From the comments on my first and second posts in what has become a series about the limitations of Globalization, it’s clear that some (read most) don’t really understand the point that Globalization’s dangers and threats are clearly starting to outweigh the benefits. This is a two-sided coin: the threats and costs of Globalization are growing, while the benefits are shrinking. I had, in the first post, listed many examples of this rejection of Globalization, primarily focusing on the threats and costs. However, the example cited below is a little different in two ways. First, it’s not a slogan on a sign at an anti-Globalization protest or a seemingly obscure indigenous group whose rights are being trampled–but an article published by Dani Rodrik, professor of Political Economy at Harvard. Second, the article focuses on the dearth of benefits created by Globalization, not the costs and threats. The article “The False Promise of Financial Liberalization” over at Project Syndicate notes:
Something is amiss in the world of finance. The problem is not another financial meltdown in an emerging market, with the predictable contagion that engulfs neighboring countries. Even the most exposed countries handled the last round of financial shocks, in May and June 2006, relatively comfortably. Instead, the problem this time around is one that relatively calm times have helped reveal: the predicted benefits of financial globalization are nowhere to be seen.
As the article goes on, it’s clear that Dani’s a little at a loss to explain the fundamentals of what is going on. In particular it is notable that he acknowledges that countries like Argentina aren’t explained by current theory. Recall when Nestor Kirchner took over in Argentina, and rejected the IMF’s plans for continued financial liberalization, many predicted that Argentina would become a basket case, and was committing economic suicide.
But things have not worked out according to plan. Research at the IMF, of all places, as well as by independent scholars documents a number of puzzles and paradoxes. For example, it is difficult to find evidence that countries that freed up capital flows have experienced sustained economic growth as a result….Among other high-growth countries, Vietnam’s current account is essentially balanced, and India has only a small deficit. Latin America, Argentina and Brazil have been running comfortable external surpluses recently.
One interesting item to note: whereas many of the other examples I have been citing here, like perspectives on Black Globalization, focus on the harm done by Globalizing processes, this article does not. Instead, Dani notes that the benefits are no longer accruing as expected. It is a watershed.