Posts Tagged ‘globalization’
“The only thing that will redeem mankind is cooperation”*…
Industrial policy is on the rise around the world, as nations (and sometimes regions) create laws and policies that prioritize domestic competitiveness and economic benefit over free trade, using tools like investment, regulation, and tariffs. Increasingly these policies are being animated not only by economic, but also security concerns. (See, e.g., here and here.)
The traditional worry about policies like these is that they create barriers (thus tensions) between countries… which, at a time when the world desperately needs collaborative responses to global challenges like climate change, could be deeply problematic. But Nathan Gardels argues that industrial policy might be precisely what we need to set the stage for meaningful cooperation…
The remarkable story future historians will tell about the late 20th and early 21st century is how inviting a Communist Party-state to enter a global economy built on the capitalist principles of free trade and markets ended up transforming the neoliberal West into a bastion of protectionism and state-directed industrial policy of the same kind now condemned as unfairly advantaging China’s rise.
They will also note the further irony that the logic of opening to China in the 1970s — and of China’s opening to the West — had a national security premise of checkmating the Soviet Union. Half a century on, the Middle Kingdom is more closely aligned with Russia than in the later stages of the Cold War, primarily as a way to do the opposite: checkmate America’s continuing dominance of the very world order that enabled its rapid ascent.
Adding more complexity to this reversal of history are the related global challenges that have arisen in both East and West: decarbonization of fossil-fuel dependency to mitigate climate change while coping with the disruptions of the digital revolution and the advent of artificial intelligence.
These threads of deglobalization, climate and technological revolution have all converged in the competitive assertion of “industrial strategies” in which nation-building is integrally bound up with international security concerns. China is driven by the fear of not catching up, the United States by alarm at losing the upper hand and Europe by the angst of falling behind both and losing its strategic autonomy.
China’s industrial strategy is called “dual circulation,” essentially a policy of self-reliance and resilience in the face of newfound Western hostility. It is aimed at bolstering domestic consumption and production, including conquering the latest AI technologies with its own resources, while off-loading manufacturing overproduction abroad and expanding trading ties in the global South.
The U.S. strategy, as crafted by President Joe Biden, encompasses a broad array of protective tariffs and subsidies. The CHIPs Act and related policies seek to foster homegrown microchip production while denying frontier technologies to China and restructuring supply chains to friendly nations. The Inflation Reduction Act promotes extensive new investment in the green energy transition. Incongruously, at the same time, a tariff of 100% has been imposed on the import of Chinese electric vehicles. Further tariffs on component inputs, such as batteries sourced in China, are already on track.
Following the U.S, the European Union is also set to raise its own stiff tariff hikes on Chinese EVs as it pursues a European Green Deal to transition to renewables on its own terms. Europe also seeks to blunt the impact of the “buy American” restrictions of the IRA so that fleeing capital looking to exploit the subsidized U.S. market does not hollow out its own green industries before they can be firmly established.
Earlier this month, the former European central banker and one-time Italian prime minister, Mario Draghi, has gone the next step and plotted out a detailed, long-term “industrial strategy” to close the gap with the U.S. and China, which he calls “an existential challenge” to the European way of life.
“If Europe cannot become more productive,” Draghi writes in his report, “we will be forced to choose. We will not be able to become, at once, a leader in new technologies, a beacon of climate responsibility and an independent player on the world stage. We will not be able to finance our social model. We will have to scale back some, if not all, of our ambitions.”…
[Gardels unpacks both European and Australian industrial policy..]
… For all these divergent industrial strategies to succeed in the end depends largely on whether sustained nation-building investment outstrips the duration of protective measures that ought to be only a temporary respite from asymmetrical conditions while they are rebalanced.
To the extent these decoupled initiatives do succeed, they will, paradoxically, come to be regarded not as the antithesis of global cooperation, but as the precondition for it. Only when the power centers of China, the U.S. and Europe are assuredly in control of their own destiny will they be secure enough to open up and cooperate on the global issues that impact them all equally…
The case that divergent “industrial strategies” in the U.S., China, and Europe can create the security to open up: “The Precondition for Global Cooperation,” from @NoemaMag.
* Bertrand Russell
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As we reconfigure, we might spare a thought for a man who provided an important part the foundation on which opponents of industrial policy base their arguments: Pierre Le Pesant, sieur de Boisguilbert (or as he is more commonly known, simply Boisguilbert); he died on this date in 1714. A French Enlightenment law-maker and economist, he was the first of the great continental liberals– a proponent of laissez-faire and minimalist government and an early opponent of mercantilist “Colbertisme.” He is considered one of the fathers of the notion of an economic market.
