Nice essay by Prof Harold James of Princeton Univ. on globalisation.
He says the idea of international markets is really old.
Globalization triggers odd responses. Although almost everyone who thinks about it today agrees that a revolt against globalization is underway, many consider the fundamental process both inevitable and irreversible.
Is that true? A look back through history helps us understand the dynamics of revolts against globalization—the movement of money, goods, people, ideas, technologies, and cultures across frontiers.
The term globalization—in its modern meaning—was coined in the 1970s to describe the internationalization of markets, especially financial ones, after the oil price increases of the decade, but it reflects a much older reality. The recent period of globalization that seemed ascendant, at least until the global financial crisis, is but one of many such periods—and reversals—that dot human history.
The global financial crisis taught us that it is misleading—and dangerous—to rely on the analysis of economic “trends” derived simply by extrapolating a short data period. We don’t know how unusual or exceptional those data are. We’re also not aware of the complex nature of global interconnection. The shock of the unexpected crisis thus produced a new interest in looking at patterns derived from much longer time periods. Those older and longer patterns can highlight vulnerabilities that help us discover how we should adjust the institutional framework to make globalization more stable, less dangerous—and more just.
Why does globalisation reverse? He cites four factors – rise of protectionism, financial crisis, financial crisis leading to rethink over international monetary system and wars.
What are the lessons from glob?
At each stage in the globalization cycle, we tend to extrapolate from current developments and to think that this particular phase will last forever—whether it is the confident upswing or the stagnation and anger of the downward movement. A break in the upward trend then produces profound disorientation and disillusion.
In the aftermath of the recent global financial crisis, a logic similar to that of a century ago drove German and American bankers not only to want to reform their financial institutions, but to think about a new financial and economic shape for the world. The United States, although the original epicenter of the 2007–08 financial crisis, pulled through better than other advanced industrial areas because of the depth and sophistication of its financial system. The experience has prompted broad discussion in Europe and Asia of ways to emulate the sophistication and robustness of the American system, just as Germans and Americans sought to learn from the model of the city of London and the Bank of England after 1907.
As was true a century ago, different parts of the world focus on various lessons taught by instability. For Chinese policymakers, the central focus is on giving their country a much greater role in trade finance, with a rapidly increasing proportion of foreign trade denominated in renminbi. The Chinese are reproducing their version of the American debate at the turn of the last century about the use of New York rather than London trade acceptances.
One lesson for Europeans is the need for a more secure asset and a better market for government bonds, which would involve moving to a standardized European security that resembles the U.S. Treasury bill. This is the equivalent of the German discussion of a hundred years ago in the wake of 1907. Many European economists, as well as outsiders, see the virtue of the early American experience, when founding father Alexander Hamilton built the new republic around a consolidated national debt. But a standardized security demands internal political and constitutional changes in the European Union that may be difficult to contemplate—just as full development of Germany’s debt market in the early 20th century would have ultimately required much more extensive constitutionalization.