“What are the consequences from moving away from nation-based economics toward, a more globalized one?”
In his 2000 Committee for Development Policy Paper “Economic Globalization: Trends, Risks and Risk Prevention”, Che Kiang University Department of Management Dean and Professor and University of Peking Professor and Ph.D. Director Gao Shangquan begins by stating his premise: that economic globalization “reflects the continuing expansion and mutual integration of market frontiers and is an irreversible trend for the economic development in the whole world”.
Professor Shangquan then lists two “enormous risks” posed by the globalization process. The first is that economic globalization has expanded the gap between what Shangquan refers to as “the North and the South”, with fewer than 20 countries benefitting from economic globalization and 80% of capital flowing among the United States and Western European and Eastern Asian countries [Page 4]. Second, Shangquan writes that a “self-fulfilling mechanism” that he calls the “sheep-flocking effect” of international financial markets under open economic conditions strengthens developing countries’ risk of being “concussed” by “unfavorable external factors” of monetary crisis and the “concussion” suffered by developing countries by “weakening their capacity of macroeconomic control and regulation” [Page 5].
Shangquan goes on to recommend three measures to be taken to prevent and “dissolve” the risks of economic globalization to developing countries.
The first is the establishment of an organization for global economic regulation that can play the role of “final lender” all over the world, providing “floating financial relief and support” to restore the confidence of international investors and a regulatory system strengthening the “monitoring and supervision” over financial institutions [Page 6].
The second is a guarantee of growth sharing, making the benefits of the progress of globalization available to every country [Page 7].
The third is strengthening of government functions of protecting intellectual property rights, ensuring legal fulfillment of contracts, and providing infrastructure; a major government role in establishing incentive and constraining mechanisms in line with corporate governance so as to improve efficiency; and a focus of government efforts on stimulating rapid scientific, technological and educational development and increasing investment in developing human capital [Page 8].
In his January 2015 paper, European Council on Foreign Relations and Foreign Policy Center Founder and Director Mark Leonard presents “Seven Challenges to Globalization” from Carnegie Endowment for International Peace Moscow Center Director Demitri Trenin, Kyoto University Graduate School of Management Adjunct Professor Takashi Mitachi, United States Alternate Executive Director to the International Monetary Fund and New America Foundation Global Strategic Finance Initiative co-Founder and Director Douglas Rediker, Princeton University Department of Economics Visiting Assistant Professor and Paris Institute of Political Studies Professor of Economics Sergei Guriev, New York University Professor Ian Bremmer and Council on Foreign Relation Maurice Greenberg Center for Geoeconomic Studies Director Michael Levi.
In his June 4, 2010 paper “Issues, Lessons and Future Challenges” for the Brookings Institution, Australian National University John Crawford School of Public Policy Center for Applied Macroeconomic Analysis Professor of Economics, Australian Center for Economic Research on Health Director and Frank Lowy Institute for International Policy Professorial Fellow Warwick McKibbin summarizes the four questions and six themes [Page 2] of a conference convened in Sydney Australia on March 18, 2010 by Australian National University, the Brookings Institution and the Lowly Institute for International Policy.
The first has to do with the nature of infrastructure: the main characteristics of infrastructure that make it special to a country’s economy and the salient features that distinguish it from other factors of production.
The second has to do with the returns to infrastructure investment. McKibbin argues that transport infrastructure in particular facilitates agglomeration economies and helps to realize the returns to agglomeration; helps to create new markets and reduces costs to access markets; and spurs innovation and facilitates the dissemination of knowledge; leading to an increase in living standards and having a disproportionate effect on the incomes and welfare of the poor [Page 3]. He argues that transport infrastructure contributes significantly to the economic efficiency of an economy by lowering prices, reducing the cost of private production, raising productivity, reducing transport costs and lowering inventories [Page 4].
The third has to do with how infrastructure should be provided and the role of the private sector [Page 5].
The fourth has to do with infrastructure in developing countries and whether infrastructure provision should be affected by the stage of a country’s economic development. McKibbin argues that developing countries are particularly aware of their infrastructure needs and that infrastructure helps alleviate poverty and provides an environment in which the poor can grow their way out of poverty: infrastructure investment providing access to energy, clean water and transport may mean the difference between life and death for low-income countries [Page 11].
1. Bhatia, Karan and Bremmer, Ian, et al. “Geo-Economics: Seven Challenges to Globalization”. World Economic Forum Global Agenda Council. January 2015: http://www3.weforum.org/docs/WEF_Geo-economics_7_Challenges_Globalization_2015_report.pdf
2. Henckel, Timo and McKibbin, Warwick. “The Economics of Infrastructure in a Globalized World: Issues, Lessons and Future Challenges”. Brookings Institution. June 4, 2010: https://www.brookings.edu/wp-content/uploads/2016/06/0604_infrastructure_economics_mckibbin.pdf
3. Shangquan, Gao. “Economic Globalization: Trends, Risks and Risk Prevention”. United Nations Department of Economic and Social Affairs Development Policy and Analysis Division Committee for Development Policy. 2000: http://www.un.org/en/development/desa/policy/cdp/cdp_background_papers/bp2000_1.pdf