“Our grandfathers lived in a world of largely self-sufficient, inward-looking national economies – but our great-great grandfathers lived, as we do, in a world of large-scale international trade and investment, a world destroyed by nationalism.”*…
There’s a growing chorus of opinion arguing that the era of global trade is ending. To be sure, nationalism and the protectionism it can spawn are on the rise. But is globalization’s decline now locked in? In a recent speech at the University of Tokyo, Bill Emmott questions the conclusions of The Economist (which he used to edit) and others predicting an end to a world in which goods and services flow relatively freely– pointing out the global trade is still very much alive. It’s a provocative talk, eminently worth reading in full; it ends with a framework for thinking about the question…
The history of globalisation that I have outlined has shown the development of international trade in goods and services to have been driven by three main forces:
- Peace, war and international security
- National external trade policies
- Technology, and its effect on transaction costs
It is clear that the biggest discontinuity in the growth of international commerce was caused by what we now know as the two world wars of the 20th century.
Russia’s invasion of Ukraine in 2022 has certainly diverted trade and financial flows considerably, thanks to direct security effects and to sanctions. But neither it nor the other conflicts we can see occurring in the Middle East, Africa or elsewhere have been sufficient to block global trade in a significant way.
Tensions between the US and China similarly have some diversionary effects, and are to some degree echoed in tensions between China and Europe and China and Japan. But those geopolitical tensions would have to get a lot worse to have a major effect on global commerce as a whole, in part because the world economy has become much more complex and multipolar in nature.
The one conflict that would be very likely to have a major “deglobalisation” influence would be a conflict between the US and China over Taiwan, for such a conflict would very likely reach catastrophic proportions and would force many countries to choose sides. We cannot predict how commerce and the exchange of ideas would look after such a conflict, just as my European forebears would have been unable to predict the world after 1918 from the standpoint of 1914 or earlier.
Secondly, nations’ external trade policies. As I commented earlier, there has been a clear trend back towards protectionism since the 2008 financial crisis, one that has lately been reinforced by policies aimed at the energy transition and by US-China tensions.
This has not yet however had a major effect on world trade. It could, of course. The big question is what would happen if Donald Trump is re-elected as US President in November and carries out his promise to impose a 10% tariff on all imported goods, and a 60% tariff on all goods from China.
One quite likely possibility is that other countries – including the EU, the UK, Japan and indeed China – would retaliate by imposing higher tariffs of their own, and we would be in a trade war, one that could escalate higher and higher.
The wider such a trade war became – i.e., taking in more countries – the likelier it would be to make deglobalisation visible in the trade statistics. Nonetheless, we should bear one other thing in mind: this is that services, especially digitally delivered services, have become an increasingly important component of global commerce. How they would be affected is unpredictable.
Third, we need to bring in the related and vitally important force of technology. Falling costs and increasing digital capabilities have been a big factor behind the growth of global commerce. The entry of artificial intelligence means that there is no likelihood of this technological force for cross-border commerce diminishing.
During the pandemic, the science and technology behind vaccine development, production and distribution were all global, even if geopolitics introduced some distortions. Moreover, the basic reason why the US stock market has been driven by the so-called “Magnificent Seven” tech stocks is that the market for all of them is global.
Geopolitics threatens, but as yet it does not decide. External trade policies at present divert, but only an escalatory trade war would be likely to have a major effect. Technology, however, remains the most powerful force in favour of continued globalisation.
The future of globalisation will be determined by the interplay of these three forces. There is no currently pre-determined destiny for globalisation. Many commentators over-play the influence of politics and under-play the role of technology. Extreme outcomes are possible, and need to be prepared for. But we must above all keep an open mind as to what the actual outcome will be…
We see deglobalization everywhere except in trade statistics: “The future of globalisation: a history,” from @bill_emmott and his excellent newsletter, Bill Emmott’s Global View .
(Image above: source)
* Paul Krugman
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As we tackle trade, we might recall that it was on this date in 1178, about an hour after sunset, that five monks from Canterbury saw “the upper horn [of the Moon] split in two.” They reported their experience to the abbey’s chronicler, Gervase, continuing (as he reports) “From the midpoint of the division a flaming torch sprang up, spewing out, over a considerable distance, fire, hot coals and sparks. Meanwhile the body of the Moon which was below writhed, as it were in anxiety, and to put it in the words of those who reported it to me and saw it with their own eyes, the Moon throbbed like a wounded snake. Afterwards it resumed its proper state. This phenomenon was repeated a dozen times or more, the flame assuming various twisting shapes at random and then returning to normal. Then, after these transformations, the Moon from horn to horn, that is along its whole length, took on a blackish appearance.”
