Globalization is apparently no longer popular and seems condemned to a certain decline. Although many of the problems will remain global. And even if all this will have a price.
After almost 30 years of accelerated economic integration, we felt the process running out of steam in the aftermath of the 2008 financial crisis, to the point where some said we had gone from globalization (globalization) to a “globalization” (slowbalization). Far from improving, the situation now seems to be turning into economic and political “fragmentation”, alarmed this week in Davos, Switzerland, the World Economic Forum, which has long been considered both a champion and a symbol of this globalization.
The breathlessness of the economic integration process is due both to cyclical factors, such as the latest economic crises, and to structural factors, such as the accelerated development of China, which no longer needs the products foreigners, experts from the International Monetary Fund (IMF) reported this week in an analysis. But even more, it stems from the increasingly open rivalry between certain major economic powers, as well as growing popular discontent.
The COVID-19 pandemic and the invasion of Ukraine by Russia did nothing to help the situation by disrupting supply chains and revealing, to many, how dependent their country was on foreign the medical, energy, food or technological plan. Since then, companies are ready to sacrifice a little of their beautiful efficiency to be more resistant to this kind of disruption. Many governments are, at the same time, increasing policies aimed at forcing them to stay at home and sever their ties with certain nations.
This is particularly the case of the American President, Joe Biden, who, in the name of the national interest, has toughened the protectionist industrial policies of his predecessor in matters, for example, of green energy, electric vehicles or even semi -drivers, observed in an analysis Tuesday Angelo Katsoras, of the National Bank. Since other countries, including European states, do not want to be the turkeys of the farce, they, in turn, threaten to do the same.
Bad news
All of this is not good news, IMF Managing Director Kristalina Georgieva said in a blog post on Monday. It is true that globalization has been associated with all kinds of problems, such as the stagnation of middle class incomes, the enrichment of the wealthiest 1% and the diffusion of an ecologically unsustainable development model. But it is also true that it has helped to triple the global economy since the end of the Cold War and to lift 1.5 billion people out of extreme poverty.
A shift towards “de-globalization” could not be more badly timed, as we are already terribly behind in “the greatest industrial transformation of our time”, that is to say the transition to a carbon neutral world, said Tuesday European Commission President Ursula von der Leyen at the Davos Forum. However, since everyone’s resources will be needed to carry out this revolution, “our economies will rely more and more on international trade as the transition accelerates”.
In fact, all this will not lead to a complete disintegration of the world economy, or even to a regionalization of trade, but to a recomposition of interdependencies with each other, predicted the expert in economic history Adam Tooze at the same platform, Wednesday.
Salty bill
In the meantime, it must be understood that globalization has notably had the effect of increasing the specialization of countries in global value chains, underlines the IMF in its analysis. This translates today into a high concentration of certain sectors in a sometimes extremely limited number of countries, from which we could not cut ourselves off, at least in the short term.
The few studies on the subject estimate that if the world were to divide into regional blocs from now on, this would reduce the world’s gross domestic product by a percentage ranging from 0.2% to almost 7%. The loss could even amount to up to 12%, if these blocks did not benefit from any technological exchange between them.
In all cases, the impact would be proportional to the depth of the cut, summarizes the IMF. The latter would particularly hurt developing countries because it would reduce their technological catch-up.
But the deleterious effect of this fragmentation would also pass through “several other channels”, continues the IMF. By impeding the movement of labour, it would hamper efficiency, innovation and the diffusion of technology, in addition to complicating matters for countries struggling with an aging population. . By impeding the flow of capital, it would deprive national companies of sources of financing and national economies of the expertise of foreign companies.
And then, as we said, there are major issues — such as global warming, pandemics, tax havens and cybersecurity — which cannot but be dealt with at the global level.
But OK. As a wind of disunity blows on the world, it is better to try to be “pragmatic”, said Kristalina Georgieva, philosopher.
This means adopting a multilateral approach and moving as quickly as possible on the most pressing issues on which we sense a common will. If only a few countries are ready to move, they should move forward in the framework of open agreements where the dissidents could, one day, join them. As for the questions on which everyone now seems to want to do as they please, we should, at the very least, agree on “safeguards” aimed at preventing the unilateral actions of some from causing too much damage to others, in particular to the poorest.
To this end, governments should also remember that their own policies, in terms of the social safety net, training or labor mobility, also have the power to make trade fairer.