It was during the late 1970's when I realized that international trade was growing much faster than the economy. Indeed, that actually triggered my graduate work at the University of Dallas in international finance. Since then, I have studied and lectured many times on the benefits of globalization. It seemed almost sacred to me that globalization would increase forever, making nations too economically interdependent to ever conduct war with each other.
But, something is happening. Cross-border investment dropped 18% in 2012 and is expected to have fallen even more last year. International trade has failed to grow as rapidly as the world economy for two straight years.
Two things have clearly contributed to this. First, technological innovation has made it easier to source and inventory parts domestically than expected, by such cutting-edge techniques as 3-D printing. Technology has made it easier to manufacture within one's country without the hassles of out-sourcing. This is made even more problematic by those nationalist governments like China, who strongly discourage any out-sourcing of labor or importing of parts.
Secondly, there has always been one or more worldwide leaders to champion the cause of economic interdependence but not now. For whatever reasons, most national leaders, from England to China, are weak by historical standards. Despite the Tea Party paranoia that President Obama is a socialist, Islamist dictator, he is actually a very weak president, relatively speaking. He has had zero success getting passage of the important Trans-Pacific Partnership (TPP) or the new U.S.-European trade pack or most anything else. Globalization has stalled.
Indeed, we are going backwards. The Center for Economic Policy Research in England has recently published that the G-20 countries have implemented 23% more protectionist measures in the last five years. This is a tragedy, indeed!
Lacking a better measure, the Baltic Dry Index has historically been the traditional benchmark on globalization. While it merely reflects shipping rates of dry goods (think: clothes, etc.) across the Atlantic Ocean, we assume increased shipping rates reflect increased shipping, which reflects increased trade. Here it is:
But, something is happening. Cross-border investment dropped 18% in 2012 and is expected to have fallen even more last year. International trade has failed to grow as rapidly as the world economy for two straight years.
Two things have clearly contributed to this. First, technological innovation has made it easier to source and inventory parts domestically than expected, by such cutting-edge techniques as 3-D printing. Technology has made it easier to manufacture within one's country without the hassles of out-sourcing. This is made even more problematic by those nationalist governments like China, who strongly discourage any out-sourcing of labor or importing of parts.
Secondly, there has always been one or more worldwide leaders to champion the cause of economic interdependence but not now. For whatever reasons, most national leaders, from England to China, are weak by historical standards. Despite the Tea Party paranoia that President Obama is a socialist, Islamist dictator, he is actually a very weak president, relatively speaking. He has had zero success getting passage of the important Trans-Pacific Partnership (TPP) or the new U.S.-European trade pack or most anything else. Globalization has stalled.
Indeed, we are going backwards. The Center for Economic Policy Research in England has recently published that the G-20 countries have implemented 23% more protectionist measures in the last five years. This is a tragedy, indeed!
Lacking a better measure, the Baltic Dry Index has historically been the traditional benchmark on globalization. While it merely reflects shipping rates of dry goods (think: clothes, etc.) across the Atlantic Ocean, we assume increased shipping rates reflect increased shipping, which reflects increased trade. Here it is:
It shows the dramatic collapse during the Great Recession, followed by recovery that also soon collapsed. During the last half of 2013, there was some recovery, but that reflects improving economic conditions, not necessarily increased globalization.
The opposite extreme of globalization is isolationism. I don't worry about that extreme, but I do regret the tangible benefits of globalization are being delayed . . . including economic interdependence.
Just five years ago, this would have been unthinkable . . .
The opposite extreme of globalization is isolationism. I don't worry about that extreme, but I do regret the tangible benefits of globalization are being delayed . . . including economic interdependence.
Just five years ago, this would have been unthinkable . . .
