Globalization disrupted: From hyper-globalization to poly-globalization
02 November 2023
Delivered at the University of International Business and Economics
Mr. Huang, Chairman of the University of International Business and Economics,
Professor Zhao Zhongxiu, President of the University of International Business and Economics,
Dear Resident Coordinator of the UN System in China,
Distinguished faculty, Dear students, Dear friends,
It is my great honour and pleasure to be here, surrounded by so many bright, young people. The UIBE enjoys a high academic reputation and has been an instrumental institution for human resources development in writing China’s trade and development story, and in training the Chinese businessmen and civil servants who made that story possible.
I have come a long way to be here, but my priority is not to speak – it is to listen. So, I will try my best to keep my presentation short, to be able to have more time available for the Q&A session.
The title of my talk is Globalization disrupted: from hyper-globalization, to poly-globalization. Hyper-globalization is not a new term. It is a term coined by Dani Rodrik from Harvard University to describe a period that goes from the mid 1980s to the mid 2010s.
During this period, we saw record levels of flows of capital, goods, information, and to a lesser extent, people. With hyper-globalization, a more interconnected world emerged than ever before, driven by technological advances and major market forces, especially in Asia. This period was marked by an unprecedented level of economic growth and poverty reduction, most remarkably here in China, which took out of poverty more almost a billion people during this period. As a result, this was period of convergence between the global south and global north.
However, this period was also marked marked by inequality, especially within countries, premature deindustrialization in many parts of the developing world, and the neglect of the climate emergency in most of the globe.
Hyper-globalization was a time that hailed the idea of the global village but also led to insular nationalisms. It was a world that shrank in terms of distance but grew in terms of inequality.
There is no consensus of when this period ended. Some say it was in the 2008 financial crisis, which proved that market forces can and often do get things catastrophically wrong. Others say that it ended around 2016-2017, with the rise of populist and protectionist governments in some countries.
Others say it ended in the pandemic, and the disruption in the global value chains.
The fact of the matter is that it ended. This is easy to see from the economic data. Foreign direct investment, one of the chief drivers of hyper-globalization, never recovered after the 2008 crisis and has been in decline so far this decade; as a result, the Global South currently faces an investment gap in sustainable development of around 4 trillion dollars per year, up from 2.5 trillion in 2015. Global trade is growing much slower than global GDP, when in the hyper-globalization era trade would often grow at twice the rate of GDP; at UNCTAD we expect trade to grow at around 1 per cent this year, with GDP growing at 2.4 per cent. Furthermore, if we look at the numbers, trade in goods is actually in decline – what is making trade remain in positive levels is trade in services, especially those related to the digital economy.
Lastly, and most importantly, global development is now side-tracked. During the previous era of globalization, we met the Millenium Development Goal for Poverty Alleviation five years ahead of schedule (mostly thanks to China) – today, at the midpoint of the 2030 agenda, only 15 per cent of all Sustainable Development Goals are on track to be achieved by 2030.
And this is a very big problem. SDGs, as I always say, are too big to fail. They are more than a set of targets – they are our last common agenda in a world that is more polarized than ever, a world in desperate need of solidarity and multilateralism.
We have seen the news. All around us, millions of people are suffering. We must have the wisdom to take this as a warning. A warning of how the world could look like in 2030 if we fail at our last common agenda for sustainable development.
In this sense, therefore, today's conversation about a change in the globalization model is beyond academic. It is, above all, an effort of vision, and of hope, to try to imagine ways in which we can work to create a different paradigm of globalization, a paradigm capable of meeting the SDGs and the Paris Agreement.
No one knows for sure what kind of globalization will follow from here. What we are in, is in transition.
That said, there are some features that can already be seen, which can help us guess this new era which I am starting to call ‘the era of poly-globalization’.
One of the features of this poly-globalization era is that we are in a more decentralized, multi-polar globalization, marked by more regional trading patterns, more policy discussions in plurinational fora such as the G7, G20, or the BRICS, and the rise of what the Brookings Institution calls “competitive multilateralism”.
