Globalization at a critical conjuncture?

Globalization at a critical conjuncture? Introduction It is 10 years since the first issue of the Cambridge Journal of Regions, Economy and Society appeared, in April 2008. When we had our first Editors’ meeting, in mid-2007, little did we know that the worst financial crisis since that of 1929 was about to disrupt and destabilise the global economy. The Global Financial Crisis of 2007–2008 in turn triggered the deepest recession since the Great Depression of 1929–1932, a debt crisis in much of Europe, and the imposition by several states of a programme of fiscal consolidation, or austerity, which is still in place in many cases. The past decade has been one of tremendous upheaval and instability throughout much of the global economy, not just in the advanced industrial economies but also in the emerging economies, including China (see Pettis, 2013). It is tempting to see the Global Financial Crisis of 2007–2008 as deriving from flaws and failures in the financial system itself, from the greed of banks and the invention and uncontrolled use of ‘clever’ exotic instruments and products for bundling, concealing and trading high-risk mortgage debt across a globally integrated financial system. Indeed, many observers would argue that it is in the financial system that globalisation finds its clearest expression. As Minsky (1982) observed some 35 years ago, attributing the causes of the financial crises that periodically disrupt capitalism to the nature of the financial system itself in this way is not uncommon: Once the sharp financial reaction occurs, institutional deficiencies will be evident. Thus, after a crisis, it will always be possible to construct plausible arguments—by emphasizing trigger events or institutional flaws—that accidents, mistakes, or easily correctible shortcomings were responsible for the disaster (Minsky, 1982, 118). But as he went on to argue, while such ‘plausible arguments’ may highlight particular and indeed relevant proximate causes, they do not necessarily tell the whole story nor confront the real underlying ultimate fundamentals at work. In the case of this financial crisis, such imbalances took the form of an accumulation of reserves in US dollars in countries running large current account surpluses with the United States, such as China, Germany and several East Asian and Latin American economies. These surpluses were complemented by low domestic savings and the expansion of credit in the USA. These real economy imbalances were in turn transformed into monetary instability, through the emergence of a system of financial engineering designed to sterilise the surpluses and invest them in the deficit countries, leading to spurious lending practices—principally in real estate in the USA—and hence to the fragility of the system. In this sense, the global financial crisis was not some purely ‘exogenous’ or ‘autonomous’ event that unexpectedly disrupted an otherwise stable regime of global economic growth and development, but a manifestation, a symptom, of the inherent instability and unsustainability of that regime itself. Globalisation: its protagonists and its antagonists A key characteristic of this regime is that it was based, in large part, on a distinctive form and particularly rapid phase of globalisation. Now globalisation, of course, is nothing new (Michie, 2017); it has been an evolving feature of world economic activity ever since the Age of Exploration in the 16th century, and also characterised many ancient systems, such as the Roman Empire (Gray, 1998; Held, 2005). But since the mid-1970s, the process—defined broadly as the increasing extension, interpenetration and interdependence of production systems, corporations, markets and networks of flows across national borders—has accelerated considerably, so that today, world trade as a proportion of world economic output is at the same previous high point that it attained in 1914, the apogee of the Atlantic Economy. Nor is globalisation a singular condition, a linear process, or final point of socio-economic change (Held et al., 1999). Rather, it is a complex admixture of different, though interrelated, historically evolving developments and transformations—economic, technological, cultural and social. One important task in analysing globalisation is to distinguish between material and institutional forms of global integration and exchange, and constructivist discourses about globalisation, and then to consider the ways they may mutually influence one another but also the ways in which they differ. Certainly, a well-organised industry of consultants, academic experts, public intellectuals, think tanks and other voices has prosecuted a narrative that globalisation represents a new logic of political economy for which adaptation to the demands of international markets and hypermobile capital and information is an inescapable imperative. It is as if globalisation is some ineluctable ‘force of nature’ out there—almost akin to gravity—to which nations, companies, regions, cities and workers must inevitably bend or otherwise get left behind.1 Yet there is also much evidence that policies adopted in specific national and regional contexts have shaped globalisation in very different ways, suggesting that globalisation is not akin to gravity, but more like the weather, where (employing a metaphor from Rodrik) one can for example, put a screen on the window and allow the pleasant breezes to flow without letting in the rain and insects. In reality, the latest phase of globalisation that has been developing since the mid- to late-1970s is a process or project that in large part has been purposively promoted and championed by individual states, transnational corporations and key international organisations such as the IMF and World Bank, all driven by a belief in the benefits of free markets and free trade. The acceleration in globalisation over the past 40 years has been accompanied by a widespread deregulation of markets, especially financial markets; the dismantling of the post-war system of international monetary and capital controls; and, in some countries, the privatisation of state assets and public industries and services. While some would argue that these moves to liberalise economic governance have been essential in order to meet the opportunities afforded by globalisation, they can equally be seen as driving the very same process. And it has been an ideology that has spread—in one form or another, and to some extent or another—across much of the OECD bloc. It would be incorrect, however, to see globalisation as some monolithic, universalising political-economic programme. What some label the ‘neo-liberal’ version of globalisation emanates heavily from the USA and the UK, while policies towards social protection, regulated labour and product markets, and certain restraints on trade are quite popular in continental Europe and in many emerging economies. Indeed, state spending as a proportion of economic output has continued to rise in virtually all of the advanced economies as well as most of the bigger emerging economies. And to further complicate matters, China’s own globalisation project, its particular state-led approach of inserting and integrating its economy into the wider world system, is most certainly not based on anything like straightforward liberalisation—very far from it. The protagonists of free-market globalised capitalism make several claims for its benefits. They point to the long boom in world economic growth over the 1990s and first few years of the 2000s, to the increase in world trade, and to the rise in incomes in several of the world’s poorest countries brought about by the opportunities they have been afforded by the freeing of markets and the expansion of trade. The OECD has estimated, for example, that a 10 percentage-point increase in trade exposure for a country has been associated with a 4 percent rise in income per capita over time. Greater trade has undoubtedly enhanced the division of labour, promoted comparative advantage and encouraged producers and consumers to reap the benefits of economies of scale. It is certainly true that many countries have been lifted out of poverty and that mobile western transnational capital has brought much-needed investment, technology and jobs to many such areas of the globe. But while acknowledging these benefits, critics and antagonists of globalisation point to various costs and adverse effects which they argue have negated or outweighed the positive effects. Thus, for the ‘discontents’, globalisation is charged with having increased inequality in income and wealth (Piketty, 2014; Stiglitz, 2002, 2015). In almost every country, the share of the upper half, and indeed usually the upper 10 or 1 percent, of the income distribution has tended to rise, both in those poor countries that have seen an overall rise in average per-capita incomes and in the advanced prosperous economies (World Inequality Lab, 2017). In many nations, spatial inequalities in prosperity have likewise widened, particularly between the cities (typically containing the political and economic elites) leading the globalisation process, and those cities and regions less favourably positioned to set the terms of the globalisation process. However, the magnitude of such changes is highly variable, with the USA as the outlier among advanced economies in the rise of the share of the top 10 percent, while continental European countries have had much smaller increases. Latin American countries and India were