Yes, Globalization Passed Its Peak
Two years ago, in an article in the January/February issue of Foreign Affairs, we argued that the process of worldwide economic integration was likely to continue but that political support for globalization was rapidly weakening. Without political and institutional underpinnings, we feared, the single global economic space could disintegrate, just as it had during the 1930s. Politicians and mass publics in the United States, Europe, and Asia were not only skeptical that the benefits of globalization outweighed the costs, they also seemed intent on raising new barriers to the movement of people, capital, goods, and services across borders. The future looked muddled, driven by strong technological forces pushing global commercial and financial integration forward and equally potent political forces pushing in the opposite direction.
At the time, many people considered us overly pessimistic. Now it looks like we might have been too sanguine. The IMF predicts that global economic activity will expand by only 0.5 percent in 2009 -- down from 3.4 percent in 2008 and 5.2 percent in 2007. Global trade is expected to fall by more than 2.1 percent this year, and no major exporting country has escaped: China exported nearly 18 percent less in January 2008 than it did just one year earlier; for Korea, the drop was 33 percent; for Taiwan, 42 percent; and for Japan, 46 percent. According to the Institute of International Finance, private investment in developing economies has collapsed, falling more than 80 percent from its 2007 level. Whereas the worry two years ago was about the renaissance of state capitalism in energy and finance, it now appears that the banking sector in the United States, and almost every other major developed economy, will end up wholly or partially owned by the state.