Globalization: Waves, Dimensions, Consequences

Globalization: Waves, Dimensions, Consequences
Globalization is one of the most discussed phenomena of modern times. What does it mean? Is it new? What are its driving forces and consequences? A deep understanding of globalization is necessary for the analysis of modern political economy.

Definition of globalization
Globalization is a multidimensional phenomenon:

• Economic dimension: integration of markets for goods, services, capital, and labor. Growth of international trade, investment, and financial flows.
• Political dimension: spread of democracy, human rights, international organizations, global governance.
• Cultural dimension: spread of ideas, values, and lifestyles. Global media, the internet, tourism.
• Technological dimension: information technologies, transport, and communications compress space and time.

Key characteristics:

• Intensification of cross-border flows
• Acceleration and compression of time
• Expansion of scale — the local affects the global and vice versa
• Deepening interdependence

Historical Waves of Globalization

Globalization is not a new phenomenon:

• First globalization (1870–1914):

  • The gold standard ensured currency stability
  • Railways and steamships reduced transportation costs
  • Large-scale migration — 60 million Europeans to America
  • Free movement of capital
  • By some indicators, integration is comparable to the current situation

• Deglobalization (1914–1945):

  • World wars broke ties
  • Protectionism, currency wars
  • Capital controls, migration restrictions
  • Shows: globalization is reversible

• Second globalization (1945–1980):

  • Recovery under American hegemony
  • Bretton Woods, GATT — the institutional foundation
  • Trade integration, but capital controls
  • Limited — mainly among developed countries

• Third globalization (1980–2008):

  • Financial and capital liberalization
  • Technological revolution — internet, containerization
  • Inclusion of China and emerging markets
  • Global value chains
  • Peak integration

• Slowbalisation (2008–):

  • The global crisis revealed the risks
  • Trade is growing slower than GDP
  • Political backlash — Brexit, Trump
  • Geopolitical rivalry US–China
  • COVID-19 accelerated the re-evaluation

Driving Forces of Globalization

What drives globalization?

• Technologies:

  • Reduction of transportation costs (containers, aviation)
  • Telecommunications (internet, mobile communications)
  • Digitalization — services cross borders

• Politics:

  • Trade liberalization (GATT/WTO)
  • Financial deregulation
  • Privatization and market opening
  • Regional integration (EU, NAFTA)

• Ideas:

  • Neoliberal consensus
  • Faith in the market and openness
  • Development model through integration

• Interests:

  • Corporations benefit from global markets
  • Financial sector — from capital freedom
  • Consumers — from cheap imports

Winners and Losers

Globalization has uneven consequences:

Global winners:

• The global elite — the top 1%
• Asian middle class — especially China
• Corporations with a global reach
• Consumers (cheap goods)

Losers:

• Working and middle class in developed countries
• Industries competing with imports
• Regions tied to declining industries
• Low-skilled workers

"Milanovic's elephant". A chart of income growth by global distribution: incomes rose in the 50–70th percentiles (Asian middle class) and the top 1% (global elite). Stagnated — 75–90th percentiles (middle class in developed countries).

Political Consequences

Globalization generates a political reaction:

• Rise of populism. Losers from globalization vote for populists who promise protection — from immigration, imports, elites.
• Crisis of centrist parties. Traditional mainstream parties that supported openness are losing support.
• Nationalism. Return to national identity as a reaction to the feeling of loss of control.
• Brexit and Trump (2016). Symbolic events that demonstrated the power of the backlash.
• Rodrik's dilemma. Dani Rodrik formulated the "trilemma": it is impossible to have hyperglobalization, national sovereignty, and democracy at the same time. One must choose two out of three.

The future of globalization is uncertain. It is likely that we will see a more "managed" globalization with more room for national policy and social protection.