highly unequal prior to this round of globalisation and remain so, while China now has levels of inequality that are above those in the USA. Similarly, while world trade has grown, so too have trade imbalances. In particular, between 1997 and 2007, China generated what is probably the largest trade surplus as a share of world GDP of any country in history, while the USA became the world’s largest deficit nation (Figure 1). As Pettis (2013) cogently shows, these contrasting situations are not independent of one another. The very large trade surpluses of countries like China and Germany, and the very large trade deficits of the USA and peripheral Europe, are inextricably linked and a major source of the financial crisis. Other critiques relate to the threats to the global commons posed by unregulated growth and exploitation of natural resources; the rise of giant monopolies, including the global ICT, digital equipment and web-based companies, that actually stifle competition; and the ability of these giant corporations to carry out complex forms of regulatory and tax arbitraging, effectively playing off nations to gain the lowest tax deals, or avoiding taxes by using offshore trusts and complex ‘transfer pricing’ arrangements.2 While technically legal, these tax avoidance strategies of the major transnational corporations result in the loss of revenues to states, which could be put to good use, for example, to fund public infrastructures and services. Figure 1. View largeDownload slide Trade balances for selected countries, 1995–2016, current account, US$ billion. Source: World Bank (https://data.worldbank.org). Figure 1. View largeDownload slide Trade balances for selected countries, 1995–2016, current account, US$ billion. Source: World Bank (https://data.worldbank.org). A further source of concern, if not critique, of the recent phase of globalisation, is that it has been quintessentially a process of geographically uneven development. In this respect it is no different from previous historical phases of globalisation. But whereas in previous historical globalisations such unequal levels of development might have been direct consequences of military power, or the unequal distribution of natural resources, since the Industrial Revolution, globally unequal development has been driven by a combination of unequal technological prowess, unequal financial and institutional endowments, and a resulting pattern of productivity and agglomeration economies. These forces led to what is known as the Great Divergence between the West and the rest of the world starting in 1820, as well as an uneven pattern within the Western industrialisers themselves. In the latest phase of globalisation, paradoxically, we observe a reduction in overall global income inequality due to the rise of China and a few other emerging economies, but a simultaneous acceleration of the agglomeration-driven inequality within almost every country on the planet. The global shift in economic growth While the argument, prior to the financial crisis, that globalisation had contributed to world economic growth in the 1990s and early 2000s, has some validity, this claim needs to be set within a longer historical perspective. The period that corresponds to the current globalisation is not a high-growth period in the developed West. The abandonment of the Bretton Woods monetary system and the onset of the Oil Crisis in the early 1970s is often identified as marking the end of a so-called ‘golden age’ of post-war growth in the global economy. In fact, the trend rate of growth of the global economy had been slowing during that period (see Figure 2). At least for the American case, the current period shows growth rates that are lower than the previous century’s average (Gordon, 2016). Although the trend rate of growth did indeed improve very slightly from the beginning of the 1990s onwards—attracting the epithet of the ‘Great Moderation’ in the USA (Stock and Watson, 2002), and the acronym NICE (non-inflationary continuous expansion) in the UK, it failed to match the record of the 1960s. In fact, most of the world’s economic growth has been in fast-growers such as China and other Asian economies, just as in the 1950s and 1960s there were economic ‘miracles’ in countries such as Brazil with a similar growth pathway to that of China in more recent times. It is also important to remember that the history of developing countries that go through such high-growth episodes is almost universally followed by growth slowdowns and a “middle-income trap”. The only exceptions to this in the past century are South Korea, Taiwan, Hong Kong, Singapore, Israel and Ireland. At the same time, this evolving rate of global economic growth masks a striking shift in performance away from the advanced industrial countries towards certain emerging countries, especially in Asia (Figure 3). Thus, allowing for cyclical effects, while the rate of economic growth (real GDP per capita) has trended downwards in countries such as the USA, the UK and France (and also in Germany, Italy and Canada), it has risen over time in countries such as China, India and Indonesia (and also Singapore and South Korea). This has led to a degree of ‘catch-up’ in GDP per capita by the latter. Of course, the dramatic improvement in growth among certain Asian countries is due to a complex mix of factors and forces, which vary from one such country to another. However, according to Baldwin (2016), this ‘global shift’ is very much due to the new nature of globalisation. The new globalisation is driven by information technology, which has radically reduced the cost of moving ideas across borders. This has made it practical for multinational firms to move labour-intensive work to developing nations. But to keep the whole manufacturing process synchronised, firms also shipped their marketing, managerial and technical know-how abroad along with the offshored jobs. In his view, the new possibility of combining high tech with low wages propelled the rapid industrialisation of a handful of developing nations, but the simultaneous deindustrialisation of developed economies. Figure 2. View largeDownload slide World growth of real GDP per capita (annual percentage change, Constant $US 2010), 1961–2016. Note: Trend is Fourth-Order Polynomial Source: World Bank Development Indicators (https://data.worldbank.org/data-catalog/world-development-indicators). Figure 2. View largeDownload slide World growth of real GDP per capita (annual percentage change, Constant $US 2010), 1961–2016. Note: Trend is Fourth-Order Polynomial Source: World Bank Development Indicators (https://data.worldbank.org/data-catalog/world-development-indicators). Figure 3. View largeDownload slide Growth in real GDP per capita in selected countries, 1951–2016 (percent per annum). Note: Trend is Fourth-Order Polynomial. Source: Conference Board Total Economic Data Base (https://www.conference-board.org/data/economydatabase/index.cfm?id=27762). Figure 3. View largeDownload slide Growth in real GDP per capita in selected countries, 1951–2016 (percent per annum). Note: Trend is Fourth-Order Polynomial. Source: Conference Board Total Economic Data Base (https://www.conference-board.org/data/economydatabase/index.cfm?id=27762). Globalisation as a driver of uneven regional development The increase in trade flows as part of greater international economic integration has also had important distributional effects within countries. In standard trade theory, such distributional implications are predicted by the Stolper–Samuelson theorem (Stolper and Samuelson, 1941): as trade opens up between countries, at least one factor of production will gain and at least one factor stands to lose unambiguously (even when national income as a whole will benefit) (McCulloch, 2006). The factor of production that will lose out will be the one that is most intensively used in the goods exhibiting a rise in imports into the country. In advanced economies, this will normally be low-skilled labour (primarily in manufacturing). The developed Western economies have done reasonably well in per-capita income terms because they dominate innovation and earn technological rents on their intellectual property. But, as we noted above, this has come at a price, which is increasing income inequality within these countries, as the rents from technology and finance are paid out to a skilled elite, while workers with average levels of education have seen declines in their relative wages and hence income shares. Thus, globalisation as a process of redistributing production across the globe is linked in complex ways to both geographically uneven patterns of overall (average) growth in output and incomes, as well as to changing income distributions within the different territories around the world (Milanovic, 2016). There is a political dimension to this process as well. Large segments of employees in advanced economies will have seen their bargaining position eroded vis-à-vis their employers, as they are still bound to a significant degree to particular places, while capital can move around more freely. Hence, globalisation appears to be significantly implicated—alongside technological changes, wider processes of financialisation and policies to liberalise labour markets and weaken labour unions—in the reduction of the share of labour in total income (and the rise of the capital share) in many developed countries since the late 1970s (Furceri et al., 2017; Piketty, 2014). The impacts of trade are felt unevenly within countries. Thus, to take the American