If people look back the development of the world economy over the past decades. Manifestly, the world economy is in the time of prosperity and increasingly perfected, thanks to a notion ‘globalization’, which could be seem as one of the important contributors to promote economic prosperity. The birth of globalization was extremely changed the world economy structure, since it carried out an integrated world-wide market, both developing and developed countries could gain benefits from global integration, such as accelerating economic growth and sharing the overseas markets and plentiful resources, respectively.
Some economists even pointed out that globalization has became an inexorable and irreversible trend of world market development. However, the belief of economic globalization was overturned again after the economic crisis in 2008. Specifically, in the process of globalization, there would be some inevitable problems and conflicts, which were criticized constantly over the past decades. With these criticisms, a new term, ‘de-globalization’, has stepped into the global market, apparently, some of the primary developed countries begin to reject trade liberalization, combining with the rising of protectionism. Undoubtedly, the reversed ideology took the global economic market into an embarrassing situation. In so doing, the conception of de-globalization was percolated into some countries quietly. But in fact, the global economic situation has already experienced a downturn during the First Great Depression in 1930s. And now, this is in another period again (Economic and Social Commission for Western Asia, 2002). By any possibility, the de-globalization seems always followed by each Depression. So it does, in the period of economic recovery nowadays, de-globalization has already permeated everywhere. A Philippine economist, Walden Bello(2004), an adherent of de-globalization, argued that globalization is losing its credits and being in the end, while ‘de-globalization is an opportunity’.
Unfortunately, despite the existence of de-globalization, the tendency of economic globalization would not be replaced, because any action would be took by de-globalization cannot continually exist, however, similarly the world economic structure could not get rid of the effect of this wave of de-globalization immediately but soonly. In respect that 80% success in Doha Round of global trade negotiation have more or less impact on Walden Bello’s announcements. Accordingly, it is worthwhile to investigate into the question. Is globalization truly come to the endThe main purpose of this paper is from financiers and economists’ perspective to illustrate de-globalization, which seems as one of outcomes of financial crisis, has side effect on economic recovery, and will not be a last winner in future world economic structure, while globalization definitely is.
In this paper, I will outline some possible reasons could give rise to anti-globalization generation, then followed by description and discuss some threats of de-globalization, like protectionism and trade barrier, combining with past examples to prove de-globalization is not the feasible solution of avoiding crisis, it would make crisis worse contrarily. Ultimately, globalization will be back on the economic platform. Finally conclusion will make some suggests that the financial globalization requires more nationals could make efforts on minimize dangers and maximize the benefits., as well as a few prediction for the future global economy structure.
Globalization provides both opportunity and challenge, but it follows with the generation of de-globalization
The definition of globalization can be briefly describe like a process of movement of goods, capital, labour across world-wild ( Bardhan, Bowles & Wallerstein, 2006). The benefits of globalization are overwhelming. For example, when countries open up, a variety of products would be exchanged frequently between rich and poor. This requires both participators should obey the fundamental principle of mutual complementarily and reciprocity, such as one country could offer comparative advantage to the other, in order to come the same target of common development. Additionally, some restrictions will be released, such as abrogating high tariff and limited foreign investment. These preferential policies help to expand economic markets and offer plenty of trade opportunities. In a sense, Foreign direct investment (FDI) is deemed to one important indication of economicglobalization performance and it refers to finance assistance for developing countries, so as the article ‘Economic and Social Commission for Western Asia’ in 2002 pointed out the global FDI inflow was increased from US$59 billion in 1982 to US$1491.9 billion in 2000. These figures illustrated the integration of the world economy experience rapid increase in 1990s. A higher FDI index means a nice condition of integrating into global economy.
Whereas, the course of globalization is unstable. The global FDI inflow suddenly slumped more than 50 percent in 2001, accounts for 735.1 billion. This may implies that in the process of global economic growth, there would carry certain risks and threats for the reasons of economic turndown. In some extent, globalization has possibility of increase inequality and poverty (IMF Staff, 2000). More apparently, there is common acknowledgment that the developed countries hold comparative advantages of economy, such as technology and management skills, while they are advanced so far than developing countries. Undoubtedly the maximum profit will belongs to the former, and the later may not gain benefits in the short run, even suffer enormous damage and clash. Besides, competition may be the primary principle, more and more wealth would flow into the winner instead of the loser.
