Goldman Sachs
Globalisation is the great economic theme of the past three decades, affecting not just business but much of the world as a whole. Behind it are technical factors such as the revolution in information and communications technology, and market-oriented liberalisation – principally of trade and finance but also to some extent of movement of people.
Globalisation has created huge increases in prosperity, notably in emerging markets, above all in China. It has reshaped the activities of business, creating integrated chains of innovation, production, marketing and distribution. Yet it has also caused huge stresses as production has shifted to low-wage economies, “winner-takes-all” markets have increased inequality and destabilising speculation has unleashed huge global financial crises.
In response, the financial sector is being re-regulated. New currents in post-crisis regulation risk balkanising the global banking industry.
Even the impulse towards trade liberalisation has slowed, though not yet reversed, as unemployment has soared in high-income countries gripped by the global and eurozone financial crises.
Some might fear a collapse of this era of globalisation, as happened in the late 19th and early 20th centuries. Yet the position today is not so dire. What we are seeing, instead, are inevitable tensions between two powerful forces.
On the one hand, the market economy seeks opportunities across national borders. Most manufacturing, finance and any service that can be digitised are highly tradable. On the other hand, political institutions, regulatory frameworks and human loyalties are national or even local. Destabilising this uneasy balance has been a loss of trust in the justice and efficiency of the market economy.
The 1980s and 1990s saw the collapse of Soviet communism and the abandonment of state planning in China and India; the completion of the Uruguay Round of trade negotiations, which incorporated emerging countries into the trading system;
Globalisation has created huge increases in prosperity, notably in emerging markets, above all in China. It has reshaped the activities of business, creating integrated chains of innovation, production, marketing and distribution. Yet it has also caused huge stresses as production has shifted to low-wage economies, “winner-takes-all” markets have increased inequality and destabilising speculation has unleashed huge global financial crises.
In response, the financial sector is being re-regulated. New currents in post-crisis regulation risk balkanising the global banking industry.
Even the impulse towards trade liberalisation has slowed, though not yet reversed, as unemployment has soared in high-income countries gripped by the global and eurozone financial crises.
Some might fear a collapse of this era of globalisation, as happened in the late 19th and early 20th centuries. Yet the position today is not so dire. What we are seeing, instead, are inevitable tensions between two powerful forces.
On the one hand, the market economy seeks opportunities across national borders. Most manufacturing, finance and any service that can be digitised are highly tradable. On the other hand, political institutions, regulatory frameworks and human loyalties are national or even local. Destabilising this uneasy balance has been a loss of trust in the justice and efficiency of the market economy.
The 1980s and 1990s saw the collapse of Soviet communism and the abandonment of state planning in China and India; the completion of the Uruguay Round of trade negotiations, which incorporated emerging countries into the trading system;