Globalization

What’s its future?

Gordon Betcherman
RSM 2616
June 22, 2023
Globalization as the dominant
paradigm for development
• Flow of goods, services, finances, people, knowledge,
information, and culture across borders
• Production organized along value chains that go back and
forth across borders
• Emergence of international institutions (e.g., UN, WTO, WB,
IMF, etc.) and cross-border forms of corporate organization
(MNCs)
• International trade and investment liberalization rules
• National policies to encourage liberalization
This model certainly has benefited
development, at least in some countries

• Decline in global poverty

• Rising standards of living for workers and their families in many
countries
• Improvements in human development indicators such as educational
attainment and health outcomes (e.g., child mortality, life expectancy,
etc.)
• Benefits for consumers in terms of access to goods, services, cultures,
information, etc.
But it has been under threat
What are the factors behind the discontent?

• Existential disruptive events

• Global Financial Crisis
• Covid pandemic
• Russia-Ukraine War
• Inability to solve global problems like climate change and inequality
• Cynicism and skepticism about globalization, its benefits, and the
mindset behind it
• The rise of populism, anti-elitism, anti-globalism/cosmopolitanism
The rise of populism, anti-elitism, anti-
globalism/cosmopolitanism
• Sense that elites (government, corporate, intellectuals, mainstream
media) have used their power and influence to “rig” the game in their
favour
• Populist movements tend to represent the interests of the ‘people’
• Two competing explanations: economic and cultural
• Nationalism and social conservatism in opposition to cosmopolitan
and socially progressive
• One consistent theme is rejection of many of the core elements of
globalization
 “Business as usual”
Where does
globalization
go from here? “Retreat”
Three
scenarios “Globalization
reinvented”
Business as usual
This has just been a blip

• Globalization has never been a linear

process, always periods of retrenchment
followed by new phase of global
integration
• Actually data do not show much of a
retrenchment and show quick recovery
from Covid “blip”
• Some parts of the world, especially Asia,
unaffected by anti-globalization
• Ultimately globalization makes too much
sense from business perspective
Globalization is a good thing for my country (IPSOS)
Retreat
National barriers and maybe regionalization

• Since financial crisis, more

protectionist measures
• Now, US-China trade war
• And vulnerabilities of global supply
chain model exposed during Covid
and the Russia-Ukraine war
• Countries retreating to national
industrial policy, self-sufficiency
• Perhaps with links to immediate
neighbours (e.g., USMCA)
Globalization
reinvented
• Costs of abandoning globalization too
high but current model costly now
• New global capitalism more about
security rather than just efficiency
• Do business in countries you can rely
on
• More vertical integration (e.g., Tesla)
• Various adjustments to supply chains
• Two parallel global systems?
Gains from globalization have been very uneven
Growth in incomes by percentile, worldwide, 1980-2020
The famous “elephant curve”
Gains from globalization have been very uneven
Growth in incomes by percentile, worldwide, 1980-2020
The famous “elephant curve”
Where does globalization go from here?
Three scenarios
1. “Business as usual”

2. “Retreat”

3. “Globalization reinvented”

• Question for discussion: Which scenario seems most likely?