In whose interest is globalization anyway? (hypotheses to ponder)

The architect of the present era of globalisation is no longer willing to be its guarantor. The US does not see a vital national interest in upholding an order that redistributes power to rivals. Much as they might cavil at this, China, India and the rest are unwilling to step up as guardians of multilateralism. Without a champion, globalisation cannot but fall into disrepair.

And yes a lot of the news is bad:

Then came the crash. Finance has been renationalised. Banks have retreated in the face of new regulatory controls. European financial integration has gone into reverse. Global capital flows are still only about half their pre-crisis peak.

As for the digitalised world, the idea that everyone, everywhere should have access to the same information has fallen foul of authoritarian politics and concerns about privacy. China, Russia, Turkey and others have thrown roadblocks across the digital highway to stifle dissent. Europeans want to protect themselves from US intelligence agencies and the monopoly capitalism of the digital giants The web is heading for Balkanisation.

The open trading system is fragmenting. The collapse of the Doha round spoke to the demise of global free-trade agreements. The advanced economies are looking instead to regional coalitions and deals – the Trans-Pacific Partnership and the Transatlantic Trade and Investment Pact. The emerging economies are building south-south relationships. Frustrated by a failure to rebalance the International Monetary Fund, the Brics nations are setting up their own financial institutions.

That is from Philip Stephens at the FT.

Comments

The web is heading for Balkanisation.

I'd say that's probably a good thing for a free(ish) Internet.

An Internet controlled by a handful of companies is one controlled by a handful of governments.

So yes, dozens of competing standards are a pain and make for a balkanized Internet. The only thing worse is the alternative.

Ditto re: financial regulation.

The Internet is based on global, slowly-evolving, low-level standards like TCP/IP that everyone then builds on top of. It's led to fantastic innovation and prosperity. But screw that, let's trash what works and balkanize it all, because your theory says that competing internet protocols must be better.

Jesus, Pardinus, if you love TCP/IP so much why don't you marry it. TCP/IP is great and all but on the other hand there is something about the archtecture of the internet as it stands that has led to the equilibrium we have now, where most of what we say to one another goes through twitter or facebook at the pleasure of those two firms, a state of affairs which is not technically necessary and which none of the hackers who had a hand in creating it would have approved of.

Also: neither "the web is heading for balkanization" nor what Tom West wrote is most reasonably interpreted as a comment about the transport layer. As you pointed out, the web and twitter and facebook etc are application layer .

I'm going to predict that globalization will continue marching onward, ignoring Philip Stephens.

+1. Can't be bothered to register for FT, but based on the excerpt above, he seems to wrongly think that governments are the primary drivers of globalization.

Also, internet censorship in authoritarian countries is lamentable, but the larger trend is still toward more and freer information in those places.

That's a pretty stupid thing for him to say. It's not as if the US Navy's commitment to the freedom of the seas has done anything to promote globalization. And globalization sure wasn't kicked off by Ferdinand and Isabella or the age of Imperial expansion.

Basically all the important earth shattering effects of globalization (discovery of new continents and market, the shifts in industrial production made possible by standardized shipping containers, major trade agreements) has been undertaken by governments or in the case of the shift in industrial production is possible only because of the commitment of the US government to open seas.

Another steaming pile of horseshit.

>Finance has been renationalised.

As long as capital can freely flow between nations and EU member-states provide military protection to one of the biggest tax dodging nations in the world (Monaco) and several smaller ones (Andorra, Lichtenstein, Luxembourg, Switzerland, Isle of Man), finance is about as nationalized as Reagan was a communist.

Those countries are pikers, The U.S. is indisputably the biggest tax dodging nation in the world. Buy U.S. Public or private debt (and we issue enough for everyone) and pay no tax. Your country signed an IGA with the US? No problem, the mandatory disclosure of private info flows into the US, not out.

