Feeling the (Chinese) heat

July 8, 2007

I remember a few years ago having to write an essay on the question “Has globalization gone too far?” It was one of those essays meant to exert the minds of LSE students on the controversy over globalisation: what is it about, is it good or bad, going too far from what/where, are governments run over by the process or are they still (maybe even too much?) in control?

Part of the exercise was of course to compare the current process with past economic integration processes. I remember having analysed in depth the pre-1914 era and compared it with today’s. I was never convinced by arguments that the world economy was really more integrated – or globalised – then than today. But I couldn’t pin it down to exactly why. My supervisor commented that I indeed had made a “sophisticated assessment” (quote) but that I needed to conclude with a clear statement on whether I find that today’s globalisation goes further than in the past. Had I had the graphic below – it is from the OECD’s latest bi-annual Economic Outlook – I would have had given a more courageous answer: today’s globalisation process might have big gaps (labour markets are less global than pre-1914, Africa is more sidelined from global financial and commercial flows than then), but it is in my view clearly much more intense. Not only because technology has allowed for a radically new global division of production, but because of the impact of the relatively sudden entry of half of humanity in Asia, and namely China’s 1.3 billion, into the global market. All this with a convergence process that spans a wider initial income gap. Judge for yourselves (please click on the picture):

new-picture-1_comp.jpg

A clearer picture is available on page 17 of this document.

All this to say what? Nothing, just chatting away in holiday mood…. The entire planet is feeling the heat of this high-voltage globalisation process. So here four random points:

1)Fear of China” is what is often mentioned behind the scenes as one of the main causes of the failure of the current Doha round negotiations. The rise of protectionist sentiment in heated domestic politics of Europe – with the current big show given by France, its elections and new president – and the US are the reflection of the hysteria this process causes. India and Brazil for their part do not want to open more of their domestic industries to Chinese competition, mind you! The countries in the middle of the road such as most Latin Americans are being “outcompeted” by China, explaining many a plight and probably even partly the re-emergence of populist politics.

2) Climate – The dragon’s flames not only heat up the debates on who gets the shares of what in global production, business, and jobs, but also on the effects of China’s take-off on the environment, the climate and global warming. The debate on climate change has something very religious, Christian-eschatologic about it, and makes sensible debate on the matter almost impossible. I refuse to blog about it: I am not entering those sulphurous waters. But I have the feeling that since the world’s Conservative governments at the G8 made the issue theirs, one can’t really argue that it is a progressive agenda. Therefore I am a more of a sceptic on climate change – yet I don’t drive a car, contrary to many a climate change thesis adept. Reasons to be sceptic are even more compelling since since Pop hijacked the matter with Live Earth. At least the British with whom I live here in London can’t say that the climate is getting warmer – floods and low temperatures for weeks just make everyone pray for warm, sunny weather.

3) Energy – Catching up economically and growing means consuming higher levels of calories… provided massively by oil & gas. With prices at their highest again, the Russia’s and Venezuelas of this world can go on provoking the rest of the world and especially the US with impunity. The energy market is one of the most monopolistic and least globalised in the world, although it is the fuel of globalisation. If it were more and well regulated markets rather than mercantilist rent-seeking politics that handled the management of such a scarce resource many a country would be a better and freer place to live in (self-promotion: please read this post for more background). But energy also drives neo-colonial Chinese policies in Africa, raising temperatures in Sudan’s conflict, and in development policy debates.

4) Summer breaks. It is early July and, in Europe, summer vacation time. Despite global warming, sitting here in the UK, I am yearning for real heat and will be off a few weeks cooling off my mind in the warmer parts of southern Europe, with hopefully fresh ideas for a new season of blogging on globalisation and the political climates it changes.

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