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Too much globalisation gloom

by Gabriel Stein

Too much globalisation gloom


Stephen King, HSBC senior economic adviser and specialist adviser to the House of Commons Treasury committee, seems to have made books on the decline of the West and globalisation his specialty.

His point of view is not new. A similar theme was forcefully – and erroneously – articulated by Oswald Spengler in his magisterial Der Untergang des Abendlandes (The Decline of the West), first published in 1918. So far the doomsayers have been wrong, though that does not mean that they always will be; the survival of a culture is as little predetermined as its decline. So King’s latest book, Grave New World: The End of Globalization, the Return of History, deserves to be read and discussed.

Weak on history
Much of the narrative is a history of globalisation, with comments on why specific matters could become a problem – occasionally it is very interesting, sometimes very apt. But at times, the book has too many generalisations such as, ‘Eventually – and, in hindsight, inevitably – post-Columbus globalisation collapsed, to be replaced by war, revolution and isolationism.’ True, the first world war did lead to a halt in globalisation but why this was inevitable except in hindsight, is difficult to understand.

King is weak on history. He claims that cigarettes became a medium of exchange during the 1923-24 German hyperinflation. In actuality, that occurred during the hyperinflation after the second world war. He later refers to a rumour that Harry Dexter White, the US Bretton Woods negotiator, may have been a Soviet spy. As we know from declassified FBI documents related to the interception of Soviet communications, it was clear in 1950 that White was indeed a spy.

King outlines, correctly, that globalisation can be reversed; technology is a double-edged sword; large migration flows may undermine the desire for domestic stability; and that there are different versions of globalisation, not just the western narrative. But he makes two other statements that are more controversial: that economic developments which reduce inequality between states but increase it within them inevitably cause hostility to globalisation; and that the international institutions that helped drive globalisation are losing their credibility.

One important point made by King is that the western narrative of globalisation triumphed because the US (or, rather, western) economic model worked, and the Soviet model did not.

But we are then back to broad statements not backed up by analysis, such as, ‘No matter how robust it might have seemed, 19th-century globalisation couldn’t last.’ This is symptomatic of the author’s attempts to put the most negative interpretation possible on any trend. Occasionally, this veers into the ridiculous.

King discusses the problems of inequality and decreasing social mobility. These are serious issues. But he then refers to (unspecified) studies that say it can take 10-15 generations for an initial advantage to erode. It is highly doubtful that there are enough studies showing any families’ wealth over a period of more than 300 years to allow such a conclusion to be reached.

On stronger ground
King is on stronger ground where he discusses the problems of immigration – the economic advantages versus the social problems. But here too there is a lacuna, in that he reviews the American, British and German attitudes towards immigrants, but not the completely different French position.

He rightly points out, ‘If globalisation is to succeed in a world of nation states, it either needs to retain the support of nation states or the nation states themselves need to change.’ Yet he is then highly critical of the euro – precisely an attempt by nation states to support globalisation.

The book’s last chapter discusses solutions to the issues that threaten continued globalisation – and dismisses them all, thereby losing some of the raison d’être.

So, to sum up: a not entirely uninteresting book addressing a key issue facing the world but one that would have benefited from being better written and less given to gloom-mongering.

Gabriel Stein is an independent macroeconomic commentator.

Grave new world