+1. True dat. Exactly. And yet the misinformation persists... Taxes are only for us US citizens. Who pay for our goverment to do our will - that is, squandering trillions to make absolute messes of other countries. And protecting the rights of large corporations to "free trade" bast numbers of jobs to lower-cost locales. Oh, and as the cherry on top, those corporations are now moving away, so they don't have to participate in funding that framework! Though they won't be canceling their contracts with US lobbyists.

"China, Russia, Turkey and others have thrown roadblocks across the digital highway to stifle dissent"

And the USA - it just thinks about dissetn differently (and Australia too, while we're at it)

Yes. It's pretty simple to understand that in one country people who steal national security material, or who concoct terrorist plots, are watched and or prosecuted (under the law) whilst in another people who simply criticise the government are tortured and imprisoned. It trivialises the suffering of people who live under authoritarian governments to claim the US or Australia operates in the same way. Non of this is to say that serious surveillance, data security etc problems don't exist in the Western world.

If I lived in such a place I would not criticize the government. Fat lot of good all this wonderful criticism stuff has done us here, anyway

What if you government criticism simply amounted to being angry that your house and all your land were going to be appropriated with pretty much zero compensation. Or you wished to make a lawful complainant that some factory was dumping toxic waste in the river outside your home. Or you don't want or do want to have an abortion.
Whilst it is possible, in authoritarian countries, in to live your life without criticising the state. It is often random, or unplanned, events that lead even unwitting, and otherwise lawful, citizens into becoming critics of the state.
It's just rubbish that criticism has not led to any benefits. Freedom of the press, of association, of religion etc were the result of determined actions by individuals who lived under more oppressive forms of government and risked their liberty and property to give you the right to make these sort of empty statements

Thanks for the civics lesson anon, I had almost forgot the party line.

"Global capital flows are still only about half their pre-crisis peak."

Echoing the well though skepticism of the posters above, I'm going to say that this statement doesn't pass muster. If global capital flows are below their pre-crisis peak, that's assuredly because nearly all capital flows, international and intra-national, are as well. The majority of investment in developed countries is housing. Both the markets for new housing and the secondary housing markets are turning over at far slower rates than they were at the peak of the housing market. In addition banks and other financial institutions have massively de-leveraged since then, which implies much less capital flow as they retain earnings to build reserves.

Well the main issue is that flows from one European state to another are well down. The collapse of the property bubble is part of that, but there truly has been a reversal of regional integration of finance within the EU. I don't think that's rightly represented as a reversal of globalization, though.

Financial institutions have NOT 'massively deleveraged'

http://www.ft.com/intl/cms/s/0/152ccd58-3294-11e4-93c6-00144feabdc0.html?siteedition=intl#axzz3COk3TF00

Umm, what? The opinion piece you linked to doesn't say anything about the recent trends of bank leverage, it only argues that it's too high. For the actual numbers you can look at the below. As you can see Eurozone banks aggregated leverage ratio fell from a peak of 18 to 13. Further along the same link you can see that this was driven by rising equity, while assets remained flat. In aggregate Eurozone banks had to increase their equity by 38%, primarily through retained earnings.

At an average ROE of about 8%, that implies that Eurozone bank treasuries have simply acted as a sponge on nearly all the capital generated by their assets. Absent deleveraging that capital would have either been returned to shareholders and invested somewhere else, or used to create new loans or liabilities to maintain the leverage ratio. Either way cyclical bank deleveraging acts as a shock to capital flows.

http://www.voxeu.org/article/assessing-leverage-through-flow-data

Globalization isn't an ideaology, a policy or an agenda. It's a tide of history. Like the technological progress which enables it, it is a process that is going to continue barring complete global catastrophe.

The idea that globalization is something that the USA is doing to everyone else reflects a profound misunderstanding. Yes, the USA is participating in globalization, but it is doing so in the same way that it participates in the global economy and language change. It has little control over these things, even while it is in actor in them.

Globalization is an ideology as well if you oppose nationalism and a peoples' right to enact tariffs and control their borders. In that regard, the U.S. is pushing an ideological globalization agenda on many nations, and when the U.S. pulls back, many nations will expel their foreign populations, re-enact tariffs and assert their sovereignty.

