When economists seek to explain Brexit, Donald Trump and the rise of populism/nationalism, the concept they most often reach for is ‘globalisation’. Goods and services, it seems, can be produced almost anywhere on the planet and consumed anywhere else, rapidly. This has had profoundly dislocating effects on patterns of employment, income and population movement over the past 30 years.
This latest book by Richard Baldwin (http://graduateinstitute.ch/directory/_/people/baldwin) attempts to explain the current driving forces behind the phenomenon and the likely consequences. It is well argued, and supported by a wealth of data and research. Baldwin argues that the economies of the world are about to enter a new age of globalisation.
Information technologies, with their ability to move ideas and data, have evened out the imbalances that have existed since the industrial revolution. Notably, between 1820 and 1990, the share of world income going to today’s wealthy nations soared from twenty percent to almost seventy. Since then, that share has plummeted to where it was in 1900. New technologies have made it practical for multinational firms to move labour-intensive work to developing nations. But, unlike the past, firms can also ‘off-shore’ their marketing, managerial, and technical expertise. This new possibility of combining high tech with low wages has propelled the rapid industrialisation of a handful of developing nations (especially China). De-industrialisation of developed nations follows, and the result is what Baldwin calls a ‘Great Convergence’.
To accompany his thesis the author provides an overview of the historical development of economic systems, showing how they are linked to migration and social evolution. The new twist in globalisation will present rich and developing nations alike with unprecedented policy challenges. It remains to be seen whether reliable, peaceful growth and co-operation can be maintained. The worry is that social cohesion within, and between, nations will break down – leading to war and global catastrophe. 2017 will provide indicators to these possibilities.
Richard E. Baldwin is Professor of International Economics at the Graduate Institute of International Development Studies in Geneva. He is also President of the Centre for Economic Policy Research.
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330 pages in Harvard University Press
First published 2016
ISBN 978-0674660489
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Professor Richard Baldwin