case, while trade largely benefits the large cities and especially those with strong financial, technology or entertainment sectors, it directly reduces incomes in those regions that were reliant on manufacturing. Manufacturing is the most trade-able part of the economy, and hence import competition effects have been the greatest in such regions, as demonstrated in the recent work on the significant and persistent negative effects of the rise of imports from China on various local labour markets across the US (Acemoglu et al., 2016; Autor et al., 2013, 2016). Meanwhile, other cities have reinforced their position as global or regional financial centres, and have thus been driving forces—as well as major beneficiaries—of globalisation (Martin and Pollard, 2017). Globalisation of trade and financial flows is but one force driving uneven development between cities and regions within and across countries, and its effects are hard to separate from the effects of technological change, structural changes in economies and domestic policy choices made in the past four decades. Agglomeration economies and other spatial economic processes will moreover interact with these processes in complicated ways. These changes seem to add up to a “new geography of jobs”— or a "great inversion"—in many advanced economies (Moretti, 2012; Storper, 2013). The inversion concerns the fact that many rural regions and middle-to-small metropolitan areas that were once quite prosperous have been characterised by a combination of job loss, declining labour-force participation or declining per-capita income relative to national averages. In some others, employment may be increasing but is not of sufficiently high quality, comprising a high share of routine and relatively less-skilled jobs. Small- and medium-sized manufacturing cities continue to suffer from a decline in employment or relative income, while their surrounding suburban or rural areas are characterised by income stagnation. In contrast, many large metropolitan areas, including their suburbs, are now among the most dynamic in terms of income and employment creation, while many manufacturing-dominated metropolitan areas or peripheral regions continue to suffer a steady long-term decline in employment and competitiveness. The inner areas of some large metropolitan regions—but not all—continue to gain high shares of high-wage jobs. The result is a finely grained, multiscale, territorial patchwork of diverging real incomes and rates of labour-force participation: between states and regions; within regions; between core areas and peripheral areas; and between prosperous metropolitan regions and less-prosperous ones. From the 1980s onward, the rise of new economy industries, propelled by globalisation, information technologies, the growing importance of advanced services and finance, inter alia, have strengthened agglomeration economies and the advantages of city-regions. With these agglomeration forces, migration shifted to cities, especially larger ones, reinforcing a talent divide between high-income places and other regions, in spite of national policies to spatially diffuse educational opportunities. The most successful urban regions today are, at one and the same time, highly internally unequal (with Gini coefficients well above their national averages), and yet also the sites of higher inter-generational social mobility than other areas. It appears that in prosperous regions, unskilled immigrant labour is complementary to higher-skilled labour, while in less-prosperous urban regions and non-urban regions, immigrants tend to compete in the labour market with the less-skilled domestic labour force there. This wave of economy-wide forces is still gathering strength, and strong agglomeration economies continue to draw in skilled labour and strengthening networked ecologies of innovation and production in the successful regions. It is now commonplace to state that greater agglomeration generates the positive externalities that lie behind the dynamism of large cities and regions, which become the motors of economic growth (Duranton and Puga, 2001; Fujita and Thisse, 2003; Fujita et al., 1999). Agglomeration is also considered to lead to greater innovation (Cooke and Morgan, 1994; Iammarino, 2005) and to lower barriers and the cost of knowledge sharing and transmission across a range of individuals’ networks (Iammarino and McCann, 2010; Storper and Venables, 2004). And yet, there is a more nuanced picture of the sources of economic success. Among city-regions, productivity effects are not linearly linked to size (Iammarino and McCann, 2015; Martin et al., 2017). Across developed countries, the relationship between city size and productivity adopts a U-shaped form. This mixed evidence supports the idea that it is not just size, but other characteristics of cities that are increasingly selectively distributed—such as knowledge accumulation (Storper, 2013), innovation (Acs, 2002), cultural diversity (Lee and Nathan, 2010) and institutions (Storper et al., 2015)—which are equally important for competitive advantages and economic growth. In the USA, for example, the productivity of city-regions reaches a maximum at the 7–8 million level (San Francisco, Washington, Boston), before declining in the biggest city-regions such as New York or Los Angeles. In the UK, while London enjoys a high level of productivity, the major second-order cities have productivity levels below the national average. The widening of geographical imbalances in economic performance has not been confined to Western countries. In China, rapid industrialisation and the boom in real estate this has fuelled have had regionally uneven consequences. Eastern seaboard provinces and cities have grown at astonishing rates, while most inland provinces and cities have lagged well behind. The geographically unbalanced nature of China’s export-driven growth model has been recognised within China itself as a major source of instability and a constraint on future growth. As Wen Jiabao—former Premier of China—has noted in 2007: Unsteady development means overheated investment as well as excessive credit supply and liquidity and surplus in foreign trade and international payments. Unbalanced development means uneven development between urban and rural areas, between different regions and between economic and social development. Uncoordinated development means there is a lack of proper balance between the primary secondary and tertiary sectors, and between investment and consumption. Economic growth is mainly driven by investment and exports…All these are pressing problems facing us, which require long-term efforts to resolve (cited in Singh et al. (2013), p. 2). Is globalisation undermining democratic politics? It was sometimes argued in the 1990s that we had entered a ‘borderless world’ (Ohmae, 1999) in which national borders have become irrelevant. This claim was overstated (see Gray, 1998, for example, for a forceful critique). But it does seem that the scale and nature of globalisation has reached the point where the notion of a territorially defined ‘national’ economy has become a blurred and protean concept, perhaps more than in previous globalisations. The developments of the last three to four decades, not only appear to have led to new patterns of convergence and divergence between national economies, and to have contributed to increasing inequalities within them, but also to have brought about major changes to democratic politics (at least at the level of the nation-state). There are three routes through which this has happened. According to Rodrik (2000, 2011), the world economy has come to be characterised by what he calls a ‘political trilemma’ (see Figure 4). The claim is that of these three elements (deep economic integration, national sovereignty, democratic politics), we can only have two. With the slow dissolution of the Bretton Woods compromise since the mid-1970s, in which the extent of globalisation—in particular with regard to capital mobility—was limited, there has instead been a move towards the ‘golden straitjacket’ option (also Streeck, 2016). Hence, there is deep economic integration (in terms of trade but also finance and investment), combined with sovereignty still primarily located in nation-states. However, we still do not fully understand what is 'straight-jacketed', in particular when we consider monetary and fiscal policy in the US over the past several decades. The Mundell-Fleming trilemma model holds that countries cannot simultaneously have open capital flows and control their interest rates and exchange rates. And yet the Federal Reserve’s intervention in the wake of the recent financial crisis seems to have defied this notion, as the Fed was able to carry out enormous quantitative easing without a concomitant rise in interest rates, inflation or a collapse in the value of the dollar. On the other hand, no government seems to be able to fully control asset price bubbles, which seem to respond to the domestic US interest rate that affects global dollarisation. Complicating matters, the enormous increase in intra-industry and circular trade within global value chains makes it virtually impossible to predict the effects of exchange rate movements on trade balances, resulting in effects which are often contrary to those targeted by policy. Figure 4. View largeDownload slide The ‘Political Trilemma’ of the world economy. Source: Adapted from Rodrik (2000, 181). Figure 4. View largeDownload slide The ‘Political Trilemma’ of the world economy. Source: