Why Globalization Cannot Be Stopped
Trade in goods and even services may be slowing for now, but globalization retains its momentum with migration and an unstoppable flow of ideas. Blame human nature.
BUENOS AIRES — Is globalization slowing down? For some observers at least, it has not just slowed in recent years but may have even reversed course. Such a supposition is largely based on a small but incipient decline in the rate of growth of global trade in proportion to the global GDP, or all goods and services produced worldwide.
Globalization is no novelty. While many see its beginnings with the Renaissance, it began to achieve a decisive momentum with the Industrial Revolution, and attained exponential growth in the years after World War II. It has of course had fluctuations and the rate of growth of global trade is just one variable affecting the globalization process and its scale. Another is changes in movements of capital, people and ideas.
The first great globalizing process occurred between 1870 and 1913, a period of marked growth in global trade, capital flows — both through direct investments and pure financial flows — and migration. World trade increased in volume then from 9% to 16% of global GDP, while migration flowed mainly from Europe to the United States, Argentina, Canada and Australia. Modern Argentina is today a perfect reflection of that migratory flux.
The process stalled with World War I, and further still with the 1930s Great Depression and World War II. In that period the relationship between global trade and GDP returned to the values of the 1870s. Some analysts have suggested that those conflicts were in part provoked by social and economic changes that were happening too fast for cultural absorption or acceptance.
The second great globalizing process began in the late 1940s and continued, with little pause, until today, featuring trade volumes of 40% of the world's GDP, an almost total integration of world capital markets, and considerable movement of persons (limited by restrictions in some countries) and ideas (accelerated exponentially by the Internet).
Some analysts attribute reduced growth in global trade to a new wave of protectionism. While the trend does exist — though perhaps more in the realm of declarations than practice —, other factors can explain this trend. One is the greater share of services in GDP and smaller growth in the trade of services compared to goods. Between 1980 and 2015, the volume of trade in goods grew twice as much as GDP growth or trade in services. But that difference has almost disappeared in the last four years. Currently services constitute about 65% of global GDP compared to less than 50% in 1970, and less than 40% in 1950.
Explosion of traveling ideas
But while trade is growing more slowly, the opposite is happening with ideas. While there are many ways to measure growth in the exchange of ideas (number of Internet connections, frequency of use, participation in networking sites, clicks, etc.), without a doubt this exchange has had explosive growth and is helping reshape globalization.
Rather than reversing, globalization has simply taken new forms. It is a cultural challenge perhaps comparable in its impact only to migratory fluxes or movements of persons today.
Humans were always said to be social by nature and interaction is crucial to two of their crucial objectives: survival and reproduction. Advances in communications multiply the options for attaining these objectives. In my opinion, globalization processes are the inevitable consequences of the social nature of humans and of the falling cost of communication (both in transport and other means). Institutions are in turn the ideal means of utilizing opportunities and minimizing the conflicts inherent to this interaction.
These interactive processes are today provoking a clash of two human characteristics: curiosity about, and fear of, the unknown. These are two, ancestral human traits that face today a much faster rate of change in external conditions and means of movement.
Recent advances in brain research show that an important proportion of our mind is related to social activities, as corroborated by the mirror neurons discovered in the 1990s. Italian neurophysiologist Giacomo Rizzolatti, observes that human survival depends on understanding others' actions and intentions, which is what mirror neurons facilitate through instinctive, simulative reactions that far outpace reasoning.
Adapting to a changing world does not mean dumping a national culture or a country's institutions, but precisely incorporating the best of those changes coming in from elsewhere. Protectionism and cultural isolation do not improve welfare, but merely protect certain sectors in a country. Each country must thus consider how to maximize the benefits of globalization for itself, and filter these down to the majority of its population.