies like Cars and planes. Then came the digital revolution which turbocharged Globalization to new frontiers, as China joined the USA as the two global powers. However, the latest wave of Globalization has seen a lot of pushback, as a result of technological advances and mass job losses. Worker exploitation and a rise in inequality have also been, at least partly, attributed to Globalization.
Kevin Gallagher is an economist and Director of the Global Development Policy Center at Boston University he said “You know, how stock markets have bubbles? And then there`s a correction. We`ve spent so much time almost thinking about the Globalization of markets as an end, rather than a means to help us live in a more stable, more equal, and more environmentally sound way.”
The Russian invasion of Ukraine has, in Gourinchas’ opinion, revealed underlying “Geopolitical tectonic plates”. Imagine the two countries are tectonic plates that rub against each other to create an earthquake. That earthquake has a ripple effect on other tectonic plates. Now think about rising commodities prices, disrupted trade, a refugee crisis, and weaker economies thanks to the central bank raising interest rates at a faster-than-expected pace all rifts that have helped push the world`s economies apart.
While the conflict between Russia and Ukraine may be the epicenter of the earthquake, the geopolitical tectonic plates that make up the globalized economy have been drifting apart for years. The globalized economy. Major economies began to drop tariff rates on imports, and many nations entered into free trade agreements following a series of events after the Second World War including a meeting in 1944 between 44 countries and the fall of the soviet union.
But over the last ten years, the backlash against Globalization has fuelled populist movements all around the world, which in many cases led to protectionist policies. Protectionism is the economic policy of restricting imports to shield a country`s domestic industries from foreign competition. Data from Global Trade Alert shows that protectionist trade policy interventions have been growing faster than liberalizing ones.
The globalized economy. The rise of China and other emerging market economies came about largely thanks to Globalization but this growing economic power may also be contributing to its fragmentation. China has been one of the largest beneficiaries of globalization when it entered the WTO. It really grew an incredible amount and it really allowed the rest of the world to grow. While China adhered to the letter, most of the time our international trade rules, they played a stronger role with their state to make sure that they produced a lot of things at home and moved into the new sectors of the future in ways that markets won`t do on their own.
Back in 2018, President Donald Trump accused China of unfair trading practices and intellectual property theft and began to slap tariffs on China to encourage US consumers to buy American products. The globalized economy. China hit back with its own tariffs and accused the US of trying to prevent it from and accused the US of trying to prevent it from becoming the world`s dominant economic power.
Rebalancing of economic power
There is a rebalancing of economic power and governance that is taking place. We`ve had this slow process over the last 40 years of the rise of emerging markets as their economic power increases, there is a need for an adjustment in the way we address and deal with problems. We`re coming out from a period where we had very strong dominance from one country and groups of countries, but we have to plan and organize the transition to this multipolar world.