Adapted from Rodrik (2000, 181). Second, democratic politics in nations is also challenged by the increase in social and spatial inequalities, and in particular the return of a pattern in which wealth and income have become increasingly concentrated in the hands of a minority. As Thomas Piketty writes: Our democratic societies rest on a meritocratic worldview, or at any rate a meritocratic hope, by which I mean a belief in a society in which inequality is based more on merit and effort than on kinship and rents. This belief and this hope play a very crucial role in modern society, for a simple reason: in a democracy, the professed equality of rights of all citizens contrasts sharply with the very real inequality of living conditions, and in order to overcome this contradiction it is vital to make sure that social inequalities derive from rational and universal principles rather than arbitrary contingencies. Inequalities must therefore be just and useful to all, at least in the realm of discourse and as far as possible in reality as well. (Piketty, 2014, 422). Such concentrations of income, wealth and economic power, favoured as they have been by ‘hyperglobalisation’, make democratic politics much more vulnerable to being captured and influenced by special interests, and this is complicated by their ability—paradoxically—to influence the media in the age of social networking, combined with more and more sophisticated operations for overt lobbying as well as more subtle control of the output of ideas, data and “research”. Third, such concentrations also foster the rise of resentful populisms. The role played by globalisation (and the geographical inequalities it has helped to create) in the rise of populism in a number of countries (the USA, the UK, Germany, the Netherlands, Austria, Spain and Italy) over the past few years is a key issue. As Rodrik (2017) has outlined, the surge in populism revolves around the cleavages between three groups in society: an ‘elite’, a ‘majority’ and a ‘minority’ (according to ethnicity, religion and/or migration status). In the USA, for example, the surprise electoral success of Donald Trump was based on his victory in 2671 of the 3144 US counties. Hillary Clinton, by contrast, was victorious in only 473 counties; but with much larger majorities, enabling her to prevail in the popular vote even while winning in limited territories. This outcome is in many ways a palimpsest of widespread disaffection by those communities ‘left behind’ by globalisation and ignored by what they regard as the metropolitan economic and political elites that have championed and benefited by that very globalisation. In the UK, the vote to leave the European Union—so-called ‘Brexit’—though driven in part by anti-immigrant sentiments, was highest in those northern cities and communities that have been most affected by deindustrialisation and neglected by the London-based political and financial classes. It would be far too simplistic to attribute the rise of populism, in its varied forms, as being primarily a backlash against globalisation, but it almost certainly reflects a cultural-political response to what is viewed locally as an unfair burden of globalisation’s negative economic impacts: [E]ven when the underlying shock is fundamentally economic the political manifestations can be cultural and nativist. What may look like a racist or xenophobic backlash may have its roots in economic anxieties and dislocations. (Rodrik, 2017, 24). In the US case, at least, such new disaffections mixed, in certain regions (such as the South), with longstanding institutionalised racism and reactions to a cosmopolitan Black president, as well as longstanding conservativism about social issues, which potentiated the terrain for “us versus them” politics in the context of economic distress. The danger is that governments react by addressing the wrong type of issues, for example, halting migration flows, cracking down on alleged abuse of welfare provisions, resorting to protectionism and promoting a new nationalism, while one of the key underlying issues that is really driving local resentment, cynicism and anxiety—an excess of globalisation giving rise to increasing inequalities and injustices—remains fundamentally unaddressed. The challenges of globalisation The articles in this special issue are wide-ranging in their approach and intent, and cover some, but by no means all of the range of major policy issues that globalisation raises. As the papers demonstrate, the variation in experience across geographies and widely varying policy environments leave us with many unanswered questions regarding what happens next in this increasingly integrated world of economic and political relations. One issue is for sure: generalisations about countries are hazardous. The world faces different conditions today than the last time a system reset occurred. These demand a kind of global geopolitical reconsideration of the sources and distribution of wealth and income the likes of which we have not seen in almost 60 years. Does reforming globalisation require collective actions on the part of the nations of the world? Some obvious examples are the world imbalance in trade, migration, the globalisation of medical science and healthcare provision; climate change and environmental degradation; and global security, especially in the light of the growing proliferation of nuclear power weaponry. First, the current level of world imbalance in trade, particularly between the USA and China, is now presenting severe tensions to the ways in which the world economy is able to function. As we noted above, real economy imbalances lead to capital flows that, at least thus far, policymakers have failed to be able to manage in a way that sustains economic growth. The contemporary era is one of mass migrations, driven by dire economic circumstances and the violence of war and conflict. Resistance to and (generally ill-conceived) fear of in-migration has played no small part in the rise of xenophobic and nativist politics in numerous destination countries and regions. How such migration should be regulated and accommodated is one of the pressing issues of our times. Third, medical science is developing such that there is now a real chance that many of the health-related problems facing the world’s poorest people can be overcome in the years ahead, but this will require a globally integrated system of cooperation and collaboration between governments and biopharmaceutical companies. Biopharmaceuticals companies are already enmeshed in a global system of production and distribution of ideas, medicines and services. The geography of this development is shaped by among other things pools of skilled labour of varying abilities and unique patient populations. Institutions and practices of the contemporary labour market are rapidly incorporating contingency as a structural feature, thus allowing true global system integration (Tapfin Manpower Group Solutions, 2017). A fourth concern working itself out today is the scale of solutions required to tackle environmental degradation, which will require a unification of beliefs, practices and regulations across countries to counter such looming problems as climate change, the growing scarcity of water and the degradation of arable lands. Already evident is the pushback by countries around the world to the USA’s retreat from the Paris Agreement on Climate Change (Galston et al., 2017). Finally, war, separatism and insurgency have battered the global political order in recent years, with hotspots from Europe to the Middle East, to the western expansionist ambitions of Russia, to the military nuclearisation of North Korea. The recent passage of the UN Treaty for the Prohibition of Nuclear Weapons received the endorsement of 122 countries, and UN officials see a path towards the 50-state ratification required for the initiative to become law (Nuclear Threat Initiative, 2017). However, the influence of the UN is itself in question, and some attribute this to the fact that the UN Security Council’s very founding premise of a world ordered by states is breaking down. Whatever one’s view about the future, there are strong grounds for arguing that the global political economy is in the midst of highly turbulent and disruptive times, possibly a crucial historical juncture. Charting and explaining the turbulence that characterises contemporary globalisation is itself a challenge, let alone devising policies and strategies to establish a fairer, more inclusive, more sustainable and more secure route to global economic development. References Acemoglu, D., Autor, D. H., Dorn, D., Hanson, G. H. and Price, B. ( 2016) Import competition and the great U.S. employment sag of the 2000s, Journal of Labor Economics , 34: 141– 198. Google Scholar CrossRef Search ADS   Acs, Z. J. ( 2002) Innovation and the Growth of Cities . Cheltenham, UK and Northampton, MA: Edward Elgar. 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( 2017) Trump’s Paris Agreement Withdrawal: What It Means and What Comes Next . Washington, DC: Brookings Institution. Gordon, R. J. ( 2016) The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War . Princeton, NJ: Princeton University Press. Google Scholar CrossRef Search ADS   Gray, J. ( 1998) False Dawn: The Delusions of Global Capitalism . London: Granta. Held, D. ( 2005) Debating Globalisation . Cambridge: Polity Press. Held, D., McGrew, A., Goldblatt, D. and Perraton, D. ( 1999) Global Transformations: Politics, Economics, Culture . Oxford: Polity Press. Iammarino, S. ( 2005) An evolutionary integrated view of regional systems of innovation. Concepts, measures and historical perspectives, European Planning Studies , 13: 495– 517. Google Scholar CrossRef Search ADS   Iammarino, S. and McCann, P. ( 2010) The relationship between multinational firms and innovative clusters. In R. Boschma and R. L. 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Endnotes 1 This was the sentiment behind then-Prime Minister Tony Blair’s speech to the British Labour Party in 2005, when he claimed that globalisation is inevitable and that to resist it is “to stand against the tide of history”. 2 It is estimated, for example, that US companies currently hold around $1.3 trillion of overseas earnings outside the USA to avoid US corporation tax. Apple alone holds 94% of its $246 billion cash hoard overseas, Microsoft some 95% of its $131.2 billion cash hoard, Alphabet some 60% of its $86.3 billion, Cisco 87% of its $71.8 billion and Oracle some 88% of its $52.8 billion. © The Author(s) 2018. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved. For permissions, please email: journals.permissions@oup.com http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Cambridge Journal of Regions, Economy and Society Oxford University Press