This refers to what seem to be competing poles, for example – in development finance, through the rise of regional development banks such as the AfDB or the NDB – and in big overseas cooperation initiatives such as Europe’s Global Gateway, America’s Build Back Better World, and China’s own Belt and Road Initiative, which precedes the other two by at least a decade.
Another feature of poly-globalization is the return of industrial policy. The US has passed the Inflation Reduction Act. Europe has the Next Generation Funds. Saudi Arabia has Vision 2030. China, Korea, and Japan have redoubled their industrial strategies, with a particular focus on semiconductors and renewables.
In Africa, political leaders openly talk about the AfCTA as a vehicle for the continent's reindustrialization. Indonesia, aiming to promote diversification from its commodities, enacted a law in 2019 against the export of raw nickel. And in Latin America, in countries like Chile, Peru, Argentina, and Bolivia, there are efforts to promote similar policies to foster a local lithium industry.
All of this is happening at a time where the World Trade Organization has no appellate body, which means that there is a lot of ambiguity in this new system. The world does not have a trade architecture adapted to a context where all economic powers do industrial policy at the same time. This in the long run can be a problem, specially for small & medium sized countries that depend on an internationally agreed, rule-based trade.
However, if this new industrial policy is done within a paradigm of massive overseas investments into sustainable development and the energy transition, it could contribute to the fight against global warming, and lead to more complex and diversified economic structures in the developing world.
However, if what we are going to see is a domino effect of unilateral measures, fuelled by polarizing geopolitics, the outlook will be different.
And this leads me to my third point. If during hyper-globalization, markets ruled the world; during poly-globalization, it is geopolitics that rule the world.
This includes trade. For example, one of the big buzzwords of the time is the so-called “friendshoring” – the intention to bring value chains to 'allied' or 'friendly' countries. It remains to be seen how much of this will materialize, as many countries in the global south are not interested in this new way of seeing things. What many developing countries are looking for, after so many unfulfilled promises, are results.
Precisely what we don’t want is a zero-sum world of good vs. evil that pit the peoples of the world against each other, fueling racism, penalizing the other, while at the same time offering no moral alternative.
This is particularly worrying in the context of the rise of artificial intelligence, which is leading to an alarming rise in ‘fake news’, ‘fake videos’, and ‘fake voice notes’.
Another problem we are also seeing is the geopolitization of humanitarian action and development cooperation. For years, the UN has tried to ensure that there are neutral and independent spaces in the multilateral discussions, that humanitarian matters are not dependent on political or geopolitical interests but on humanitarian law itself. Something similar can be said about development cooperation.
Dear students, dear friends,
It is still too early to tell whether the new era of poly-globalization will be better or worse. In front of us, we see a path that splits in two. On the one hand, a world of political distrust, trade decoupling, and a retreat from the universal values that made the UN possible. According to the IMF, a world of full trade decoupling would result in a five per cent hit to global GDP, about twice the economic damage of the COVID pandemic.
On the other hand, we can have a world of healthy competition, but at the same time a world of enhanced cooperation and coordination, where the Global South has a greater voice at the table.
I call on all of us here, including you the students who will inherit the world, to work hard to make sure that we take the second path, and not the first. This will require many things.
First of all, it will require seeing ahead of the curve – to understand the changes and the complexity of the new world.
Second, it will require curiosity – poly-globalization is fundamentally a more fascinating, more complex, more diverse form of globalization – this will be a world which will benefit the students of world cultures, the people with friends all over the world.
And third, lastly, it will require humanism – the ability to put on the other persons shoes, to understand that we all share the same fate, that we are all capable of greatness and error.
Humanism is a universal wisdom. All cultures in the world have recognized it in sayings that have been passed down generation after generation. One of these immortal proverbs is the one from Mencius, the great Confucian scholar from the Warring States period, who said, and with this I close: “The feeling of compassion is the beginning of humanity.”
Thank you. I look forward to your comments and questions.