In 1976, a geologist suggested that this was consistent with the location and age of the 22-km lunar crater Giordano Bruno. However, such asteroid impact would have ejected debris causing an astonishing meteor shower, which was never reported. So, while that is plausible, it’s now considered more likely that the sighting of 1178 was an exploding meteor that just happened to line up with their view of the Moon.
“We all live in each other’s shadow”*…
Further, in a fashion, to yesterday’s post, Nathan Gardels, editor of Noema Magazine, on a new book by Children of a Modest Star, “A clear-eyed and urgent vision for a new system of political governance to manage planetary issues and their local consequences” by Jonathan Blake and Nils Gilman…
Globalization was about markets, information flows and technology crossing borders. The planetary is about borders crossing us, embedding and entangling human civilization in its habitat. That, in a nutshell, is the core thesis of a new paradigm-shifting book by Jonathan Blake and Nils Gilman titled “Children of a Modest Star: Planetary Thinking for the Age of Crises.”
The concept of planetarity describes a new condition in which humans recognize not only that we are not above and apart from “nature,” but that we are only beginning to understand the complexities of our interdependencies with planetary systems.
“If Copernicus’s heliocentrism represented the First Great Decentering, displacing the Earth from the center of the heavens, and Darwin’s theory of evolution by natural selection the Second Great Decentering, then the emergence of the concept of the Planetary represents the Third Great Decentering, and the one that hits closest to home, supplanting the figure of the human as the measure and master of all things,” Blake and Gilman write.
As further argued by the authors in a forthcoming Berggruen Press volume, “the Planetary as a scientific concept focuses on the Earth as an intricate web of ecosystems, with myriad layers of integration between various biogeochemical systems and living beings — both human and non-human. Drawing on earth system science and systems biology, this holistic understanding is being enabled by new planetary-scale technologies of perception – a rapidly maturing technosphere of sensors, networks, and supercomputers that collectively are rendering the planetary system increasingly visible, comprehensible and foreseeable. This recently-evolved smart exoskeleton — in essence a distributed sensory organ and cognitive layer — is fostering an unprecedented form of planetary sapience.”
The open question is how, and if, human governance in the late-stage Anthropocene can align with the knowledge we are now attaining.
Paradoxically, planetary-scale connectivity is also what divides us. Convergence entails divergence because the universalizing and rationalizing logic of technology and economics that ties the world together operates in a wholly different dimension than the ethos of politics and culture, rooted in emotion and ways of life cultivated among one’s own kind.
While the emergent world-spanning cognitive apparatus may be sprouting the synapses of a synchronized planetary intelligence, it clashes with the tribal ingathering of nations and civilizations that remain anchored in their historical and spatial identity.
Consequently, this new domain of encompassing awareness is — so far — as much the terrain of contestation as of common ground…
[ Gardel unpacks Blake’s and Gilman’s proposition, which would devolve some decision-making on some issues, even as it globalized others. By way of addressing the Herculean challenge of creating the equitable, workable global system for addressing global challenges they [propose– a task made the more difficult by the divergence in values discussed yesterday— he invokes an episode from American history…]
… At the turn from the 19th to the 20th century, America was morphing from an agricultural, largely rural society into an urban and industrial one. Cultural norms and familiar ways of living were in upheaval. Political institutions that had become dysfunctional were challenged — not so unlike the disruptive transition to digital society and planetarity we are experiencing at present.
The turmoil of transition in those days gave birth to what became known as the Progressive Era. Its progenitors sought to address the new social concerns of a more complex society — working hours and safety conditions in newfangled factories, women’s suffrage, public health exposure from mass food processing, poor urban infrastructure from housing to water and electricity, the concentration of power in the railroad and banking trusts as well as exploitative private utility companies.
The Progressive Era response in the American states was to move in two directions at once. The movement promoted direct democracy whereby citizens could make laws and enforce accountability directly, skirting the corrupt and bought-off legislators of the patronage machines, through the citizens’ ballot initiative, the referendum and the recall of elected officials. At the same time, elected Progressive governors delegated authority to nonpartisan experts for commissions that regulated commerce, banking, railroads and electric utilities on behalf of the public interest. Professional city managers, unelected but accountable to direct democracy and the elected officials who appointed them, came into being for the first time to competently administer ever more complex urban environments.
