Globalization is Both Dead and Alive

schrodingers_cat

Quantum superposition does not apply to microscopic particles alone. It applies to human socio-political-economic reality as well. The election of Modi in India in 2014, Brexit in the United Kingdom (UK) in 2016, and the coming to the presidency of Donald Trump in the United States (US) also in 2016 has revealed what would happen to how countries engage with each other when the existing paradigm of international engagement fashioned by the elites is closely experienced and observed by the electorate. The multitude of possibilities in history which can simultaneously exist until – in the realm of human affairs – observation, experience and understanding of a circumstance by the people can collapse all such possibilities into a specific outcome is reminiscent of physicist Erwin Schrodinger’s thought experiment about a cat that is simultaneously both dead and alive. What was contemplated about the condition of Schrodinger’s cat is also applicable to globalization.

If the rise and the formation of nation-states began with the Renaissance and culminated in the post-colonial world order in the 20th century of democratic republics, the economic globalization since then has established firmly the regime of nations trading with each other based on their comparative advantage: even though a nation is entirely capable of producing a good or service on its own, the narrative of Ricardian comparative advantage put into place a global trading system where the nation would still import the same goods or services from another nation which can produce them more efficiently – displacing the importing nation’s domestic industry. For nearly two centuries this worked well for all the countries which were first movers during the Industrial Revolution that swept through Britain, Europe and America in the 18th and 19th centuries.

As living standards improved and wages rose in the West, comparative advantage had shifted to the newly developing post-colonial countries after the end of the Cold War which promised cheap labor and less legal hurdles governing labor, environment, and production. Goods and services began being imported by developed countries in the West from these newly developing countries, particularly China and India, displacing local employment in the developed countries. The comparative advantage of technological innovation in the West has also been gradually eroded as technologies invented in the West began to diffuse at an ever faster rate around the world seeking access to markets more than benefiting from the intellectual property.

The West has become the consumer of production in the rest of the world while the newly developing countries have been slow to consume what they produced thereby not creating their domestic markets as quickly as the West had hoped for. The Western consumer, therefore, is sharing the brunt of the burden of consumption to not only increase the gross domestic product (GDP) of the West but also the GDPs of the developing countries. This is the economic paradigm we have been living in since the beginning of the implementation of the neo-liberal thought in the late 1970s and 1980s in America and Britain.

Just as old global systems die a slow death as new systems replace them upon popular demand – the old and new systems being both dead (or non-existent) and alive simultaneously – presenting alternative historical possibilities at the same time, so it is with the state of the existing paradigm of globalization which has become obsolete and is dying, being replaced by a new system that is focused on the development of the domestic markets in the various nations of the world. The developing countries want to live like the people in the West and the people in the West, in their desire not to lose their way of life as the developing countries catch up, want their industries and jobs back.

The issue here is not globalization but its “how.” We need better globalization. In contrast to the current mode of globalization, companies should globalize by setting up in other countries and serve the local markets by hiring locally and producing locally to create local jobs and markets. This will lead to economic development. The trade model of exporting from one country to another – even though the importing country is perfectly capable of producing the good or service by itself – based on comparative advantage is obsolete. Prices, in this new mode of globalization, in the short to medium run may vary from country to country for the same product or service, but in the long run there will be convergence. America which had set up the current mode of globalization is now, under Trump, working to change the “how.” China is a mercantilist and a neo-colonial globalizer.

The emerging new paradigm continues to belong to the global corporations which have their origins in colonial companies such as the British East India Company, but this time global corporations are also emerging from the developing countries wanting reciprocal access to developed country markets. The post-modern multinationals are restructuring globalization to produce locally and, most importantly, sustainably around the world. They intend to make globally, in most of the countries around the world, including their own, for the people of those countries, creating local jobs and cultivating local markets for global living standards to converge.

Global development is the next frontier and global corporations are embarking upon it to do it locally, globally and sustainably because the organization of business, global homogenization of laws governing businesses, and technology can make production in any country as efficient as in any other country around the world, minimizing the arbitrage of comparative advantage.

The cat of globalization is both dead and alive.

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