January 18, 2007


The shifting power equation of globalization (Jonathan Schmidt and Howard Davies, January 17, 2007, YaleGlobal)

A few short years ago an antiglobalization coalition severely disrupted a World Trade Organization summit meeting in Seattle and began a wave of demonstrations against the institutions seen as being "responsible" for globalization. At the time, most of the protests centered around the perceived inequities between North- South economies. Western corporations were thought to be gaining a disproportionate share of benefits of globalization. That kind of disruption seems less likely in 2007. And full frontal attacks on globalization seem distant memories.

But this relative calm on the streets does not mean that all the arguments have ended -- they have just changed character. While most people may accept that the trend towards greater interconnectedness between the world's major economies is unlikely to be reversed, there is increasing focus on the resulting winners and losers. In the long run, the economic theory of comparative advantage tells us that globalization should result in a net increase in human welfare; however, it is not likely that all boats will rise at the same time or to the same extent on this incoming tide, and some may be shipwrecked. Indeed, "The Shifting Power Equation" will be the overarching theme of the Annual Meeting of the World Economic Forum in Davos next week. There participants will try to make sense of the various ways that power is being transferred and redistributed in our ever more connected global polity.

One dimension of this debate is geographical. Over the coming decades there could well be a massive transfer of wealth from the industrialized Western economies to the fast-growing countries of South and East Asia in particular. This argument is most loudly advanced in what Donald Rumsfeld used to call "Old Europe."

That is surprising, in a sense, since recent figures show that in fact the European Union has maintained its share of world trade over the last decade.

As all of the jobs of an elderly Europe are taken by immigrants who are sending money home there'll be a tremendous shift.

Posted by Orrin Judd at January 18, 2007 7:58 AM
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