Globalisation at a critical conjuncture?

It is 10 years since the first issue of the Cambridge Journal of Regions, Economy and Society appeared, in April 2008. When we had our first Editors’ meeting, in mid-2007, little did we know that the worst financial crisis since that of 1929 was about to disrupt and destabilise the global economy. The Global Financial Crisis of 2007–2008 in turn triggered the deepest recession since the Great Depression of 1929–1932, a debt crisis in much of Europe, and the imposition by several states of a programme of fiscal consolidation, or austerity, which is still in place in many cases. The past decade has been one of tremendous upheaval and instability throughout much of the global economy, not just in the advanced industrial economies but also in the emerging economies, including China (see Pettis, 2013). It is tempting to see the Global Financial Crisis of 2007–2008 as deriving from flaws and failures in the financial system itself, from the greed of banks and the invention and uncontrolled use of ‘clever’ exotic instruments and products for bundling, concealing and trading high-risk mortgage debt across a globally integrated financial system. Indeed, many observers would argue that it is in the financial system that globalisation finds its clearest expression. As Minsky (1982) observed some 35 years ago, attributing the causes of the financial crises that periodically disrupt capitalism to the nature of the financial system itself in this way is not uncommon: Once the sharp financial reaction occurs, institutional deficiencies will be evident. Thus, after a crisis, it will always be possible to construct plausible arguments—by emphasizing trigger events or institutional flaws—that accidents, mistakes, or easily correctible shortcomings were responsible for the disaster (Minsky, 1982, 118). But as he went on to argue, while such ‘plausible arguments’ may highlight particular and indeed relevant proximate causes, they do not necessarily tell the whole story nor confront the real underlying ultimate fundamentals at work. In the case of this financial crisis, such imbalances took the form of an accumulation of reserves in US dollars in countries running large current account surpluses with the United States, such as China, Germany and several East Asian and Latin American economies. These surpluses were complemented by low domestic savings and the expansion of credit in the USA. These real economy imbalances were in turn transformed into monetary instability, through the emergence of a system of financial engineering designed to sterilise the surpluses and invest them in the deficit countries, leading to spurious lending practices—principally in real estate in the USA—and hence to the fragility of the system. In this sense, the global financial crisis was not some purely ‘exogenous’ or ‘autonomous’ event that unexpectedly disrupted an otherwise stable regime of global economic growth and development, but a manifestation, a symptom, of the inherent instability and unsustainability of that regime itself. A key characteristic of this regime is that it was based, in large part, on a distinctive form and particularly rapid phase of globalisation. Now globalisation, of course, is nothing new (Michie, 2017); it has been an evolving feature of world economic activity ever since the Age of Exploration in the 16th century, and also characterised many ancient systems, such as the Roman Empire (Gray, 1998; Held, 2005). But since the mid-1970s, the process—defined broadly as the increasing extension, interpenetration and interdependence of production systems, corporations, markets and networks of flows across national borders—has accelerated considerably, so that today, world trade as a proportion of world economic output is at the same previous high point that it attained in 1914, the apogee of the Atlantic Economy. Nor is globalisation a singular condition, a linear process, or final point of socio-economic change (Held et al., 1999). Rather, it is a complex admixture of different, though interrelated, historically evolving developments and transformations—economic, technological, cultural and social. One important task in analysing globalisation is to distinguish between material and institutional forms of global integration and exchange, and constructivist discourses about globalisation, and then to consider the ways they may mutually influence one another but also the ways in which they differ. Certainly, a well-organised industry of consultants, academic experts, public intellectuals, think tanks and other voices has prosecuted a narrative that globalisation represents a new logic of political economy for which adaptation to the demands of international markets and hypermobile capital and information is an inescapable imperative. It is as if globalisation is some ineluctable ‘force of nature’ out there—almost akin to gravity—to which nations, companies, regions, cities and workers must inevitably bend or otherwise get left behind.1 Yet there is also much evidence that policies adopted in specific national and regional contexts have shaped globalisation in very different ways, suggesting that globalisation is not akin to gravity, but more like the weather, where (employing a metaphor from Rodrik) one can for example, put a screen on the window and allow the pleasant breezes to flow without letting in the rain and insects. In reality, the latest phase of globalisation that has been developing since the mid- to late-1970s is a process or project