In time, the reforms that resulted from this pairing of citizen engagement and technocracy percolated up to the national level into institutions such as the Interstate Commerce Commission or the Food and Drug Administration and led to the abolition of child labor, the eight-hour working day and women’s right to vote.
The point of this brief detour into American history is not to suggest the unworkable proposition of direct democracy at a planetary scale, but simply to say that it is well within the capacity of the political imagination to marry modes of consent with delegated authority in a way that confers legitimacy.
The paradigm shift and governing innovations Blake and Gilman propose in “Children of a Modest Star” are no less realizable over time than what has come before because, now just as then, changing circumstances demand it…
A paradigm shift from globalization to planetary governance? “The Third Great Decentering,” @NoemaMag @JonathanSBlake @nils_gilman.
* Irish proverb (in Gaelic, “Ar scáth a chéile a mhaireann na daoine”), quoted by Irish Prime Minister Michael Martin
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As we think systemically, we might recall that on this date in 1998 The Price Is Right aired its milestone 5,000th episode (the longest-running game show in history, it’s over 10,000 episodes to date, and still chugging along). Every prize given away on that episode was a car.
“I discovered that if one looks a little closer at this beautiful world, there are always red ants underneath”*…
E.O. Wilson once observed that “Ants have the most complicated social organization on earth next to humans.” John Whitfield explores the way in which, over the past four centuries, quadrillions of ants have created a strange and turbulent global society that shadows our own…
It is a familiar story: a small group of animals living in a wooded grassland begin, against all odds, to populate Earth. At first, they occupy a specific ecological place in the landscape, kept in check by other species. Then something changes. The animals find a way to travel to new places. They learn to cope with unpredictability. They adapt to new kinds of food and shelter. They are clever. And they are aggressive.
In the new places, the old limits are missing. As their population grows and their reach expands, the animals lay claim to more territories, reshaping the relationships in each new landscape by eliminating some species and nurturing others. Over time, they create the largest animal societies, in terms of numbers of individuals, that the planet has ever known. And at the borders of those societies, they fight the most destructive within-species conflicts, in terms of individual fatalities, that the planet has ever known.
This might sound like our story: the story of a hominin species, living in tropical Africa a few million years ago, becoming global. Instead, it is the story of a group of ant species, living in Central and South America a few hundred years ago, who spread across the planet by weaving themselves into European networks of exploration, trade, colonisation and war – some even stowed away on the 16th-century Spanish galleons that carried silver across the Pacific from Acapulco to Manila. During the past four centuries, these animals have globalised their societies alongside our own.
It is tempting to look for parallels with human empires. Perhaps it is impossible not to see rhymes between the natural and human worlds, and as a science journalist I’ve contributed more than my share. But just because words rhyme, it doesn’t mean their definitions align. Global ant societies are not simply echoes of human struggles for power. They are something new in the world, existing at a scale we can measure but struggle to grasp: there are roughly 200,000 times more ants on our planet than the 100 billion stars in the Milky Way…
…
The more I learn, the more I am struck by the ants’ strangeness rather than their similarities with human society. There is another way to be a globalised society – one that is utterly unlike our own. I am not even sure we have the language to convey, for example, a colony’s ability to take bits of information from thousands of tiny brains and turn it into a distributed, constantly updated picture of their world. Even ‘smell’ seems a feeble word to describe the ability of ants’ antennae to read chemicals on the air and on each other. How can we imagine a life where sight goes almost unused and scent forms the primary channel of information, where chemical signals show the way to food, or mobilise a response to threats, or distinguish queens from workers and the living from the dead?
As our world turns alien, trying to think like an alien will be a better route to finding the imagination and humility needed to keep up with the changes than looking for ways in which other species are like us. But trying to think like an ant, rather than thinking about how ants are like us, is not to say that I welcome our unicolonial insect underlords. Calamities follow in the wake of globalised ant societies. Most troubling among these is the way that unicolonial species can overwhelmingly alter ecological diversity when they arrive somewhere new. Unicolonial ants can turn a patchwork of colonies created by different ant species into a landscape dominated by a single group. As a result, textured and complex ecological communities become simpler, less diverse and, crucially, less different to each other. This is not just a process; it is an era. The current period in which a relatively small number of super-spreading animals and plants expands across Earth is sometimes called the Homogecene. It’s not a cheering word, presaging an environment that favours the most pestilential animals, plants and microbes. Unicolonial ants contribute to a more homogenous future, but they also speak to life’s ability to escape our grasp, regardless of how we might try to order and exploit the world. And there’s something hopeful about that, for the planet, if not for us.
