Ensuring globalization after the great crisis
The global crisis has rocked people’s faith in globalization. This article introduces a new book arguing that, despite taking a step back, globalization is one of the most travelled routes the world has known for spreading growth and prosperity. It provides policy recommendations for renovating that road dealing with the WTO, social security, global imbalances, and foreign direct investment.
In statistical terms, globalization is back. The trade rebound looks V-shaped – a drop of 12.2% in 2009 followed by a projected gain of 13.5% in 2010 (WTO 2010). Global foreign direct investment (FDI) is expected to recover to $1.2 trillion this year, after plunging from $2.0 trillion in 2007 to $1.0 trillion in 2009 (UNCTAD 2010). Financial markets have rebounded, and cross-border flows are recovering. After halving from $1.3 trillion in 2007 to $0.5 trillion in 2009, net portfolio capital flows to emerging markets will rise to an estimated $0.7 trillion this year (IIF 2010). Investors with cash are eyeing bets on Europe and the US, where good companies still go for cheap prices.
While the “Great Crisis” of 2008-2009 devastated the world economy and all but halted globalization, much went right. In contrast to the beggar-thy-neighbor protectionism in the 1930s, international commitments made over the past sixty years to liberalize world trade and finance, defended by thousands of vocal proponents of free markets ensconced in industry, academia, the media, and national governments, preserved the open global economy (Baldwin and Evenett 2009). To be sure, protection has erupted across the G20 like a thousand flowers, but collectively the damage was orders of magnitude less than in the Great Depression of the 1930s.
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