Is Globalization Coming To An End?

This week the International Monetary Fund expressed its concerns about the health of the global economy, pointing to the weakening situation in China as just one symptom. In fact, the once-heralded Chinese economy is slowing, as is evident by the first decline in exports in generations.

This has led many to predict that globalization may be nearing an end, writes Daniel Gros of the Center for European Policy Studies.

In seeking an answer to why global trade is declining, Gros says the key to understanding trade trends lies in the trend in commodity prices.

“When they were high, they drove increased trade – to the point that the share of trade to GDP rose – fueling hype about the inevitable progress of globalization. But in 2012, commodity prices began to fall, soon bringing trade down with them,” he says.

That hype, however, has been shown to be, well, just hype.

“Most economies are more open today than they were a generation ago. But it is now becoming clear that the widespread perception that globalization is some overwhelming and inexorable force largely reflected the side effects of the last decade’s commodity boom,” concludes Gros.

Globalization, particularly the impact of trade pacts on local economies, has become a heated issue in this year’s presidential campaign as Donald Trump and Bernie Sanders have railed against trade in heavily protectionist tones. While academics are debating whether trade is an economic benefit or a bust, others are focused on globalization’s failure to produce promised democratization.

“True, examples like Spain, Chile and South Korea seem to confirm that authoritarian countries tend to democratize as they join in global production. But we may have been misled by our tendency to think in terms of linear extrapolations. Global development doesn’t lead all nations toward a common destination. Globalization’s most dramatic success, China, shows little progress toward democratization,” argue Hilton Root and Hong Zhang in U.S. News & World Report.

Noting that the promise of a rebirth of liberal democracies may have fallen short, they contend that the opportunity and openness which globalization provides may be the obstacle in some sense.

“The reason why non-Western countries don’t converge toward liberal democracy is because globalization enables them to avoid doing so. Countries, like species in an ecosystem, do not all seek to be the strongest, most advanced or most complex. Some turn to predation, and others settle for parasitism or symbiosis,” the authors assert.

Those expressing opposition to free trade and globalization often point to China and low-skilled workers as a primary reason for declining wages and job loss. But American Enterprise Institute scholar James Pethokoukis says politicians would be better served by paying attention to the transformation of industry through technology, rather than chasing the Chinese bogeyman.

“Beijing planners view advanced robotics as key to raising productivity and keeping economic growth strong as the country transitions to a more service-based economy. It’s already happening, actually. The nation is on pace to soon have more industrial robots than any other advanced economy. Foxconn, a Taiwan-based company that employs over a million workers to assemble iPhones and other Apple products in mainland China, wants robots to take over 70 percent of its assembly work within three years,” he writes, noting studies which indicate the era of low-wage workers may be passing.


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