that in large part has been purposively promoted and championed by individual states, transnational corporations and key international organisations such as the IMF and World Bank, all driven by a belief in the benefits of free markets and free trade. The acceleration in globalisation over the past 40 years has been accompanied by a widespread deregulation of markets, especially financial markets; the dismantling of the post-war system of international monetary and capital controls; and, in some countries, the privatisation of state assets and public industries and services. While some would argue that these moves to liberalise economic governance have been essential in order to meet the opportunities afforded by globalisation, they can equally be seen as driving the very same process. And it has been an ideology that has spread—in one form or another, and to some extent or another—across much of the OECD bloc. It would be incorrect, however, to see globalisation as some monolithic, universalising political-economic programme. What some label the ‘neo-liberal’ version of globalisation emanates heavily from the USA and the UK, while policies towards social protection, regulated labour and product markets, and certain restraints on trade are quite popular in continental Europe and in many emerging economies. Indeed, state spending as a proportion of economic output has continued to rise in virtually all of the advanced economies as well as most of the bigger emerging economies. And to further complicate matters, China’s own globalisation project, its particular state-led approach of inserting and integrating its economy into the wider world system, is most certainly not based on anything like straightforward liberalisation—very far from it. The protagonists of free-market globalised capitalism make several claims for its benefits. They point to the long boom in world economic growth over the 1990s and first few years of the 2000s, to the increase in world trade, and to the rise in incomes in several of the world’s poorest countries brought about by the opportunities they have been afforded by the freeing of markets and the expansion of trade. The OECD has estimated, for example, that a 10 percentage-point increase in trade exposure for a country has been associated with a 4 percent rise in income per capita over time. Greater trade has undoubtedly enhanced the division of labour, promoted comparative advantage and encouraged producers and consumers to reap the benefits of economies of scale. It is certainly true that many countries have been lifted out of poverty and that mobile western transnational capital has brought much-needed investment, technology and jobs to many such areas of the globe. But while acknowledging these benefits, critics and antagonists of globalisation point to various costs and adverse effects which they argue have negated or outweighed the positive effects. Thus, for the ‘discontents’, globalisation is charged with having increased inequality in income and wealth (Piketty, 2014; Stiglitz, 2002, 2015). In almost every country, the share of the upper half, and indeed usually the upper 10 or 1 percent, of the income distribution has tended to rise, both in those poor countries that have seen an overall rise in average per-capita incomes and in the advanced prosperous economies (World Inequality Lab, 2017). In many nations, spatial inequalities in prosperity have likewise widened, particularly between the cities (typically containing the political and economic elites) leading the globalisation process, and those cities and regions less favourably positioned to set the terms of the globalisation process. However, the magnitude of such changes is highly variable, with the USA as the outlier among advanced economies in the rise of the share of the top 10 percent, while continental European countries have had much smaller increases. Latin American countries and India were highly unequal prior to this round of globalisation and remain so, while China now has levels of inequality that are above those in the USA. Similarly, while world trade has grown, so too have trade imbalances. In particular, between 1997 and 2007, China generated what is probably the largest trade surplus as a share of world GDP of any country in history, while the USA became the world’s largest deficit nation (Figure 1). As Pettis (2013) cogently shows, these contrasting situations are not independent of one another. The very large trade surpluses of countries like China and Germany, and the very large trade deficits of the USA and peripheral Europe, are inextricably linked and a major source of the financial crisis. Other critiques relate to the threats to the global commons posed by unregulated growth and exploitation of natural resources; the rise of giant monopolies, including the global ICT, digital equipment and web-based companies, that actually stifle competition; and the ability of these giant corporations to carry out complex forms of regulatory and tax arbitraging, effectively playing off nations to gain the lowest tax deals, or avoiding taxes by using offshore trusts and complex ‘transfer pricing’ arrangements.2 While these tax of the major transnational corporations in the of to states, which be put to for example, to public and services. for countries, current World A further source of if not of the phase of globalisation, is that it has been a process of In this it is different from previous of globalisation. 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