By Pompeo Della Posta, Department of Economics and Management, University of Pisa
In this paper I review and discuss the past and current phases of globalization, namely the first phase (1869-1914), the second phase (1944-1979) and the third phase (1979-2016) together with the crises characterizing both the period between the two world wars and the current phase of (de)-globalization, that can be considered as starting with the election of Donald Trump to the presidency of the US administration and with the occurrence of Brexit, and continuing with the spreading of neo-nationalism and populism worldwide. I also discuss and compare the two waves of criticism of globalization, namely the one started at the end of the 1990s and the current one, coinciding with a crisis of globalization.
The second part of the so-called Victorian Age is usually identified with the first phase of globalization, that can be considered as included between 1869 (given the symbolic relevance of the opening up of the Suez Canal, occurred in that year) and 1914, when World War I started. The latter determined the beginning of the first crisis of economic globalization so as to prove for the first time that globalization is not an irreversible phenomenon, and that it is not the case that “there is no alternative” (TINA) to markets’ openness, since it depends on the political will of the citizens.
The second phase of globalization started with the signing of the Bretton Woods agreement, in 1944, and has been characterized by a generalized economic growth, driven mostly by Keynesian policies. The fall of the Bretton Woods system and the two inflationary shocks that followed paved the way to the ensuing economic and political neo-liberal revolution. Such a change of paradigm, characterizing the third phase of globalization, prescribed markets liberalization and the withdrawal of the state from the economy and can be marked by the 1979 advent of Margaret Thatcher in the UK and Ronald Reagan in the USA in 1981 as leaders of their respective countries. The third wave of globalization was also characterized by the explosion of financial derivatives and by an extraordinary technological development based on information technology.
It is possible to identify, however, two sub-periods composing such a third phase. The first one goes from the end of the 1970s to the beginning of the 1990s and is the period in which neo-liberal and monetarist policies have been applied almost uncritically. Around the end of the 1990s, however, a change of perspective occurred, so as to weaken substantially this almost homogenous belief.
The main critiques were relative to the negative effects of trade liberalization (including the GATT agreements), and of short-term capital liberalization and FDIs on least developed and developing countries. Issues of poverty and (to a much lesser extent) inequality at the world level also acquired prominence and received greater attention, At the same time, the Millennium Development Goals were devised in the year 2000 by the United Nations, in order to address some of the concerns (including those relative to the environment but not to inequality!) raised by the street protests and the public opinion in general.
Many critics also observed that developed countries were suggesting – and enforcing, through the Washington consensus – a unique growth recipe for least developed and developing countries, implying fiscal and monetary tightness, free capital mobility and goods markets’ openness, something that the former had deliberately not followed during the initial phases of their own economic development.
Some protests referred also to the negative effects of globalization on developed countries and it was observed that the promised gain for consumers resulting from lower product prices did not always materialize. As a matter of fact, while labor markets are almost perfectly competitive, given the possibility to delocalize production, product markets are quite often imperfectly competitive, being characterized by monopolistic competition, oligopoly or even monopoly. In all of those cases globalization does not produce necessarily lower price for the products, but just higher profits and lower wages.
Such complaints and criticisms, however, did not turn into an open crisis since they were not coming from the middle class, as it will be the case instead later on, especially as a result of the 2007-08 global financial crisis and of the fiscal austerity adopted in response to the euro area crisis. The critiques against growing economic inequalities, both across and within countries, were also discarded because they were considered as irrelevant from an economic point of view (the negative effect of an increasing within-countries inequality on social capital, for example, was ignored) and in fact they were seen as even beneficial from the point of view of the incentives to be provided to economic actors.
A second, this time right-wing and North-driven wave of criticism (represented by Brexit, by the election of Trump and its protectionist implications, by the immigration crisis and by the spreading of populism), has emerged after 2016, determining also a second crisis of globalization after the one characterizing the wars interlude: the ‘ladder’ of protectionism used in the past by the now developed countries, is being brought back, then, given that they feel the need to use it again: rather than “a bowl of cherries”, more and more globalization is becoming the symbol of a process which is impoverishing the developed countries rather than the developing ones, as it was believed at the end of the 1990s.
The protest has populist and neo-nationalist connotations and is spreading outside the US and Britain, alimented also by the diffused perception of the negative effects of immigration, driven quite often by an instinctive rather than informed approach.
Rodrik’s trilemma, proposed during the first wave of criticism against economic globalization, emerges then as a prophetic anticipation of populism, suggesting that an hyper-globalization which is enforced by nation states and élites cannot occur with the democratic approval of citizens, so that economic integration may well be accompanied by social disintegration, as it seems to be the case in these days.
Is there any solution? One way out of the current dilemmas is the application of what can be defined as “smart globalization”, that should take into account the voices and needs of the many losers of globalization (and technology) within a context of international cooperation: the opposite of the unilateralism which seems to be characterizing the current situation.