The scale and spread of ant societies is a reminder that humans should not confuse impact with control. We may be able to change our environment, but we’re almost powerless when it comes to manipulating our world exactly how we want. The global society of ants reminds us that we cannot know how other species will respond to our reshaping of the world, only that they will…
Bracing: “Ant geopolitics,” from @gentraso in @aeonmag.
* David Lynch
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As we investigate insects, we might spare a thought for Sara Josephine Baker; she died on this date in 1945. A physician, she was a pioneer in public health and child welfare in the United States in her roles as assistant to the Commissioner for Public Health of New York City, and later, head of the city’s Department of Health in “Hell’s Kitchen” for 25 years. Convinced of the value of well-baby care and the prevention of disease, in 1908 she founded the Bureau of Child Hygiene– and decreased the death rate by 1200 from the previous year. Her work made the New York City infant mortality rate the lowest in the USA or Europe at the time. She set up free milk clinics, licensed midwives, and taught the use of silver nitrate to prevent blindness in newborns.
Baker is also remembered as the public health official who (twice) tracked down “Typhoid Mary.”
“The international situation is desperate, as usual”*…
… so desperate, an increasing number of pundits argue, that globalization– the “flat world” proclaimed by Tom Friedman– that was to totem of the turn of the century, is no longer possible. But as the estimable Martin Wolf argues, we shouldn’t be too hasty– nor too sweeping and blunt– in our judgements. Trade in goods may be slowing, but the potential for technology-enabled trade in services remains huge…
What is the future of globalisation? This is among the biggest questions of our time. In June, I argued that, contrary to increasingly widespread opinion, “Globalisation is not dead. It may not even be dying. But it is changing.” Among the most important ways in which it is changing is via the growth of services provided at a distance.
…
A crucial point is that the expansion of trade in such services has depended little on trade agreements. The regulation of service activities focuses on final services, not intermediate ones. There exist, for example, strict rules on selling accounting services in the US. Yet there are few rules on the qualifications of the workers that do the paperwork behind the provision of such services.
Thus, a “US accountant can employ pretty much anybody to tally up a client’s travel expenses and collate them with expense receipts”. Examples of occupations that provide intermediate as opposed to final services include book-keepers, forensic accountants, screeners of CVs, administrative assistants, online help staff, graphic designers, copy-editors, personal assistants, X-ray readers, IT security consultants, IT help staff, software engineers, lawyers who check contracts, financial analysts who write reports. The list goes on. As Baldwin argues in The Globotics Upheaval, the potential for this sort of technology-enabled trade is huge. It will also be highly disruptive: the white-collar workers who provide these services in high-income countries are an important part of the middle class. But it will be hard to protect them.
In all, the evidence suggests that natural economic forces have largely been responsible for past changes in the pattern of world trade. Growing concern over the security of supply chains will no doubt add to these changes, though whether the result will be “reshoring” or “friendshoring” is doubtful. More likely is a complex pattern of diversification. Meanwhile, technology is opening up new areas of growth in services…
“Globalisation is not dying, it’s changing,” from @martinwolf_ in @FT.
* Tom Robbins, Even Cowgirls Get The Blues
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As we contemplate commerce, we might send muckraking birthday greetings to Upton Sinclair; he was born on this date in 1878. A writer, activist, and politician, he is probably best remembered for his classic novel, The Jungle, which exposed labor and sanitary conditions in the U.S. meatpacking industry, causing a public uproar that contributed in part to the passage a few months later of the 1906 Pure Food and Drug Act and the Meat Inspection Act.
Many of his novels can be read as historical works. Writing during the Progressive Era, Sinclair describes the world of the industrialized United States from both the working man’s and the industrialist’s points of view. Novels such as King Coal (1917, covering John D. Rockefeller and the 1914 Ludlow Massacre in the coal fields of Colorado), Oil! (1927, the Teapot Dome Scandal), and The Flivver King (1937, Henry Ford– his “wage reform” and his company’s Sociological Department, to his decline into antisemitism) describe the working conditions of the coal, oil, and auto industries at the time.
Sinclair ran unsuccessfully for Congress as a nominee from the Socialist Party. Then he ran, as a Democrat, for Governor of California during the Great Depression, under the banner of the End Poverty in California campaign, but was defeated in the 1934 election.
He was awarded he Pulitzer Prize for Fiction in 1943 for Dragon’s Teeth, which portrayed the Nazi takeover of Germany during the 1930s.
It is difficult to get a man to understand something, when his salary depends upon his not understanding it.
Upton Sinclair, ruminating on his gubernatorial loss
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