🪴 Maixnor WU

Globalization - An Introduction

Nov 04, 20255 min read

Globalization | An introduction

  • what is globalization?
  • enablers of globalization
    • first and second unbundling
  • loosers of globalization and “political countermovements”
    • who wins/loses from second unbundling
    • political countermovements
    • the end of Hyperglobalization?

What is?

wontfix get quotes from slides

The cost of overcoming distance

Enablers of Globalization

After Baldwin:

3 constraints:

  • Goods Trade Costs
  • Communication Costs
  • Face-to-Face Costs

Steam revolution decreased goods trade costs Information and communication revolution decreased communication costs Face-to-Face Costs still high

Pre-Globalized World

  • high trade cost
  • high comms cost
  • high f2f cost Leading to:
  • workers and consumers needed to live close by
  • very expensive to import/export goods
  • local monopolies (cost was still lower than transportation cost)
  • limits the size of the market (no Economy of Scale)

First Unbundling (Steam Revolution)

started in 1820 until 1940 (paused because of WW2)

lower transporation costs lead to:

  • geographic expansion, decreased cost of overcoming distance
  • turn-over times of capital increase
  • quasi-local monopolies disappear
  • global markets → mass produciton
  • still high comms and f2f costs

Resulting in:

  • Global
    • global north specialize in manufactured goods
    • global south specialize in primary commodities, food products
    • division of labour
    • the great Divergence
    • india/china/africa loose
    • europe, and later USA, win
  • cities specialize in production of particular commodities
  • knowledge and information remains in the cities and factories of the global north

Beyond the first unbundling

Many problems still

  • econoomic
  • political
  • socaial
  • cultural
  • environmental
  • innovation
  • urbanization
  • trade policies
  • slavery
  • gunboat diplomacy

general process and contingent historical-geographic factors combine to tell a causal story

Rebundling (World Wars)

  • world wars put a stop on global trade and integration
  • increased fees, focusing on domestic market

Second Unbundling

  • different parts can be produced in different sites

started after 1945

  • improvements in transportation
  • lower comms cost → global division of labour
  • increases turnover time
  • faster product life cycles (e.g. fast fashion)

information and knowledge flow between companies and between global north and global south.

Transportation Tech

  • commercial jet aircraft
    • took off (pun unintended) in 1950s
  • containerization
    • enabled mass-transportation
    • incredibly cheap transport costs

Shift in Production

Tasks, Products, Assembly is split onto many different people/companies not a single producer of e.g. airplanes or phones

Comms Technology

  • Satellite and optical fiber technology
  • The internet
  • Mobile Communication
  • Electronic mass media (TV, Radio)
  • Intellectual property rights

A third unbundling?

Face-to-Face Costs remain high

  • tacit (non-codified) information exchange is still geographically restricted
  • high-tech, financial, and creative industries → expert industries
    • e.g. Hollywood in LA

Current World

  • low trade barriers
  • low transport costs (first unbundling)
  • low comms cost (second unbundling) → extremely complex global value chains → complex global divions of labour based on job and task outsourcing

Losers of Globalization

Task outsourcing

  • old: All steps of the production by one company
  • new: Many steps are delegated (offshored) to other companies

Stolper-Samuelson (1941)

Elephant Curvewontfix get from slides

  • string re-distributive implications of free trade models
  • model predicts, that unskilled workers will be worse off
  • establishes absolute losses, not relative losses

Rodriks additions

  • There re loosers from trade
  • winners need to compensate the loosers
  • redistribution is flipside
  • wontfix get more from slides

Empirical Studies

Countermovements

  • anti-globalization protests
  • economic outcomes are linked to political processes
  • string political reaction to increasion precarization
  • job insecurity, competition in the labor market

Reactions and its Manifestations

  • populist voting
  • wontfix what the fuck did I do here?
  • Left or Right?
    • link to welfare state
    • right wing: if generous and open to all residents → turns against immigration
    • left wing: if limited to a few market insiders → turns against EU, WTO, global finance

Polanyi’s double movement

Backlash

  • Rodriks suggests a political backlash

  • wontfix what should I put here?

  • split is more about cultural lines, less about economic lines

What now?

  • have we reached peak globalization?
  • no more increase in globalization after 2008

Key Changes

  • similarity to cold war: economic superpowers are fighting over geopolitical power
  • “value” of trade is not juts measured by efficiency/profit/revenue but also by e.g. environmental aspects
  • move to circular economies / local trade relations → less emissions
  • democracy and market based economies not defined by international law → every country can choose for themselves
  • wontfix get the end of “in-China for China” from Slides
  • stronger focus on “strategic autonomy” and “de-coupling/de-risking” and technological sovereignity
    • chips being produced in EU
    • server farms being built in EU
  • China is not just a competitor, but a geopolitical adversary
    • China has almost-monopoly on raw resources for high-tech products (chips, batteries)

Standard Economic Theory

  • helps us understand
    • benefits of trade
    • winners and losers of globalization
    • leads to productivity/efficiency gains
  • rarely includes political backlashes etc
    • maybe higher efficiency per company
    • but lower efficiency on marco/global level
  • wontfix get the rest from slides

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