Au Revoir, Ma Mondialisation

David Smick makes a pretty darned good argument that whatever the outcome of the November election the winner is likely to preside over a dismantling of the system of globalization that’s dominated the world economy for the last 30 years:

The globalization model of the past 30 years is cracking up. And there appears to be no new model to replace it.

Since April, an ugly economic world has turned uglier. The annual growth rate of total global exports has collapsed. Exports were a crucial engine in powering the U.S. economy out of the worst of the recession in the second half of 2009 and remain important for growth.

Lately, even China and India, which were thought able to decouple from the weakness of the industrialized world, have fallen victim to the seizing up of global trade. The World Trade Organization is slashing its estimates for trade growth. The U.N. Conference on Trade and Development reports that economic growth is weakening worldwide.

Meanwhile, the Doha Trade Round is on life support. The world is at the edge of a currency war with at least 12 countries beyond China manipulating their currencies against the dollar for trade advantage. China is experiencing trade deficits and has slapped tariffs on American-made automobiles in response to U.S. duties on Chinese tires. Leto Research analyst Criton Zoakos argues that rapid Chinese wage inflation and new software-based cost-cutting manufacturing technologies in the United States are helping make the globalization model “obsolete.”

Another casualty: financial liberalization.

Over the period of the last thirty years foreign trade has added about a trillion dollars a year to U. S. GDP (in 2012 dollars) but the income that corresponds with that production hasn’t been distributed evenly within the society. The benefit has accrued overwhelmingly to the highest income earners, to the federal government, and to politicians. It has fostered income inequality.

A collapse of globalization might be uncomfortable and unsettling here but it would be disastrous for Europe and even worse for Brazil, Russia, India, and China. Be prepared for interesting times.

A revitalization of globalization should be a top agenda item for the next four years. We will not benefit by a decline in globalization and increasing world misery presents security threats. Unfortunately, given these two candidates the likelihood of that happening is practically nonexistent.

7 comments… add one
  • Good thing we have ObamaCare!!!!

    We’ll get it right eventually, right steve?

  • Somewhat less snarky….

    Here is the bad news: Obama is not the guy to lead us forward.

    Here is even more bad news: Mitt Romney is not the guy to lead us forward either.

    HAND, HTH….

  • Okay, for a bit of reason to hope….

    The risk stems from something more fundamental: The globalization model of the past 30 years is cracking up. And there appears to be no new model to replace it.

    The globalization model of the past 30 years is not something somebody had a brainstorm about. It is probably more correct to say, it sort of just happened with some shaping done around the edges. The notion that we have to have a ready made model to slot into place is raising the bar so high as to be virtually nonsensical. It is the kind of thinking from somebody who doesn’t want to think for themselves. Help me Obama Wan Kenobi…help me come up with a new global economic model….

    Sure.

  • Be prepared for interesting times.

    The times are always interesting. For example I would pick the 1950s as THE most interesting decade* of the 20th Century**, and I don’t think there’s a close second. Most people just axiomatically assume the 1950s were drab and boring.

    * And yes, I’m using the completely arbitrary notions of decades and centuries.

    ** I mean world-wide, not just in the USA.

  • Drew Link

    “The notion that we have to have a ready made model to slot into place is raising the bar so high as to be virtually nonsensical. ”

    This, of course, is the essential point. There is no Book of Innovations, where when innovation #123,567 runs its course some wiseman goes to the book for #123,568.

    You never know. All you can do is set an environment for innovation and let people do what they may. But for instance, a Barack Obama would set up a situation where, if you win, the government gets half, if you lose, tough titty said the kitty when the milk ran dry. That’s no way to foster innovation. And you don’t set up a system…..I’m thinking Dr Chu……where smart guys decide and subsidize what technologies will make it or fail. This is a recipe for disaster, as we have seen. Lost funds, lost time.

    All of history is filled with human innovation, especially when the chips are down. Top down direction has a miserable record.

    I guess we have to relearn these fundamentals all the time. But that’s what you get from Big Government, and a President whose highest and best use is undoubtedly as a college professor, not a chief executive.

  • In another thread Drew wrote: Icepick

    You poor, demented soul.

    Yes, NOW you are getting it!

  • Andy Link

    The article didn’t make much sense to me. The author threw around “globalization” and used it in a number of different contexts. What “model” exactly is he talking about?

    I also think he’s wrong simply because the issues he raises are fundamentally political and I think it’s likely that policymakers around the world will do what they usually do, which is double-down on the status quo.

    Rather than economics, I think the rifts will be based on ethnic, sectarian and/or national identity.

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