Inequality and poverty, nevertheless, do not tell the whole story. The current world-wide economy is remaining in global economy structure. The growth of economic globalization is processed in challenges and opportunities. Even as Chow mentioned in 2001, in the year of China joined WTO, some investigators were worried about that, is it a positive impact on China’s economic development or a disaster for domestic enterprisesAs the matter of fact, China has obtained excellent achievement in economic improvement over these years. Globalization provides China large amounts of opportunity to export manufacture goods, and it also brings fearful harm, i.e. China is one of the biggest victims in the financial crisis (Hillebrand, 2009). Perhaps just because of these challenges and opportunities existence, the idea of de-globalization would come out. As Bello said that the world is in the end of globalization in 2009, while in the next year the chief Pascal Lamy said ‘Finishing Doha round by 2011 is technically doable’ ( Tralac, 2010), which illustrated the goal of decreasing trade barrier and trade protectionism has finished about 80 percent, the remaining 20 percent needs a lot efforts on political wishes. In a certain extent, the progress of Doha round negotiation takes a great strike to the spread of de-globalization.
The arising of de-globalization is not by chance, it might be a consequence by financial crisis. There is no doubt that the current world economy is growing fast, and the economic globalization has been obviously reached in a high level, while the potential risks are still existed. Even though crisis is not just result of globalization, there is a certain relationship between globalization and crisis (Lobaton et al 2001), i.e. Financial volatility and crisis will be infected by countries liberalized their financial systems. For instance, the financial crisis in 2008 was caused by American sub-prime loans. once sub-prime loans were collapsed, the crisis spread immediately to all over the world. That was lead to most countries were suffering inflation, unemployment even bankruptcy in the period of economic downturn. To confront with the serious recession, from small companies to international economic organizations carried out flexible measures, whereas some developed countries put protectionism and trade barrier forward on economic platform. So far, this has mostly promoted de-globalization raising.
The global economy structure ups and downs, but it does not mean the end of globalization
The global economy structure has experienced a downturn 70 years ago, and nowadays other downturn reoccurred after financial crisis. And this stage, protectionism as the main outcome of de-globalization.
Protectionism will not beneficial to economic recovery, on the contrary, it could make the matter worse, while free trade would be a better choice. As a result of financial crisis, some developed countries are motivated for the sake of keeping survival of domestic industries, they persisted in carrying out protectionism. One of the typical examples is United States, in Jan 2009, American claimed ‘American Recovery and Reinvestment Act’, abbreviated ARRA provision or ‘Buy American’ provision (Keffer, 2009), which intended to simulate the American economy by ‘Stimulus Bill’ to support American jobs and domestic industries. In despite of this provision was criticize by many critics, American still keep the foreign products away from them. But is it a really an advisable actThe ‘Stimulus Bill’ is only for supporting iron and steel industries, however if being observe deeply of ‘Buy American’, which means all products relate to iron and steel industries, from raw material to finished product, should be made, produced, packaged in the United Stated only. But in particular, the difficulties in this procedure make suspicions about the feasibility of this provision. Even Keffer, the president of EBAA Iron Sales, was come out the words that, the act of ‘Buy American’ provision is far reaching (2009). Additionally, the implementation of the rescue plan is still in animadversion.
Though the clause’s target is to stimulate American economy by creating jobs for Americans, in fact it seems to reverse. Because it can be argue that the disadvantages of ‘Buy American’ provision are likely overwhelmed by its advantages. Imaging that, there is a good chance for world economy could accelerate recovery, if governments are willing to persist in liberalizing the domestic financial sector cross countries capital movement, with making a concerted effort, the world economy will not be worse in the period of financial crisis. Since these contradictory debates were quickly increased, Some scholars have to reconsider the feasible of this provision, When United States sent a protectionism massage to the world and held in opposition to the leitmotiv of G-20, as well as WTO and Doha Round Negotiation. A bad impression might be set up by other nations. A literature was done by Hufdauer and Schott in 2009, pointed out ‘buy American is bad for America (and everyone else)’. In more specific terms, as the act was run counter to the world trade common goal, it could break U.S trade obligation and national reputation. More surprisingly, economic stimulus bills have little assistance on U.S. jobs, because both iron and steel industry are capital intensive, which may have less demand on labour force supply, It could be suppose that the reinvestment on iron and steel would make 1,000 new jobs, which is a small proportion, alternatively, if expand the plan to stimulate all manufactured goods, the most gain is 9,000 jobs. Apparently, U.S. iron and steel industry would end up with more costs than gains.
With the growing up spearhead of protectionism, a terrible consequence was embroiled in worldwide. from the aspect of economics, more and more economists are worried about that, United States, as a powerful developed country, was act protectionism rampantly, these would cause other countries are imitative of American’s tail. Imaging that if the other countries are imitating of practicing protectionism universally, the world economy situation, especially for global trade system, will in confusion and ultimately intensify the negative impact of financial crisis as well as deteriorate world economy environment. Since the clause arose a mass of discontentment by worldwide opponents, the supporters have brought forward some altisonant phrases, like ‘the purpose is to make sure we are creating jobs in the United States and not in China’ (Horsley, 2009), and ‘US taxpayer money should go to US workers’ (Hufbauer,et al 2009), at the same time, Europeans began to increase its pressure on US and went against of ‘Buy American’ clause. They stressed that the act not only aggravated protectionism but also induce retaliatory moves (BBC News, 2009). The more serious is that, American went ahead and did this could provoke spiteful retaliate on trade, which could be followed by the possibility of the relationship between trade partner break up, consequently, the danger may be the eruption of trade war.
