The globalization? Came to stay

With the financial crisis of 2008, governments around the world began to express concern about globalization. Although the Wall Street crash resonated in some countries more than others, its consequences sparked a debate on the subject. Today, the health, economic and social crisis of COVID-19 once again casts doubt on the global project. There are those who believe that isolationism will return with greater force and distrust between nations will be common. In reality, the opposite will occur.

The global phenomenon

The debate on globalization in 2008 did not remain in the after-dinner of the workers or in the notes of the legislators. During the last decade it materialized in Brexit, in the victory of Donald Trump and in the rise of populist and protectionist leaders, such as Modi in Asia and Bolsonaro in Latin America.[1] Despite this, international interaction, thanks in part to digitization, has been exacerbated in recent years. With everything and disagreements, globalization was strengthened.

Source: Own elaboration with data retrieved from the World Bank.

Currently, [coronavirus brought states to their knees](https://www.who.int/news/item/13-10-2020-impact-of-covid-19-on-people's-livelihoods-their-health -and-our-food-systems) and revived global skepticism. COVID-19 damaged ties between Asian industries and Western companies by halting global production and shutting down business chains .[2] But globalization is a broader and deeper phenomenon, so it is not enough to stop industries to eliminate it. This can be understood from an economic point of view —free exchange of goods and services between countries that seeks to equalize prices—, from a political perspective —interdependence between nations—, social —migration, employment, education and humanitarian support programs— or technology —interaction in cyberspace.[3]

Consolidating this globalization has positive results, but also negative ones: the mechanisms for the equalization of prices and goods have environmental consequences, present since the extraction of natural resources, manufacturing, transportation, even their consumption and waste. Added to this, economic integration, although it has allowed greater growth in multiple countries, has increased inequality —exacerbated by the pandemic— by lack of state controls, minimal accountability of transnational corporations and corruption. As the sociologist and economist François Bourguignon explains:

With economic globalization, countries had the opportunity to grow and reduce the difference between their productivity, capital and even education. But due to inefficient policies, as well as the use of international elites and government abuse of the cheap labor factor, inequality was given rise…[4]

From these characteristics and effects, globalization is explained as a phenomenon that expands beyond commercial interaction. But that, even in times of crisis, has persisted.

The first crisis: hunger, goods and industries

The Great Irish Famine of 1845 killed over a million people. Its impact was international since it affected the rest of the European continent. It brought down industries, created trade deficits, and worsened conditions for workers. It was in this context that Marx and Engels argued in The Communist Manifesto that global integration was leading to political and social upheaval that would end up fragmenting relations between states.[5] Indeed, interdependence and discontent initiated nationalist protests in France, Italy and Central Europe.

Contrary to the prediction of both authors, globalization deepened. The crisis forced governments to reduce tariffs, negotiate trade agreements and allow the transit of people and food. France was an example of this when Napoleon III strengthened the railway infrastructure and promoted the free flow of goods. It eventually had a comparative advantage over its neighbors by having access to goods it did not produce, as well as selling large quantities of what other countries lacked.[6]

The tariff-free production and export model was slow to convince the rest of the countries. The United Kingdom, for example, did not believe that it needed to reform its model. With the Great British Exhibition of 1851 he sought to demonstrate English superiority, but the result was quite the opposite. The best inventions came from Prussia, France and the US, who managed this model of intellectual and commercial exchange.[7] This was enough to motivate the British to get out of the competitive lag: in 1860 the Treaty was signed Cobden-Chevalier Trade between UK and France. Also before these reforms projects were inspired to consolidate States in Italy and Germany. In the end, the option was openness and progress or famine and lag behind.

This growth and interdependence also influenced America and Asia, although not without consequences. The USA suffered a civil war to carry out this new national project, since the south was not willing to abandon the agricultural and slave economy.[8] For its part, Japan experienced the Meiji renewal, which implied a change from a feudal model to an industrial one in order to adapt to an increasingly globalized world.[9]

Trade was the path followed by States in the face of the challenges of the 19th century, which represented 4.6% of the world economy in 1846, but grew to 8.9% by 1860. Global integration was a way of solving economic challenges and if a country was not globalizing, others would.

The second crisis: oil, capital and institutions

Once the States were strengthened again under this model, political frictions and new protectionist ideas arose. Being integrated, any conflict in the system could break the balance achieved so far. This happened when, empowered by a productive industry and new technologies, States sought to expand: the result was the First and Second World Wars, which once again led to the need for cooperation, this time through international institutions. .

Despite being formed in a bipolar Cold War system, [international organizations had a globalizing role.](https://www.intechopen.com/books/globalization-approaches-to-diversity/the-role-of-the -international-organisms-in-the-globalization-process) The UN is a clear example of this, but also the World Bank, the IMF and the European Coal and Steel Community, precursor of the European Union. With treaties on nuclear controls, maritime activities and trade, such as the General Agreement on Tariffs and Trade (GATT) —which evolved into the World Trade Organization (WTO)— globalization began to have certain rules that showed the need to adapt The right to an interdependent world.

