Richard Baldwin on the New Globalization

To really understand how this changed the nature of globalization, consider a sports analogy. Suppose we have two football teams, one that needs a quarterback but has too many linebackers, and one that needs a linebacker but has too many quarterbacks. If they sit down and trade players, both teams win. It’s arbitrage in players. Each team gets rid of players they need less of and gets players they need more of. That’s the old globalization: exchange of goods.

Now let’s take a different kind of exchange, where the coach of the better team goes to the field of the worse team and starts training those players in the off-season. This is very good for the coach because he gets to sell his knowledge in two places. You can be sure that the quality of the league will rise, all the games will get more competitive, and the team that’s being trained up will enjoy the whole thing. But it’s not at all certain that the players of the better team will benefit from this exchange because the source of their advantage is now being traded.

In this analogy, the better team is, of course, the G7, and not surprisingly this has led to some resentment of globalization in those countries. The new globalization breaks the monopoly that G7 labor had on G7 know-how…

That’s Richard Baldwin on the new globalization. His book, The Great Convergence is very good.