As a matter of fact, terrible calamities can be traced back in history. Normally, they are catastrophic and temporary. For instance, regarding the great depression in 1930, the U.S. government legislated the Smoot-Hawley Act, which was aim to protect U.S. companies from foreign contention. Nevertheless this decision was completely deviated from the original purpose, according to the congressman Wally Herger (2010), the Smoot-Hawley Act was the ‘signature failure of 20th century protectionism’. Specifically, the tariffs, was increased a highest level in history recording, on more than 2,000 import products, and it became the highest tariff barrier over the world, then war of trade was broke out. In consequence, other counties took retaliatory tariffs on trade to United States, this could resulting in its import and export underwent a big loss, accounted for more than 50 percent, as well as world trade was slumped dramatically. Thus with the increase of protectionism would not the feasible solution of stimulating the economy recovery, instead it brings a lot of harm and pushes United States slumped deeper into great depression. So it can be seen that, the disadvantages of protectionism outweigh its gains.
Furthermore, the failure of globalization is a temporary phenomenon not permanent. These can be validated by the past lessons. For example, the tensional relations on trade between India and China have lasted for a long time, unfortunately the economic downturn heightens the tensions dramatically. (Wonacott, 2009). On Jan. 23 2009 India government carried out a ban on import of toys from China for 6 months (Srivaslave, 2009). During the period of implementing this restriction, the inventories from China import toys were sold out less than in one month, this give rise to toy’s price in India market went up by around 30 percent to 100 percent. In this case, India has no choice to compromise with protectionism soon. Actually, the 6 months ban was only lasting for 39 days.
While it is still need to admit that, whether ‘Smoot-Hawley’ or ‘India-China toys ban’, after all they are measures to meet an emergency, perhaps protectionism proceeds from nationalism by governments who are in suffer of great depression, so it seems that these kinds of rescue policies can be understood. Rescue policies might not have much impact on economic recovery but could help to comfort morale of their own communities in some extent. Once countries are hurting by huge unemployment, they must do something even if the ending will much severer than before. Whereas, through testify the failure of protectionism, to learn lessons of that, de-globalization would not the ending, a better global structure will be estimated later.
The financial globalization would retrogress into meltdown is seem as a necessity consequence of history process, the same as globalization, de-globalization is not the exception. Global economic integration has underwent vicissitudes over last decades, it reached in such high level at the beginning of 21 century, because it has the feature of quickly infection, financial markets become deeper and more advanced. One of the benefits of financial globalization is the preeminent contribution on developing countries commerce. Specially for China gained big advantage over export manufactured goods, however the prosperous phenomenon enable risks were invaded in market. Although financial globalization encourages economic prosperity, the potential risks and challenges also give rise to chance of appearance of financial crisis. Consequently, a shock of new round de-globalization was accompanied by the harm of economic depression. Thereby, globalization may have certain responsibility on the depression. So it does, any form of de-globalization activities are existed by the name of protectionisms will not be permanently lasted. The significant defect of de-globalization may be worse off the world economy than financial crisis does, usually these consequences are expressed as damage national reputation and rising of trade war. Hence, as the common wish of people, globalization would not really end, the current global structure is just in a temporary phenomenon, the reverse will be turn back again. Manifestly, all the comments can conclude in a word, ‘financial globalization is not necessarily to be reversed, particularly for partially integrated economies, even if the possibility of that happening still exists’ (Lobaton, et al, 2001).
As far as I concerned, the threats of anti-globalization should be read as a harrowing lesson that leans toward protectionism. For those prime ministers of countries, the most useful effort I can make is to suggest that blindly insist on de-globalization cannot really protect their profits from harmful impact of financial crisis. The possible solution is that to reconsider regulatory mechanism on international trade and find out an appropriate new order in the process of globalization, because it is irrational to reject one thing when have problems on it. Financial system globalization is inevitable to avoid. Globalization is the ultimately trend of the world, the same as the earth, is in round, and entirely a whole, so does economic system.
We should be smart optimists, in the sensitive downturn period, the global economic bodies are periodic reversal, but the most important is to remember that the global society begin to take into re-globalization soon. Just as Director-General of World Trade Organisation, Pascal Lamy, said that Doha round of trade negotiations is ‘technically doable’, it is still must complete remaining 20 percent by 2011, and it just requires much more efforts on political promise, the agreement will be achieved eventually. The future financial global structure of all countries may not only consider maximise self-interest. But more and more of them will choose to gain common development opportunity in becoming mutually beneficial pattern. Accordingly, keeping both rich and poor countries’ markets open, the growth in one part of the world can help stimulate the recovery over the world.
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