With the establishment of commercial, industrial and institutional integration, the next crisis would lead to financial integration. Due to the oil shocks in the 1970s, countries took protectionist stances: for example, [UK promoted domestic consumption](http://bilbo.economicoutlook.net/blog/?p=33160#:~:text =The%20two%20major%201970s%20oil%20shocks%20and%20inflation&text=Inflation%20rose%20from%209.2%20per,and%20unemployment%20also%20rose%20sharply.) and Latin America adopted the industrialization by substitution of Imports (ISI). However, the increase in oil prices was accompanied by a financial revolution, which through international banks made it possible to transfer surpluses from oil producers to loanable funds. This generated renewed demand and encouraged international trade to be considered once again as an alternative for developing economies, mainly in Asia, where they took advantage of this opportunity to integrate into the global economy.[10]

The response to the crisis of the seventies were protectionist measures that raised the prices of products. Eventually the solution was trade. The conclusion of the 1970s was the same as in the 19th century: openness creates opportunity, resilience and growth. In 1970 trade represented 27% of world GDP, by 1980 it grew to 37%. Of these moments that were analyzed, it is possible to appreciate the greater scope of globalization. The coronavirus will once again open the debate and will have two new sectors: the digital space and civil society.

The third crisis: COVID, people and information

Although it is not a demand crisis – as in 1840, 1929, 1970 or 2008 – the pandemic does have characteristics of a crisis of goods: from shortages of containers for vaccines, computer chips and even some food. It also shares a discontent response as in the 1840s against the incompetence of governments to provide efficient responses.

In the US, the first response to the pandemic was disastrous and only with vaccination this country was able to stabilize. Boris Johnson in the UK had a moment of uncertainty in his match after he sent mixed signals about health measures. In the case of the EU, the first measures were applauded, but the bureaucracy and political interests [failed to coordinate an effective vaccination plan](https://www.nytimes.com/2021/04/02/world/europe/ europe-coronavirus-vaccine.html). The good example is found in Asia, mainly in China, despite the fact that COVID originated there. Xi Jinping's government was effective in quarantine and vaccination measures, and helped developing countries as well. Just like during the first wave of globalization in 1840, States should take examples from abroad, not lock themselves into protectionist measures.[11]

The above with an important difference. This time, global interdependence is broader and is not limited to just the West or the North. Initiatives such as COVAX, the vaccine donation program for developing countries, must be promoted to prevent inequality from deepening. Cooperative measures will need to be taken beyond the powers, this includes an effort by Europe and the US, but also by China, Russia and other regional powers.

Finally, similar to what happened in previous crises, technology will play an important role. At the time, the steamboat, the railway and the electricity were just as important, as were the computers and the international financial systems; today it is big data and the internet. Digital technology, artificial intelligence and the Internet of Things will be catalysts for this new wave of globalization.[12]

At the center of this technology is information. It is the new competitive advantage and a new resource for productivity. In addition, its only limitation is the unilateral control of governments, which keeps states like North Korea in isolation and represents a strong weakness for China's competitiveness. However, to prevent the theft of information and ensure proper management, it is necessary to update the international instruments of a system that is 75 years old. If the US or China, which [are outlined as the hegemonies of this new resource](https://cemeri.org/art/la-hegemonia-del-siglo-xxi-un-cuento-chino-o-estadounidense /), don't design one framework to regulate it, the other one will.[13]

The information goes even further on productivity and price matching. As Matthew Slaughter of Dartmouth College and David McCormick, CEO of macro-investment firm Bridge Water Associates explain, the increase in data use has great economic and social potential for a reason:

Data are what economists call “nonrival” goods. Almost all goods and services are "rivals," meaning that their use by one person or business precludes their use by another. […] But the data can be used simultaneously and repeatedly by any number of companies or individuals without diminishing it. The widespread notion that “data is the new oil” overlooks this economic difference between the two. Information can drive innovation again and again without running out, more like a supply of sunlight […] than oil.[14]

Sovereignty has been the main tool of States to maneuver globalization, but as digital technology advances, they lose this tool since the information is not in a physical environment; At least until they fix it.

Specifically, the globalization drive of the 19th century focused on productivity, trade, and industry. In the 20th century, it focused on institutions, both international and stock market. The 21st century will see even deeper integration, centered on individuals and the information linked to them. The elements of the present, together with the examples of the past, project a new wave of globalization and allow us to conclude that States have always been a brake on their own globalization –allowing their interaction with other international actors to be strengthened or weakened–, but they have never managed to eliminate it. . The current pandemic won't do that either.