Report on globalization presents three scenarios: ‘globalisation thrives’, ‘a multi-polar world emerges’ and ‘globalisation comes to an end.’
Credit Suisse Research Institute’s report ‘The End of Globalization or a More Multipolar World’ says that globalization is the predominant economic, strategic and political force of our age. However, its implications and side-effects—from wealth creation to climate change—are pervasive and create uncertain future.
The first scenario is that globalisation continues. This means the dollar will continue its role as first among equals in the forex world, generally Western multinationals dominate the global business landscape and the fabric of international law and institutions are still Western in nature.
The second scenario is based on the rise of Asia and a stabilisation of the euro-zone so that the world economy rests, broadly speaking, on three pillars – the Americas, Europe and Asia (led by China). In detail, the report expects to see the development of new world institutions that outgrow the likes of the World Bank, the rise of ‘managed democracy’. New institutions – such as sovereign wealth funds and fiscal councils – are amongst the more prominent. In the course of the last year alone some events, such as the establishment of the Asia Infrastructure Investment Bank, international political engagements surrounding the Ukraine crisis, Abenomics in Japan, the rise of Asian companies like Alibaba and the active role that the ECB is playing in the European economy, point towards the emergence of a more complex, multipolar world and away from globalization as we have come to know it.
The third scenario is a more negative, though lower probability one that recalls the collapse of globalisation in 1913 and the subsequent onset of First World War. Today we clearly see that the economic center of gravity – has shifted eastward. Like centuries ago, the world GDP may again be dominated by China and India . Growing military spending in Asia – and may cause a major threat to globalization from severe military expansion.
Globalization, which we define as the increasing interdependence and integration of economies, markets, nations and cultures, is the most powerful economic force the world has witnessed in the past twenty years. It is now so pervasive in its effects and has produced so many startling outcomes—the rise of global cities, the successes of small states, growing wealth in emerging economies, the emerging consumer and fast-changing consumer tastes, for example—that we risk taking it for granted. The current wave of globalization is the second the world has seen, the first one occurring between the years 1870 to 1913, built on the fruits of the industrial revolution and the rise of the American economy The current period effectively dates from the early 1990s, where events like the fall of communism, rounds of trade liberalism and the growing momentum of the Chinese economy accelerated globalization. This was then driven by US multi-nationals, the advent of the euro, the growth of financial markets and the development of many emerging economies.
The first period of globalization (1870 to 1913) serves to show the benefits of globalization and also how it can be negatively transformed by geopolitics and changes in international economic health. It highlights the severe and enduring costs associated with the end of globalization scenario is a darker, negative one that recalls the collapse of globalization in 1913 and the subsequent onset of the First World War. In recent years the path that globalization is taking has become obstacle strewn and much less clear.