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Abstract

Introduction It is 10 years since the first issue of the Cambridge Journal of Regions, Economy and Society appeared, in April 2008. When we had our first Editors’ meeting, in mid-2007, little did we know that the worst financial crisis since that of 1929 was about to disrupt and destabilise the global economy. The Global Financial Crisis of 2007–2008 in turn triggered the deepest recession since the Great Depression of 1929–1932, a debt crisis in much of Europe, and the imposition by several states of a programme of fiscal consolidation, or austerity, which is still in place in many cases. The past decade has been one of tremendous upheaval and instability throughout much of the global economy, not just in the advanced industrial economies but also in the emerging economies, including China (see Pettis, 2013). It is tempting to see the Global Financial Crisis of 2007–2008 as deriving from flaws and failures in the financial system itself, from the greed of banks and the invention and uncontrolled use of ‘clever’ exotic instruments and products for bundling, concealing and trading high-risk mortgage debt across a globally integrated financial system. Indeed, many observers would argue that it is in the financial system that globalisation finds its clearest expression. As Minsky (1982) observed some 35 years ago, attributing the causes of the financial crises that periodically disrupt capitalism to the nature of the financial system itself in this way is not uncommon: Once the sharp financial reaction occurs, institutional deficiencies will be evident. Thus, after a crisis, it will always be possible to construct plausible arguments—by emphasizing trigger events or institutional flaws—that accidents, mistakes, or easily correctible shortcomings were responsible for the disaster (Minsky, 1982, 118). But as he went on to argue, while such ‘plausible arguments’ may highlight particular and indeed relevant proximate causes, they do not necessarily tell the whole story nor confront the real underlying ultimate fundamentals at work. In the case of this financial crisis, such imbalances took the form of an accumulation of reserves in US dollars in countries running large current account surpluses with the United States, such as China, Germany and several East Asian and Latin American economies. These surpluses were complemented by low domestic savings and the expansion of credit in the USA. These real economy imbalances were in turn transformed into monetary instability, through the emergence of a system of financial engineering designed to sterilise the surpluses and invest them in the deficit countries, leading to spurious lending practices—principally in real estate in the USA—and hence to the fragility of the system. In this sense, the global financial crisis was not some purely ‘exogenous’ or ‘autonomous’ event that unexpectedly disrupted an otherwise stable regime of global economic growth and development, but a manifestation, a symptom, of the inherent instability and unsustainability of that regime itself. Globalisation: its protagonists and its antagonists A key characteristic of this regime is that it was based, in large part, on a distinctive form and particularly rapid phase of globalisation. Now globalisation, of course, is nothing new (Michie, 2017); it has been an evolving feature of world economic activity ever since the Age of Exploration in the 16th century, and also characterised many ancient systems, such as the Roman Empire (Gray, 1998; Held, 2005). But since the mid-1970s, the process—defined broadly as the increasing extension, interpenetration and interdependence of production systems, corporations, markets and networks of flows across national borders—has accelerated considerably, so that today, world trade as a proportion of world economic output is at the same previous high point that it attained in 1914, the apogee of the Atlantic Economy. Nor is globalisation a singular condition, a linear process, or final point of socio-economic change (Held et al., 1999). Rather, it is a complex admixture of different, though interrelated, historically evolving developments and transformations—economic, technological, cultural and social. One important task in analysing globalisation is to distinguish between material and institutional forms of global integration and exchange, and constructivist discourses about globalisation, and then to consider the ways they may mutually influence one another but also the ways in which they differ. Certainly, a well-organised industry of consultants, academic experts, public intellectuals, think tanks and other voices has prosecuted a narrative that globalisation represents a new logic of political economy for which adaptation to the demands of international markets and hypermobile capital and information is an inescapable imperative. It is as if globalisation is some ineluctable ‘force of nature’ out there—almost akin to gravity—to which nations, companies, regions, cities and workers must inevitably bend or otherwise get left behind.1 Yet there is also much evidence that policies adopted in specific national and regional contexts have shaped globalisation in very different ways, suggesting that globalisation is not akin to gravity, but more like the weather, where (employing a metaphor from Rodrik) one can for example, put a screen on the window and allow the pleasant breezes to flow without letting in the rain and insects. In reality, the latest phase of globalisation that has been developing since the mid- to late-1970s is a process or project that in large part has been purposively promoted and championed by individual states, transnational corporations and key international organisations such as the IMF and World Bank, all driven by a belief in the benefits of free markets and free trade. The acceleration in globalisation over the past 40 years has been accompanied by a widespread deregulation of markets, especially financial markets; the dismantling of the post-war system of international monetary and capital controls; and, in some countries, the privatisation of state assets and public industries and services. While some would argue that these moves to liberalise economic governance have been essential in order to meet the opportunities afforded by globalisation, they can equally be seen as driving the very same process. And it has been an ideology that has spread—in one form or another, and to some extent or another—across much of the OECD bloc. It would be incorrect, however, to see globalisation as some monolithic, universalising political-economic programme. What some label the ‘neo-liberal’ version of globalisation emanates heavily from the USA and the UK, while policies towards social protection, regulated labour and product markets, and certain restraints on trade are quite popular in continental Europe and in many emerging economies. Indeed, state spending as a proportion of economic output has continued to rise in virtually all of the advanced economies as well as most of the bigger emerging economies. And to further complicate matters, China’s own globalisation project, its particular state-led approach of inserting and integrating its economy into the wider world system, is most certainly not based on anything like straightforward liberalisation—very far from it. The protagonists of free-market globalised capitalism make several claims for its benefits. They point to the long boom in world economic growth over the 1990s and first few years of the 2000s, to the increase in world trade, and to the rise in incomes in several of the world’s poorest countries brought about by the opportunities they have been afforded by the freeing of markets and the expansion of trade. The OECD has estimated, for example, that a 10 percentage-point increase in trade exposure for a country has been associated with a 4 percent rise in income per capita over time. Greater trade has undoubtedly enhanced the division of labour, promoted comparative advantage and encouraged producers and consumers to reap the benefits of economies of scale. It is certainly true that many countries have been lifted out of poverty and that mobile western transnational capital has brought much-needed investment, technology