The (Second) Decline of Globalization

By Shlomo Maital    


  Thomas Friedman’s definition of globalization in The Lexus and the Olive Tree (2009, p. 9)  is this:   “…inexorable, integration of markets, nation-states, and technologies”, enabling the “individuals, corporations and nation-states to reach around the world farther, faster, deeper, and cheaper than ever before, and in a way that is enabling the world to reach into individuals, corporations and nation-states farther, faster, deeper, and cheaper than ever before.”

   Each of us can reach everyone else (to sell, inform, communicate, buy, invest), and everyone else can reach us.  This is globalization.  It has good points – doubtless, it made Asia wealthy.  It has bad points – those who were not able or willing to globalize were left behind, way behind. 

   But there are signs that globalization is declining. As more and more countries face rising unemployment and economic stagnation, they seek ways to export their troubles, by limiting imports and free trade. This is a doom loop, because the more countries limit trade, the worse the global economy becomes, and the worse unemployment becomes. 

   Harvard historian Niall Ferguson points out that all this has happened before.  In his Foreign Affairs (2005) article, “Sinking Globalization”, Ferguson notes that in the 19th C., the world was perhaps even more globalized than today, with the British Empire running huge flows of people, money and goods, across its colonies, and with free enterprise freer than today, because governments were tiny or non-existent.  Moreover, the global monetary system was stable because it was built on the gold standard, which prevented spendthrift nations like America from excessively printing paper money. 

   But all this ended when a German submarine sank the American ship Lucitania off the cost of Ireland, killing 1,000 (including 128 Americans).  “Between 1914 and 1918,” notes Ferguson, a horrendous war stopped [globalization]…  international trade, investment and migration all collapsed. Moreover the attempt to resuscitate the world economy after the war’s end failed.  The global economy effectively disintegrated with the onset of the Great Depression (1929-39).” 

   Globalization was revived, only when world leaders met at Bretton Woods, NH, in July 1944 and redesigned the architecture of the world economy.    There are calls for a new Bretton Woods conference. This is vital.   When each country tries to solve its own economic problems, in a narrow win-lose manner, all countries suffer.  Our problems are global. They need a global solution.  

    Let world leaders learn from Ferguson, and from history. The collapse of the first globalization episode was horrendous.  The second episode could be no less awful.  There is still time to prevent it.