First, let’s agree with this:
Trade – free exchange between individuals – is mutually beneficial.
It’s not a competition between nations, it’s not a ‘global race’, and it’s not a winner-take-all game of international treaty poker. The whole bloody point is that both participants gain.
But, rather than overstating the threat to free markets that come from politics, we might better regard globalisation as a century-long cycle and the turning tide as nothing but a natural process just like live and death.
A simple History Review
For six decades after the WWII (1945 to 2005), unprecedented growth of trade in goods and services and spectacular expansion of foreign direct investment (FDI) were powerful drivers of the best half-century in human history.
Global trade maintained an annual growth rate of 6 percent in real terms, while the global stock of FDI grew at 15 percent annually in nominal terms between 1980 and 2005.
It looks like the impetus towards further economic integration has stalled and in some respects gone into reverse.
Globalisation is no longer driving world growth.
A simple answer to: Why have global trade and investment not rebounded as they did after past recessions?
less liberalization & more micro-protection
Reductions in trade barriers is lagged
And imposition of local content requirement measures affects global trade in goods and services, reducing global exports.
Above all, important segments of the western public no longer believe increased trade benefits them.
But as we have argued at very first, the reverse (if true) would not be the first time since the industrial revolution.
A (if not the first) period of globalisation, in an era of empires, occurred in the late 19th century.
The first world war ended this and the Great Depression destroyed it.
A principal focus of US economic and foreign policy after 1945 was to recreate the global economy, but this time among sovereign states and guided by international economic institutions.
Let’s see the picture again, and think again
A. Part of the reason for the slowdown can be that many opportunities are radically diminished.
When, for example, the production of essentially all labour-intensive manufactures has moved out of the rich countries, the growth of trade in such products must fall.
Just review what we have learned here about new pattern of labour growth
B. Maybe we have just produced too much
We have China, the biggest investment boom in the history of the world, to blame for, which affects the demand for many commodities.
C. the end of once-in-a-lifetime global credit boom is sure to lead to a decline in the cross-border holdings of financial assets.
D. after decades of FDI, a host of companies with something to gain from it will have taken their opportunity and succeeded or, in important cases, failed.
There are just nothing lucrative
E. The world has reached a demographic peak.
“In the modern era it seems that ever since the beginning of the 1980s the global economy has been dominated by globalisation and also a complimentary and massive change in demographics … We will argue that this era is close to being over and the economic, political, policy and asset trends that accompanied it could soon start to reverse.”
A surge in high earning, high spending workers to dramatically increase the global productivity ratio is a base of globalisation since 1980.
China – cheap labour force – is an one-off factor for globalization and yet no substitution appears.
At a time of poor economic performance in leading countries, aging, rising inequality and big shifts in the balance of global power, another collapse must be a possibility.
Recently, even tech giants begin to suffer this
Despite we have just discussed, a way simple answer may be behind the history
During the turning of globalisation from 1910s, there were governments relentlessly printing currency in order to gathering money.
History does not repeat itself, but it rhymes.
And still referring to the history, some would argue the resurgence always requires a hegemonic power: the UK before 1914 and the US after 1945, or even China after 1980s.
It may take long times.