and jobs to many such areas of the globe. But while acknowledging these benefits, critics and antagonists of globalisation point to various costs and adverse effects which they argue have negated or outweighed the positive effects. Thus, for the ‘discontents’, globalisation is charged with having increased inequality in income and wealth (Piketty, 2014; Stiglitz, 2002, 2015). In almost every country, the share of the upper half, and indeed usually the upper 10 or 1 percent, of the income distribution has tended to rise, both in those poor countries that have seen an overall rise in average per-capita incomes and in the advanced prosperous economies (World Inequality Lab, 2017). In many nations, spatial inequalities in prosperity have likewise widened, particularly between the cities (typically containing the political and economic elites) leading the globalisation process, and those cities and regions less favourably positioned to set the terms of the globalisation process. However, the magnitude of such changes is highly variable, with the USA as the outlier among advanced economies in the rise of the share of the top 10 percent, while continental European countries have had much smaller increases. Latin American countries and India were highly unequal prior to this round of globalisation and remain so, while China now has levels of inequality that are above those in the USA. Similarly, while world trade has grown, so too have trade imbalances. In particular, between 1997 and 2007, China generated what is probably the largest trade surplus as a share of world GDP of any country in history, while the USA became the world’s largest deficit nation (Figure 1). As Pettis (2013) cogently shows, these contrasting situations are not independent of one another. The very large trade surpluses of countries like China and Germany, and the very large trade deficits of the USA and peripheral Europe, are inextricably linked and a major source of the financial crisis. Other critiques relate to the threats to the global commons posed by unregulated growth and exploitation of natural resources; the rise of giant monopolies, including the global ICT, digital equipment and web-based companies, that actually stifle competition; and the ability of these giant corporations to carry out complex forms of regulatory and tax arbitraging, effectively playing off nations to gain the lowest tax deals, or avoiding taxes by using offshore trusts and complex ‘transfer pricing’ arrangements.2 While technically legal, these tax avoidance strategies of the major transnational corporations result in the loss of revenues to states, which could be put to good use, for example, to fund public infrastructures and services. Figure 1. View largeDownload slide Trade balances for selected countries, 1995–2016, current account, US$ billion. Source: World Bank (https://data.worldbank.org). Figure 1. View largeDownload slide Trade balances for selected countries, 1995–2016, current account, US$ billion. Source: World Bank (https://data.worldbank.org). A further source of concern, if not critique, of the recent phase of globalisation, is that it has been quintessentially a process of geographically uneven development. In this respect it is no different from previous historical phases of globalisation. But whereas in previous historical globalisations such unequal levels of development might have been direct consequences of military power, or the unequal distribution of natural resources, since the Industrial Revolution, globally unequal development has been driven by a combination of unequal technological prowess, unequal financial and institutional endowments, and a resulting pattern of productivity and agglomeration economies. These forces led to what is known as the Great Divergence between the West and the rest of the world starting in 1820, as well as an uneven pattern within the Western industrialisers themselves. In the latest phase of globalisation, paradoxically, we observe a reduction in overall global income inequality due to the rise of China and a few other emerging economies, but a simultaneous acceleration of the agglomeration-driven inequality within almost every country on the planet. The global shift in economic growth While the argument, prior to the financial crisis, that globalisation had contributed to world economic growth in the 1990s and early 2000s, has some validity, this claim needs to be set within a longer historical perspective. The period that corresponds to the current globalisation is not a high-growth period in the developed West. The abandonment of the Bretton Woods monetary system and the onset of the Oil Crisis in the early 1970s is often identified as marking the end of a so-called ‘golden age’ of post-war growth in the global economy. In fact, the trend rate of growth of the global economy had been slowing during that period (see Figure 2). At least for the American case, the current period shows growth rates that are lower than the previous century’s average (Gordon, 2016). Although the trend rate of growth did indeed improve very slightly from the beginning of the 1990s onwards—attracting the epithet of the ‘Great Moderation’ in the USA (Stock and Watson, 2002), and the acronym NICE (non-inflationary continuous expansion) in the UK, it failed to match the record of the 1960s. In fact, most of the world’s economic growth has been in fast-growers such as China and other Asian economies, just as in the 1950s and 1960s there were economic ‘miracles’ in countries such as Brazil with a similar growth pathway to that of China in more recent times. It is also important to remember that the history of developing countries that go through such high-growth episodes is almost universally followed by growth slowdowns and a “middle-income trap”. The only exceptions to this in the past century are South Korea, Taiwan, Hong Kong, Singapore, Israel and Ireland. At the same time, this evolving rate of global economic growth masks a striking shift in performance away from the advanced industrial countries towards certain emerging countries, especially in Asia (Figure 3). Thus, allowing for cyclical effects, while the rate of economic growth (real GDP per capita) has trended downwards in countries such as the USA, the UK and France (and also in Germany, Italy and Canada), it has risen over time in countries such as China, India and Indonesia (and also Singapore and South Korea). This has led to a degree of ‘catch-up’ in GDP per capita by the latter. Of course, the dramatic improvement in growth among certain Asian countries is due to a complex mix of factors and forces, which vary from one such country to another. However, according to Baldwin (2016), this ‘global shift’ is very much due to the new nature of globalisation. The new globalisation is driven by information technology, which has radically reduced the cost of moving ideas across borders. This has made it practical for multinational firms to move labour-intensive work to developing nations. But to keep the whole manufacturing process synchronised, firms also shipped their marketing, managerial and technical know-how abroad along with the offshored jobs. In his view, the new possibility of combining high tech with low wages propelled the rapid industrialisation of a handful of developing nations, but the simultaneous deindustrialisation of developed economies. Figure 2. View largeDownload slide World growth of real GDP per capita (annual percentage change, Constant $US 2010), 1961–2016. Note: Trend is Fourth-Order Polynomial Source: World Bank Development Indicators (https://data.worldbank.org/data-catalog/world-development-indicators). Figure 2. View largeDownload slide World growth of real GDP per capita (annual percentage change, Constant $US 2010), 1961–2016. Note: Trend is Fourth-Order Polynomial Source: World Bank Development Indicators (https://data.worldbank.org/data-catalog/world-development-indicators). Figure 3. View largeDownload slide Growth in real GDP per capita in selected countries, 1951–2016 (percent per annum). Note: Trend is Fourth-Order Polynomial. Source: Conference Board Total Economic Data Base (https://www.conference-board.org/data/economydatabase/index.cfm?id=27762). Figure 3. View largeDownload slide Growth in real GDP per capita in selected countries, 1951–2016 (percent per annum). Note: Trend is Fourth-Order Polynomial. Source: Conference Board Total Economic Data Base (https://www.conference-board.org/data/economydatabase/index.cfm?id=27762). Globalisation as a driver of uneven regional development The increase in trade flows as part of greater international economic integration has also had important distributional effects within countries. In standard trade theory, such distributional implications are predicted by the Stolper–Samuelson theorem (Stolper and Samuelson, 1941): as trade opens up between countries, at least one factor of production will gain and at least one factor stands to lose unambiguously (even when national income as a whole will benefit) (McCulloch, 2006). The factor of production that will lose out will be the one that is most intensively used in the goods exhibiting a rise in imports into the country. In advanced economies, this will normally be low-skilled labour (primarily in manufacturing). The developed Western economies have done reasonably well in per-capita income terms because they dominate innovation and earn technological rents on their intellectual property. But, as we noted above, this has come at a price, which is increasing income inequality within these