Has Globalization Reached Its Peak - Coursework Example

Has Globalization Reached Its Peak? Introduction The end of the world wars was the beginning of the notion of globalization. It was in this era that there was seen the need to create international organisations and institutions that eventually lead to the integration, interdependence and the coming together of all nations. In the recent past there has been seen a rise in the protectionism strategies by different countries. Nations are engaging in antics that indicate that more and more countries are moving away from the globalized world. This has been ranging from the sanctions on Ukraine, Trade tariffs being put up by India, the rise of China as a trade leader and the most recent on the exit of Britain from the European Union. If there is a chance that countries are pulling away from the globalized community, then is it an indication, that in this era, globalization has already reached its peak? This paper will focus on the strategies and events that indicate that indeed it’s the peak of globalization in this era. This paper will also analytically look at the arguments and occurrences that accelerate this situation and finally if there is any chance that the rise in global trends and political support can be sustained. The Peak Of Globalization: Defined Globalization has yet to receive a clear definition that is agreed to by all parties. However, there is an agreement of what includes the components of globalization. The Mc Kinsey Global Institute report (Bloomberg) defines globalization to include: trade in goods and services; financial flows; mobility of people; and the exchange of information. It is also evident that this flows as described are propelled by the increase I technology and innovation. The McMillan dictionary defines a peak as the highest point or the greatest level that can be reached. In economics, the point peak is seen as the point between an expansion and contraction. Combining the latter definition of peak and globalization, this paper will adopt the meaning that implies that globalization has reached its peak if it has reached its greatest level. This definition will also include the circumstances that are construed to imply that people or nations are shunning away from the globalization. Globalization in Perspective Collins (2014) in his report in Fidelity International identifies the second era of globalization, spanning over the last 30 years, has seen the globalization of trade, finance and culture and politics reach its maximum. He has likened the trend to a global financial market. The first era was characterized by increased trade and opening up of borders trough increased technologies while the second era is driven by faster and cheaper communication channels. It is also characterized by increase in foreign investment where investors are willing to take their money wherever they think that they will earn a higher interest (Collins 2014). However the achievement of a global economy has not always been smooth especially in the diverging views on how integration should take course (Segal and Abdelal 2007). The main goal for which globalization was being supported was for its perceived ability to reduce the gap between the rich and the poo countries such that as a global economy, even those that are losers are duly compensated. However, this has seen not to be fruitful. In fact, this factor has been seen as the main motivator for the Brexit vote against the European Union (EU). The Peak Of Globalization The beginning of the end of the globalization era can be traced to the financial crisis of 2008/2009. This was the period that globalization was said to be at its peak (Coy 2014). Nussbaum (2010) described the global economy to be at its peak since the benefits derived from globalization are defined by the country, class or constituency of the participants. This situation is characterizes by countries that want to promote their own national interest and maintain sovereign power. In fact Nussbaum (2010) notes that globalization has reached and passed it peak and now it is only receding. He notes five factors that are contributing to this situation: rise and fall of generations and nations; global urbanization; spread of social media; planetary bio stress (Nussbaum 2010). Meadway (2015) on the other hand identified two factors that show that globalization may have reached its peak: the lack of a strong financial system leading to the 2008 financial crisis; states are working towards their own interest. The impact of the financial crisis was to cast doubt in the ideals that were promoted by globalization. A report by McKinsey (Lund et al 2013) shows that global financial asset growth was slower after the crisis than the growth 15 years prior. Capital flows through borders was seen to have declined due to a reduction in financial integration in Europe zone and reduction in global banking (Lund et al 2013). . In all these the report (Lund et al 2013) concludes that the globalization trend may be coming to a retreat. It is a generalized view that the main reason why trade would grow faster tan the GDP of a country, when it would only mean that globalization is at its greatest level in that country. If the recent trends are anything to go by, then this integration is coming to a halt. Altomonte et al (2015) show that after the financial crisis, the international trade growth rate has been slower than that experienced in the earlier years which could be an indication that indeed globalization has reached its peak. Subramanian and Kessler (2013) in their paper show that there has been a hyperglobalisation of trade in the 21st century where countries are now trading in the same products, the rise of China as the major trader in 2010 and an increased regionalization. The rise of China against U.S was the beginning of what seemed as national interest and sovereignty; all of which are working against globalization. Globalization has been seen to reach its peak in the recent time when economic sanctions were taken against Russia over the annexation of Crimea in 2014. The European Union considered this annexation to be illegal and against the rules set out by the Union. The union led instructions that no European or its companies may deal in the financial instrument provided by Russian companies. The union also set out restriction for Crimea that included a ban on its imports, restricting Europeans from investing in Crimea, restricts the provision of technical assistance to Crimea (European Union Newsroom). However Russia seemed unperturbed by such sanctions against them. This goes to show that indeed countries are now after their own interest (Collins 2014). The process of globalization has not at all been smooth to all concerned parties. There has been an increased skepticism over its benefits and debates have cropped up on the benefits and cost of globalization. In particular, there is an increased debate on whether the globalization strategies have been beneficial in reducing the rich or poor gap or it has worsened. The inequality presently seen has never been higher than it is after the globalization process. In effect, even the people who