There are two major differences
between the current and the earlier
waves of globalisation. The first is the
respective role of the centre and
the
periphery.
The
second
difference between the current and
earlier
waves
of
globalisation
concerns institutions. How well have
the global institutions performed
during
the
current
wave
of
globalisation? asks André Sapir,
Senior Fellow, Bruegel and Professor
of Economics, Université Libre de
Bruxelles
GLOBSEC Policy Briefs provides the
security community with policy
recommendations by renowned
decisionand
opinion-makers
throughout
the
Euro-Atlantic
community. Their aim is to foster the
discussion on current international
security issues and transatlantic
agenda bringing upon critical
assessment the topic.
The series is put together by the
Central European Policy Institute
(CEPI), a new regional think-tank
established by the Slovak Atlantic
Commission. It links top research
institutions and experts from across
Central Europe in order to come up
and promote innovative regionally
based solutions. By setting the
fundaments for the convergence of
national positions and by applying a
regional approach, the Institute
seeks to strengthen the region's
identity and voice.
aThe current of wave of globalisation
that started at the end of the
twentieth century has a lot in
common with the previous wave that
began one century earlier. The same
factors
are
behind
both:
technological change and political
decisions to open up markets for freer
trade and capital movements.
Likewise
both
created
huge
economic opportunities and wealth,
but also huge economic and political
tensions within and across countries.
Domestic tensions arise because not
everyone in a country is able to take
advantage of the opportunities
created by globalisation and some
clearly lose out from technological
change or freer trade. International
tensions result from an unequal
distribution of the gains and pains
from globalisation across nations.
During the first wave of globalisation,
tensions
were
mainly
between
established colonial powers (primarily
Britain, France and Russia) and new
ones (mainly Germany and Japan).
The colonised nations, including
China and India, were simply too
weak economically and politically to
be autonomous actors during this
period. The combination of domestic
and international tensions, mainly
within and between
European
powers, is what eventually led to the
first world war (WWI) and the end of
the first wave of globalisation.
Is the current wave of globalisation
doomed to end the same way?
There are two major differences
between the current and the earlier
waves of globalisation. The first is the
respective role of the centre and the
periphery. The end of the nineteenth
century and the beginning of the
twentieth century was the age of
Europe and imperialism, with what
are now referred to as “emerging
countries” falling rapidly behind. The
beginning of the twenty-first century,
by contrast, is an age in which the
BRICs (Brazil, Russia, India, China) and
other emerging countries are growing
in strength.
The second difference between the
current
and earlier waves of
globalisation concerns institutions. The
domestic
and
international
confrontations that brought the first
wave of globalisation to an end
happened in an environment in
which
nations
clearly
lacked
adequate institutions to resolve
conflicts. It took the first world war, the
Great Depression and the second
world war for countries, mainly
European nations and the United
States, to set up the institutions of
global economic governance, such
as the World Bank, the IMF and the
GATT/WTO, aimed at containing the
kind of economic and political
tensions inherent in the process of
economic transformation brought
about by globalisation.
How well have the global institutions
performed during the current wave of
globalisation?
Before the financial crisis, a clear
disconnect had developed between
the shift of global economic power in
favour of the emerging countries and
the
largely
unchanged
global
economic regime still dominated by
the industrial countries. In particular,
the
Bretton
Woods
institutions
remained
squarely
under
the
leadership of the G7, a grouping by
then accounting for only about 40 percent of world GDP
(measured in purchasing power parities) and 10 percent of
world population. By contrast, the G20, a grouping of
major advanced and emerging countries created in the
wake of the Asian crisis, although accounting for 80
percent of world GDP and 60 percent of world population,
only assumed a minor role, perhaps because, contrary to
the G7, it only operated at finance minister and central
bank governor levels.
Despite the weak state of global economic governance at
the start of the financial crisis, the international community
was able to act cooperatively and prevent a replay of the
‘beggar-thy-neighbour’ policies that plagued the Great
Depression of the 1930s. Credit for this goes to the first two
summits of the G20 leaders held in Washington in
November 2008 and in London in April 2009. As well as
helping to stabilise international currencies, revive
international trade and avert global depression, these
summits marked the end of an era in which America,
Europe and Japan dominated world affairs, and the
beginning of a potentially new relationship between
mature and emerging economies.
So can globalisation be sustained despite the
unprecedented speed and size of the global
transformation brought about by China, India and other
emerging countries? The answer is, perhaps, yes if the G20
can evolve from a crisis committee to a global steering
committee and can help reform global governance
institutions and global policies. Its members must now
come forward with concrete reform proposals. On the side
of the advanced countries, the European Union has the
duty to contribute to the reform of the Bretton Woods
institutions in which its members are grossly overrepresented in terms of voting rights and board seats.
Decreasing the EU weight would permit better
representation of emerging and developing countries, and
might even increase the EU’s influence if its reduction in
voting rights coincided with unified representation.
For their part, emerging countries, particularly China and
India, must commit to play a more active role in global
institutions and policy design. Their greater economic and
political weight must go hand-in-hand with greater sharing
of global responsibility.
André Sapir is Senior Fellow at Bruegel and Professor of Economics at Université Libre de Bruxelles.
© Slovak Atlantic Commission, 2012
“This is a joint publication of the Centre for European Studies and the Konrad Adenauer Stiftung. This publication receives funding from
the European Parliament. The Centre for European Studies, Konrad Adenauer Stiftung and the European Parliament assume no
responsibility for facts or opinions expressed in this publication or any subsequent use of the information contained therein . Sole
responsibility lies on the author of the publication”