countries, as the rents from technology and finance are paid out to a skilled elite, while workers with average levels of education have seen declines in their relative wages and hence income shares. Thus, globalisation as a process of redistributing production across the globe is linked in complex ways to both geographically uneven patterns of overall (average) growth in output and incomes, as well as to changing income distributions within the different territories around the world (Milanovic, 2016). There is a political dimension to this process as well. Large segments of employees in advanced economies will have seen their bargaining position eroded vis-à-vis their employers, as they are still bound to a significant degree to particular places, while capital can move around more freely. Hence, globalisation appears to be significantly implicated—alongside technological changes, wider processes of financialisation and policies to liberalise labour markets and weaken labour unions—in the reduction of the share of labour in total income (and the rise of the capital share) in many developed countries since the late 1970s (Furceri et al., 2017; Piketty, 2014). The impacts of trade are felt unevenly within countries. Thus, to take the American case, while trade largely benefits the large cities and especially those with strong financial, technology or entertainment sectors, it directly reduces incomes in those regions that were reliant on manufacturing. Manufacturing is the most trade-able part of the economy, and hence import competition effects have been the greatest in such regions, as demonstrated in the recent work on the significant and persistent negative effects of the rise of imports from China on various local labour markets across the US (Acemoglu et al., 2016; Autor et al., 2013, 2016). Meanwhile, other cities have reinforced their position as global or regional financial centres, and have thus been driving forces—as well as major beneficiaries—of globalisation (Martin and Pollard, 2017). Globalisation of trade and financial flows is but one force driving uneven development between cities and regions within and across countries, and its effects are hard to separate from the effects of technological change, structural changes in economies and domestic policy choices made in the past four decades. Agglomeration economies and other spatial economic processes will moreover interact with these processes in complicated ways. These changes seem to add up to a “new geography of jobs”— or a "great inversion"—in many advanced economies (Moretti, 2012; Storper, 2013). The inversion concerns the fact that many rural regions and middle-to-small metropolitan areas that were once quite prosperous have been characterised by a combination of job loss, declining labour-force participation or declining per-capita income relative to national averages. In some others, employment may be increasing but is not of sufficiently high quality, comprising a high share of routine and relatively less-skilled jobs. Small- and medium-sized manufacturing cities continue to suffer from a decline in employment or relative income, while their surrounding suburban or rural areas are characterised by income stagnation. In contrast, many large metropolitan areas, including their suburbs, are now among the most dynamic in terms of income and employment creation, while many manufacturing-dominated metropolitan areas or peripheral regions continue to suffer a steady long-term decline in employment and competitiveness. The inner areas of some large metropolitan regions—but not all—continue to gain high shares of high-wage jobs. The result is a finely grained, multiscale, territorial patchwork of diverging real incomes and rates of labour-force participation: between states and regions; within regions; between core areas and peripheral areas; and between prosperous metropolitan regions and less-prosperous ones. From the 1980s onward, the rise of new economy industries, propelled by globalisation, information technologies, the growing importance of advanced services and finance, inter alia, have strengthened agglomeration economies and the advantages of city-regions. With these agglomeration forces, migration shifted to cities, especially larger ones, reinforcing a talent divide between high-income places and other regions, in spite of national policies to spatially diffuse educational opportunities. The most successful urban regions today are, at one and the same time, highly internally unequal (with Gini coefficients well above their national averages), and yet also the sites of higher inter-generational social mobility than other areas. It appears that in prosperous regions, unskilled immigrant labour is complementary to higher-skilled labour, while in less-prosperous urban regions and non-urban regions, immigrants tend to compete in the labour market with the less-skilled domestic labour force there. This wave of economy-wide forces is still gathering strength, and strong agglomeration economies continue to draw in skilled labour and strengthening networked ecologies of innovation and production in the successful regions. It is now commonplace to state that greater agglomeration generates the positive externalities that lie behind the dynamism of large cities and regions, which become the motors of economic growth (Duranton and Puga, 2001; Fujita and Thisse, 2003; Fujita et al., 1999). Agglomeration is also considered to lead to greater innovation (Cooke and Morgan, 1994; Iammarino, 2005) and to lower barriers and the cost of knowledge sharing and transmission across a range of individuals’ networks (Iammarino and McCann, 2010; Storper and Venables, 2004). And yet, there is a more nuanced picture of the sources of economic success. Among city-regions, productivity effects are not linearly linked to size (Iammarino and McCann, 2015; Martin et al., 2017). Across developed countries, the relationship between city size and productivity adopts a U-shaped form. This mixed evidence supports the idea that it is not just size, but other characteristics of cities that are increasingly selectively distributed—such as knowledge accumulation (Storper, 2013), innovation (Acs, 2002), cultural diversity (Lee and Nathan, 2010) and institutions (Storper et al., 2015)—which are equally important for competitive advantages and economic growth. In the USA, for example, the productivity of city-regions reaches a maximum at the 7–8 million level (San Francisco, Washington, Boston), before declining in the biggest city-regions such as New York or Los Angeles. In the UK, while London enjoys a high level of productivity, the major second-order cities have productivity levels below the national average. The widening of geographical imbalances in economic performance has not been confined to Western countries. In China, rapid industrialisation and the boom in real estate this has fuelled have had regionally uneven consequences. Eastern seaboard provinces and cities have grown at astonishing rates, while most inland provinces and cities have lagged well behind. The geographically unbalanced nature of China’s export-driven growth model has been recognised within China itself as a major source of instability and a constraint on future growth. As Wen Jiabao—former Premier of China—has noted in 2007: Unsteady development means overheated investment as well as excessive credit supply and liquidity and surplus in foreign trade and international payments. Unbalanced development means uneven development between urban and rural areas, between different regions and between economic and social development. Uncoordinated development means there is a lack of proper balance between the primary secondary and tertiary sectors, and between investment and consumption. Economic growth is mainly driven by investment and exports…All these are pressing problems facing us, which require long-term efforts to resolve (cited in Singh et al. (2013), p. 2). Is globalisation undermining democratic politics? It was sometimes argued in the 1990s that we had entered a ‘borderless world’ (Ohmae, 1999) in which national borders have become irrelevant. This claim was overstated (see Gray, 1998, for example, for a forceful critique). But it does seem that the scale and nature of globalisation has reached the point where the notion of a territorially defined ‘national’ economy has become a blurred and protean concept, perhaps more than in previous globalisations. The developments of the last three to four decades, not only appear to have led to new patterns of convergence and divergence between national economies, and to have contributed to increasing inequalities within them, but also to have brought about major changes to democratic politics (at least at the level of the nation-state). There are three routes through which this has happened. According to Rodrik (2000, 2011), the world economy has come to be characterised by what he calls a ‘political trilemma’ (see Figure 4). The claim is that of these three elements (deep economic integration, national sovereignty, democratic politics), we can only have two. With the slow dissolution of the Bretton Woods compromise since the mid-1970s, in which the extent of globalisation—in particular with regard to capital mobility—was limited, there has instead been a move towards the ‘golden straitjacket’ option (also Streeck, 2016). Hence, there is deep economic integration (in terms of trade but also finance and investment), combined with sovereignty still primarily located in nation-states. However, we still do