most benefitted from the process- USA and China- are beginning to advocate for economic barriers on their territories (Segal and Abdelal 2007 pg. 4). Even those that are economic giants are feeling the inequality in terms of loss of employment opportunities that they think they are losing to immigrants. The increase in inequality especially within each bloc is further accelerating the nationalism and politics geared toward identity of the various countries. It is no wonder that the US elections campaigns have been marred with policies, from Trump’s camp, on the attempt to send immigrants back to their countries. The political leaders are now being put under pressure by their citizens to find ways to mitigate the impact of globalization on the increasing inequality. A case in point was the recent vote by Britain to leave the EU. Economist Jim Stanford is quoted to have blamed the Brexit vote on the increasing weakness of the EU and the failure of the Union in improving the lives of the British (Solomon 2016). The same situation is being faced in Canada even after (North American Free Trade Agreement) NAFTA agreement was signed. A report shows that one in every 3 Canadians believe that the agreement is not benefiting them in any way (Solomon 2016). This was the epitome of the notion that indeed the world is moving away from globalization by the day. The other fundamental factor in the process of globalization apart from the free flow of capital and goods is the free flow of people. Presently, there are less people crossing borders today than they did in the first era of globalization. This is partly because most of the European Union countries are changing their border control measures (Collins 2014). The free flow of people is also being restricted in the wake of rising terror attacks and nationalist ideas that the immigrants may render the nationals jobless should they be allowed to enter these territories. Switzerland already voted to put immigration restriction on its borders (Collins 2014) while recently Belgium re introduced border controls as well. Further to this the Schengen Agreement, through which the EU states allows for free movement within the bloc, has introduced a clause that allows for the EU nations to apply restriction should there be need for such (O’Sullivan 2016). The free flow of persons is not only being restricted through border restriction but through the growth of technology. It is the development of technology that saw globalization reaches its climax in the first ear. Ironically, it is the very same factor that is working against the globalization process. Much as with technology all things are made easier, it has made all nations dependent on it vulnerable. Case in point was the leakage of important documents in WikiLeaks and the Panama paper. There is therefore an increase in flow of information that is exceedingly becoming dangerous to the development of nations and it is for the same reason that countries such as Brazil had put up restrictions on the use of servers and data protection. On the other hand, this great shift of markets from physical locations to the internet servers. Presently, there is a mushrooming of e-commerce business that requires not the fundamentals of the globalized economy, to which the focus is fast shifting. Sustaining Globalization The indications that globalization has already reached its peak is the fact that there are presently more and more countries coming up with policies and strategies that are shifting further away from the globalization process. The shift is accelerated by the failures of the economic models that were in operations coupled by a reduction in confidence in the institutions mandated to deliver on the promises of globalization. Therefore in order to maintain the globalization flight there is need for all countries to bring up the confidence that is lost. This includes an endeavor to increase the trade between countries and ensure the effectiveness of protectionism laws as set out in WTO guidelines (Alden and Schwartz 2016).Subramanian and Kessler (2013) summaries this strategies as: ensure political support for globalization; ensuring the support of China in the process; reduce the rise of regionalism. Conclusion The rate at which globalization has been increasing since the world war ended can only be attributed to the growth of technology. Since technology is developing at a faster rate, globalization is not likely to come to an end but it is reducing. This marks the peak of it: the extent that nations are actually moving away from the ideologies that hold the very foundations of globalization. Therefore in order to restore or least save the process, there is need for the international organisations to restore the confidence in nations that indeed the goals of the process of eliminating inequality will and can be achieved. References Alden E and Schwartz B July 2016 if you want to save globalization, here’s how [online] available from: https://www.weforum.org/agenda/2016/07/from-brexit-to-trump-it-s-been-a-testing-year-for-globalization-but-it-s-not-too-late-to-save-it accessed 28/10/2016 Altomonte C, Colantone I and Zaurino E September 2015 Has globalization ‘peaked’? Trade and GDP growth in the Post-crisis context [online] available from: https://bruegel.org/2015/09/has-globalisation-peaked-trade-and-gdp-growth-in-the-post-crisis-context/ accessed 28/10/2016 Collins M November 2014 Globalization has peaked [online] available from: www.fidelity.com.au/insights-center/investment-articles/globalisation-has-peaked/ accessed 28/10/2016 Coy P April 2014 Globalization’s Peak Year Was 2007 [online] available from: www.bloomberg.com/news/articles/2014-04-23/globalizations-peak-year-was-2007 accessed 28/10/2016 European Union Newsroom EU sanctions against Russia over Ukraine crisis [online] available from: https://europa.eu/newsroom/highlights/special-coverage/eu_sanctions_en accessed 28/10/2016 Lund S, Daruvala T, Dobbs R, Harle P, Kwek JH and Falcon R march 2013 Financial globalization: retreat or reset [online] available from: www.mckinsey.com/global-themes/employment-and-growth/finanacial-globalization accessed 28/10/2016 Meadway J September 2015 What if we’ve reached peak globalization? [Online] available from: www.theguardian.com/sustainable-business/2015/sep/28/peak-globalisation-have-we-reached-it-uk accessed 28/10/2016 Nussbaum B December 2010 Peak Globalization [online] available from https://hbr.org/2010/12/peak-globalization Harvard Business Review accessed 28/10/2016 O’Sullivan F February 2016 Europe’s Open Borders are crumbling [online] available from: www.citylab.com/politics/2016/02/eurpopean-union-open-border-belgium-checks-syrian-refugee-isis/470733/ accessed 28/10/2016 Segal A and Abdelal R February 2007 Has Globalization passed its peak? Foreign Affairs Solomon E June 2016 have we already reached peak Globalization? [Online] available from: www.macleans.ca.news/canada/have-we-already-reached-peak-globalisation/ accessed 28/10/2016 Subramanian A and Kessler M 2013 the hyper globalization of Trade and its Future [online] available from: https://papaers.ssrn.com/sol3/papers.cfm?abstract_id=2297994 accessed 28/10/2016 Read More