Globalization II

A second reflection on thinking about globalization.

Photo by Anne Nygård on Unsplash

The first, and perhaps primary, consequence of decades of globalization has been changes in the economies of industrialized countries. Wealth production has migrated to regions that provide financial, information, and entertainment services and away from former industrial heartlands. This has created “rust belts,” in major geographic areas.

The resultant complex networks of global supply chains have proved vulnerable, however, and we are seeing a limited realignment of some patterns of trade and production to source manufacturing closer to supplies of raw materials and consumption.

The fundamental patterns, though, seem to me, to favor developed urban areas positioned to facilitate innovation and distribution of products and services.

These changes are well described in the growing volume of literature on globalization. What is less acknowledged are fundamental changes in the very nature of the traditional advantages that have justified regimes of “free trade.”

These require careful consideration. In a world that was only a few decades removed from the present, economic theory rightly stressed the importance of comparative advantage in justifying global trade.  It assumed that natural resources, infrastructures and employment conditions varied between regions of the world to such an extent that overall prosperity was increased by each country focusing on production that exploited its comparative advantage.  I would argue that technological changes in transportation, communication, capital investments, labor costs, material sciences, consumer preferences and other factors have fundamentally altered these traditional terms of comparative advantage, narrowing such advantages and encouraging intra-state production.

This, more than concern over the vulnerability of global supply lines, is encouraging a growth in domestic and regional production. Critical to this transformation will be a renewed emphasis on infrastructure development as well as government initiated industrial policies that fast track new production by partnering with industry to mobilize large-scale capital investment.

This holds the possibility of shifting global trade partnerships and resulting political alliances. Coupled with new energy sources and IA robotic technologies, traditional power alignments between sovereign States will unravel and domestic alignments of political power will change.

It will not, however, result in any marked reduction in the strength and reach of global corporations. In fact, I would assume that their elites will be even less tethered to national agendas and policies that promote “national interests.”

All of this assumes national efforts to align military power and interests to new political forces.

Some of this thinking may lay behind such present realities as the war in Ukraine and the new alliances developing in the non-Western world.