Globalization

By any measure, the world today is more integrated and wealthier than at any other time in human history. Advances in macroeconomic performance —fueled by policy liberalizations and technology—account for the ever more rapid movement of people, goods, services, money, and ideas. Trade flows have grown 300 percent larger over the last 20 years alone.

In 1970, $10 billion was traded on foreign exchange markets in a day; in 2002, the same amount was traded in one second. The average global per capita gross domestic product (GDP), largely static for centuries, nearly tripled between 1950 and 2000, and is likely to grow another 60 percent to more than $10,000 per person by 2025, in constant 1990 dollars.

Yet one-third of the world has not participated in this process of wealth-creating integration. The word’s 225 richest individuals control as much wealth as the 2.5 billion poorest—nearly half the total global population. Thanks to pervasive modern communications technology, these tremendous and growing inequities are fully transparent. We should not be surprised by simmering resentments and violence throughout the Middle East, one of the least globalized regions of the world and one of the biggest losers in the globalization process. Since 1980, the Middle East’s share of global trade and investment has collapsed, falling 75 percent even as the region’s population has almost doubled.

At the turn of the century the Arab League’s 22 member states had 278 million people. But a combined economic output significantly less than that of Spain, a country with one-seventh the population. Even more surprising is the challenge to the “integration-globalization” proposition in industrialized nations. The globalization of corporate operations has created new wealth, but it has also triggered a heightened sense of personal insecurity, as individuals grow increasingly aware of their vulnerability to ricocheting global economic developments.

Greater mobility of people brings not only opportunity, but also the prospect of migrating microbes. Open economies and borders allow not only people and products to move with greater ease, but also terrorists and security threats to infiltrate once-safe societies. “E-business” gives consumers and producers options beyond the wildest expectations of the previous generation, while also making major systemwide infrastructures vulnerable to interruption or even sabotage.

The paradox of this era of globalization is this: The same forces that ushered in unprecedented opportunity have also given rise to unprecedented vulnerabilities and insecurities. That doesn’t mean globalization will now inexorably slip into reverse, any more than it will inevitably move forward without interruption. Rather, it means that how much benefit global integration brings will depend on how the principal proponents and beneficiaries of globalization interact with the governments that safeguard the process and answer to their constituents. The multinational corporate sector also has the capacity to influence, for good or ill, the critical public policy decisions of the next decade or so.

Can globalization’s beneficiaries effectively build the institutional framework required to protect and enfranchise those made vulnerable by integration? The answer will likely determine globalization’s future course.