From left: Associate Professor in Practice James Crabtree, Thomas Friedman, Foreign Affairs Columnist from The New York Times, Rana Karadsheh-Haddad, Regional Industry Director, Asia-Pacific, International Finance Corporation (IFC) and Professor Danny Quah, Dean and Li Ka Shing Professor in Economics, Lee Kuan Yew School of Public Policy.
Globalisation has been a much-discussed topic for decades; and has even inspired the title of this publication, Global-is-Asian. And yet, as we progress nearly two decades into the 21st century, the global balance seems to be shifting. What was once thought of as an unstoppable force appears to be weakening. New trends like protectionism have people wondering if globalisation or de-globalisation best describes the world’s future.
That was exactly the question posed at a panel during the Lee Kuan Yew School of Public Policy’s 2019 Festival of Ideas. The session Globalisation vs De-globalisation: What is the World’s Future? was moderated by the school’s Associate Professor in Practice James Crabtree and featured speakers Danny Quah, Dean and Li Ka Shing Professor in Economics, Lee Kuan Yew School of Public Policy, Rana Karadsheh-Haddad, Regional Industry Director, Asia-Pacific, International Finance Corporation (IFC) and Thomas Friedman, Foreign Affairs Columnist from The New York Times.
James Crabtree framed the issue by pointing out the three “big Ts” of the first era of globalisation trade, technology, and travel (meaning the movement of people across borders) have all, “since the global financial crisis, either stalled or gone into reverse.” He then asked, “What is our future? Particularly thinking of it here in Singapore, a very globalisation dependent economy.”
Hairy, asymmetrical and in need of helping hand
Professor Quah was first to lay out his analysis, making three distinct points.
The first was that globalisation is not linear.
Unlike the infamous Doomsday Clock, where atomic scientists assess the likelihood of nuclear catastrophe as being closer or farther away from midnight, he argued that, “Globalisation is messy. It is a knotted ball of string. It is hairy in parts. It's all complicated and nonlinear.”
By this, he meant that it is not so simple to say that an increasing level of globalisation is always a good thing because it brings more open markets.
He agreed that open markets can bring greater social openness, flatten social hierarchies, spark creativity as well as make producers more efficient and increase the variety of goods while lowering the cost.
But it can also introduce other vested interests, like multinational banks and large corporations, all of which will worsen social hierarchies and exacerbate income inequality, in turn, creating “ a local political economy where more globalisation doesn't mean necessarily good things.”
The second point was that globalisation is asymmetric. It does not benefit every nation equally. In fact, it can pit nation against nation.
The clearest example he pointed out, is China and India’s globalisation that have put some two billion additional low wage workers into the global labour markets. This has resulted in wages in developed economies being driven down, while that in emerging markets have been driven up. In that respect, emerging countries “greatly value globalisation,” while America, Britain and elsewhere “are tortured” by it, a trend which creates tension.
Professor Quah’s third point was that nations can help themselves to the fruits of globalisation by helping others through the difficulties that they face.
“We need to step back from the easy policy advice that says more globalisation is always good.” Instead he countered, countries should be more creative. Countries that value globalisation should think about how to help those that do not.
“Help them on income inequality, help them build infrastructure. You can bring everyone up and in doing so, you yourself can benefit from globalisation,” he added.
The risk of de-globalisation
Rana Karadsheh-Haddad described the IFC as the private sector investing arm of the World Bank Group. It was set up to help emerging economies develop by investing directly in the private sector. They invest between 15 and 20 billion every year globally, and only in emerging markets.
She shared her view of globalisation and economic development from the perspective of an investor looking for returns as well as positive global impact, like job creation, increased access to water and increased power generation.
Ms Kardsheh-Haddad pointed to the World Development Report 2020 -Trading for Development in the Age of Global Value Chainsas a reference for the relative success for globalisation. She says the report shows that globalisation has, “net benefited” the population, but there are certain trends to be aware of.
For example, in 1970, global value chains made up 37% of all global trade. That increased to 52% by 2005. The 2008 financial crisis saw a dip, but since then there has been an overall decline to about 48% today.
This shift was caused in part by trends like China focussing more on servicing their local economy and boosting domestic consumption, the drop in commodity trade that came from the US shale gas revolution and trade reforms.
But why does this matter? A continued decline would mean “there is a risk that an additional 30 million people could be pushed into poverty, and global income could decline by 1.4 trillion,” she said.
She also emphasised that while “the biggest beneficiaries of global trade are women in the workforce,” they would also be the hardest hit from de-globalisation.
Regardless, Ms Kardsheh-Haddad sees a future of constant disruption, where one’s professional survival depends on being able to connect the dots, work globally and constantly retrain as well as re-tool yourself to remain relevant.
From flat, to fast, to smart, to deep
Following on Ms Kardsheh-Haddad’s comments about decline in trade, Thomas Friedman said, “if you actually think about globalisation as containers on ships and planes, it's actually flat to declining. If you think of globalisation as I do, which is digital globalisation… it is actually accelerating.”
According to Friedman, technology moves up in steps, and each step tends to be driven by a bias toward a certain set of capabilities.
Around the year 2000, the step was biased towards connectivity. “The dot-com boom, bubble and bust had collapsed the price of fibre optic cables. And so we accidentally wired the world.” This led to connectivity becoming fast, virtually free, and ubiquitous. And the world became flat.
That was essentially the point he made in his best-selling book The World is Flat: A Brief History of the Twenty-first Century, that technology had levelled the playing field to connect humans around the world; for example a computer engineer in Bangalore could work as easily on a project as anyone else in the world.
He mentioned that a second step also culminated around the year 2000, biased towards complexity and driven by a different price collapse, that of compute and storage. “That allowed — with the right algorithms — for us to massively abstract complexity in more and more ways of our daily life. And so the world became fast.”
The latest technological step according to Friedman was in 2015, when the cost of sensors dropped enough to make a global system of interconnected devices, or the Internet of Things (IoT) possible.
“…every light, faucet, drain, computer, engine. We could put sensors and create this Internet of Things everywhere and then digitise all that data and store it in the cloud, and the world became smart. “When the world goes from fast, to flat, to smart, it starts to go really deep.”
He explained this as a way to describe the way researchers or professionals today can find the needle in the haystack of data at a depth of precision that was previously unimaginable.
How does this effect globalisation? Friedman answered the question in the context of US and China. He pointed out that for decades, China sold the US “shallow” goods — toys, t-shirts and tennis shoes, while China bought “deep” goods, like software and computers from the US because they didn’t have any choice.
Now with exports like Huawei 5G, China has also entered the deep end. But there is no existing trust framework for the US to buy deep goods from China.
That leaves two possibilities, according to Friedman. Either a framework is developed, in which case, “you are going to see globalisation like you've never seen it before,” or without a trusted framework, “we're going to look back on the past 30 years of globalisation as the great, wonderful, good old days.”