Well, the Russian idiots will, but any foreigner still there is basically lining up to be mugged anyway.

A nation can be 'anti-globalism', certainly, but globalism is still going to happen. Unless a nation is willing to do the full North Korea, they are going to see their world get smaller and more interconnected. If nations erect tariff barriers they can at best slow this process down. But can it be stopped? I am skeptical.

A good start at reigning in globalization would be to leave Alaska to the Athabascans and Inupiats and return Hawaii to the native Hawaiians.

The problem with that strategy is that the natural political support for tariffs and border control comes from the middle class. In high income countries the poor benefit from cheap food, textiles and manufactured junk from international markets. Also in high income countries the poor increasingly don't work and receive government redistribution, so they don't feel wage pressure. In low income countries the poor benefit from globalization because multinational sweatshops pay multiples more than local employers. The rich benefit from access to cheap international capital and access to global markets which offer better risk-adjusted rates of return.

The people that lose are the middle class, frequently white collar workers in the service sector. Since their output isn't tradeable they feel the downward pressure of global wage competition. They disproportionately spend their income on housing, which also isn't tradeable. So global hot money bids up the cost of property without offering any supply to relieve the pressure. If there's one voting bloc that forms a natural opposition to globalization it's the middle class. But this poses a chicken and egg problem. In order to reject globalization you need a strong middle class, but in order to grow a middle class you need to turn your back on globalization.

As it stands there's no where in the world where the middle class is gaining economic or political ground. In the developing world from China to Brazil to South Africa, the model is increasingly about mega-rich elites and peasants. In the developed world the median continuously falls as wealth concentrates among the 1%. The traditional Social Democratic and Centrist Left political factions are much more interested in buying votes with welfare than pandering to the working man. The only potential political movements with the power to reverse this pattern, like the Jobbiks or Marine Le Pen, are on the far fringe, and have little to no chance of ever holding power.

"Globalization isn’t an ideology, a policy or an agenda. It’s a tide of history. "

LOL. I've heard Marxists, Evangelical Christians, the Republican Party, the Democratic Party say the same sort of thing. Rome in the first century A.D., the Ancien Regime, the Third Reich in 1941; there's no shortage of folks thinking they've pegged the inexorable tide of history. I'm guilty of such arrogance myself.

Well, the Doggerlanders were correct about the tide 'n their history.

I like to say "everything is unimaginable until suddenly it's inevitable." (gay marriage being the obvious example du jour). Maybe that works in the other direction too.

International trade is at all time highs: http://unctadstat.unctad.org/wds/TableViewer/tableView.aspx

I fail to understand how you can claim that globalization is falling into disrepair. There might be more regional trade deals, but they are on top of the existing world trade routes not replacing them.

I agree with above^

There's simply no evidence that globalization is reversing at present. The financial crisis helped accelerate globalization by increasing the power of international organizations like the IMF and spurring the creation of more international cooperation on issues like bank secrecy.

Every indicator I've seen is pointing towards greater integration for the vast majority of the world's people.

fewer winners, more losers. average is over

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Mine. Globalization is in my interest.

It is in my interest. Thanks to globalization i became a zillionaire, and at the same time i no longer have to pay taxes. I can control politicians and politics (if your corporate tax is not low enough I will move to your neighbour country), countries are no longer independent (if you dont follow this policy i will call my Goldman Sachs friend and sell all your debt causing your interest rate to go up, so that you can no longer finance yourself, and IMF will get you), i can have slaves in Bangladesh working for a tenth of the cost. and back home workers rights are going down toilet. At the same time control was never so effective (i know what you eat, who are you in bed with, your music taste, your political views), and manipulation of the masses is becoming a piece of cake!!! ... huuum the po$$ibilities are endless!!!

A fully globalized world market is not in anyone's interests. I suspect we all do better in a world of fractured markets -- with limited cross-block trading. The globalize market is a basket with the worlds eggs all waiting for a single bad even to crack them all. Not a good plan.

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