In The Great Convergence, one of this year’s most important economics books, Richard Baldwin argues that revolutionary advances in information technology and computing transformed globalization around 1990 in ways that few governments and companies have yet to fully understand.
Better communication made it feasible for rich-nation firms to move manufacturing stages to developing nations. Offshoring is old hat, but the book argues for a focus less on the trade, investment and offshored jobs, and more on the offshoring of the ideas, intellectual property and knowledge that went with the jobs. After all, to keep the international production network in synch, firms had to send their marketing, managerial and technical knowhow along with the jobs.
These massive knowledge flows fundamentally changed the way globalisation affects nations. In rich nations, the new flows broke the monopoly that rich-nation workers had on the use of advanced know-how, ideas and industrial/manufacturing intellectual property – firms could now combine high-tech with low-wage workers in developing nations.
The ICT-enabled offshoring of production stages and occupations means that international competition is helping or harming individuals with little regard to sectors and skill groups. In short, the New Globalisation is impacting economies with a finer degree of resolution. Or to put it directly, no matter what job you have and no matter which sector you work in, you cannot really be sure that your job won’t be the next to suffer or benefit from the New Globalization.
Moreover, because the New Globalisation is driven by fast-paced technological change and production fragmentation, its impact is more sudden, more individual, more unpredictable, and more uncontrollable. For the same reasons, it tends to defy the 20th century policy toolkits that were used to address the “rust-belting” of industries and communities in the 1970s and 1980s.
As The Great Convergence shows, the New Globalisation presents governments in developed and developing nations with unprecedented economic and social policy challenges in their efforts to maintain reliable growth and social cohesion.