not fully understand what is 'straight-jacketed', in particular when we consider monetary and fiscal policy in the US over the past several decades. The Mundell-Fleming trilemma model holds that countries cannot simultaneously have open capital flows and control their interest rates and exchange rates. And yet the Federal Reserve’s intervention in the wake of the recent financial crisis seems to have defied this notion, as the Fed was able to carry out enormous quantitative easing without a concomitant rise in interest rates, inflation or a collapse in the value of the dollar. On the other hand, no government seems to be able to fully control asset price bubbles, which seem to respond to the domestic US interest rate that affects global dollarisation. Complicating matters, the enormous increase in intra-industry and circular trade within global value chains makes it virtually impossible to predict the effects of exchange rate movements on trade balances, resulting in effects which are often contrary to those targeted by policy. Figure 4. View largeDownload slide The ‘Political Trilemma’ of the world economy. Source: Adapted from Rodrik (2000, 181). Figure 4. View largeDownload slide The ‘Political Trilemma’ of the world economy. Source: Adapted from Rodrik (2000, 181). Second, democratic politics in nations is also challenged by the increase in social and spatial inequalities, and in particular the return of a pattern in which wealth and income have become increasingly concentrated in the hands of a minority. As Thomas Piketty writes: Our democratic societies rest on a meritocratic worldview, or at any rate a meritocratic hope, by which I mean a belief in a society in which inequality is based more on merit and effort than on kinship and rents. This belief and this hope play a very crucial role in modern society, for a simple reason: in a democracy, the professed equality of rights of all citizens contrasts sharply with the very real inequality of living conditions, and in order to overcome this contradiction it is vital to make sure that social inequalities derive from rational and universal principles rather than arbitrary contingencies. Inequalities must therefore be just and useful to all, at least in the realm of discourse and as far as possible in reality as well. (Piketty, 2014, 422). Such concentrations of income, wealth and economic power, favoured as they have been by ‘hyperglobalisation’, make democratic politics much more vulnerable to being captured and influenced by special interests, and this is complicated by their ability—paradoxically—to influence the media in the age of social networking, combined with more and more sophisticated operations for overt lobbying as well as more subtle control of the output of ideas, data and “research”. Third, such concentrations also foster the rise of resentful populisms. The role played by globalisation (and the geographical inequalities it has helped to create) in the rise of populism in a number of countries (the USA, the UK, Germany, the Netherlands, Austria, Spain and Italy) over the past few years is a key issue. As Rodrik (2017) has outlined, the surge in populism revolves around the cleavages between three groups in society: an ‘elite’, a ‘majority’ and a ‘minority’ (according to ethnicity, religion and/or migration status). In the USA, for example, the surprise electoral success of Donald Trump was based on his victory in 2671 of the 3144 US counties. Hillary Clinton, by contrast, was victorious in only 473 counties; but with much larger majorities, enabling her to prevail in the popular vote even while winning in limited territories. This outcome is in many ways a palimpsest of widespread disaffection by those communities ‘left behind’ by globalisation and ignored by what they regard as the metropolitan economic and political elites that have championed and benefited by that very globalisation. In the UK, the vote to leave the European Union—so-called ‘Brexit’—though driven in part by anti-immigrant sentiments, was highest in those northern cities and communities that have been most affected by deindustrialisation and neglected by the London-based political and financial classes. It would be far too simplistic to attribute the rise of populism, in its varied forms, as being primarily a backlash against globalisation, but it almost certainly reflects a cultural-political response to what is viewed locally as an unfair burden of globalisation’s negative economic impacts: [E]ven when the underlying shock is fundamentally economic the political manifestations can be cultural and nativist. What may look like a racist or xenophobic backlash may have its roots in economic anxieties and dislocations. (Rodrik, 2017, 24). In the US case, at least, such new disaffections mixed, in certain regions (such as the South), with longstanding institutionalised racism and reactions to a cosmopolitan Black president, as well as longstanding conservativism about social issues, which potentiated the terrain for “us versus them” politics in the context of economic distress. The danger is that governments react by addressing the wrong type of issues, for example, halting migration flows, cracking down on alleged abuse of welfare provisions, resorting to protectionism and promoting a new nationalism, while one of the key underlying issues that is really driving local resentment, cynicism and anxiety—an excess of globalisation giving rise to increasing inequalities and injustices—remains fundamentally unaddressed. The challenges of globalisation The articles in this special issue are wide-ranging in their approach and intent, and cover some, but by no means all of the range of major policy issues that globalisation raises. As the papers demonstrate, the variation in experience across geographies and widely varying policy environments leave us with many unanswered questions regarding what happens next in this increasingly integrated world of economic and political relations. One issue is for sure: generalisations about countries are hazardous. The world faces different conditions today than the last time a system reset occurred. These demand a kind of global geopolitical reconsideration of the sources and distribution of wealth and income the likes of which we have not seen in almost 60 years. Does reforming globalisation require collective actions on the part of the nations of the world? Some obvious examples are the world imbalance in trade, migration, the globalisation of medical science and healthcare provision; climate change and environmental degradation; and global security, especially in the light of the growing proliferation of nuclear power weaponry. First, the current level of world imbalance in trade, particularly between the USA and China, is now presenting severe tensions to the ways in which the world economy is able to function. As we noted above, real economy imbalances lead to capital flows that, at least thus far, policymakers have failed to be able to manage in a way that sustains economic growth. The contemporary era is one of mass migrations, driven by dire economic circumstances and the violence of war and conflict. Resistance to and (generally ill-conceived) fear of in-migration has played no small part in the rise of xenophobic and nativist politics in numerous destination countries and regions. How such migration should be regulated and accommodated is one of the pressing issues of our times. Third, medical science is developing such that there is now a real chance that many of the health-related problems facing the world’s poorest people can be overcome in the years ahead, but this will require a globally integrated system of cooperation and collaboration between governments and biopharmaceutical companies. Biopharmaceuticals companies are already enmeshed in a global system of production and distribution of ideas, medicines and services. The geography of this development is shaped by among other things pools of skilled labour of varying abilities and unique patient populations. Institutions and practices of the contemporary labour market are rapidly incorporating contingency as a structural feature, thus allowing true global system integration (Tapfin Manpower Group Solutions, 2017). A fourth concern working itself out today is the scale of solutions required to tackle environmental degradation, which will require a unification of beliefs, practices and regulations across countries to counter such looming problems as climate change, the growing scarcity of water and the degradation of arable lands. Already evident is the pushback by countries around the world to the USA’s retreat from the Paris Agreement on Climate Change (Galston et al., 2017). Finally, war, separatism and insurgency have battered the global political order in recent years, with hotspots from Europe to the Middle East, to the western expansionist ambitions of Russia, to the military nuclearisation of North Korea. The recent passage of the UN Treaty for the Prohibition of Nuclear Weapons received the endorsement of 122 countries, and UN officials see a path towards the 50-state ratification required for the initiative to become law (Nuclear Threat Initiative, 2017). 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Endnotes 1 This was the sentiment behind then-Prime Minister Tony Blair’s speech to the British Labour Party in 2005, when he claimed that globalisation is inevitable and that to resist it is “to stand against the tide of history”. 2 It is estimated, for example, that US companies currently hold around $1.3 trillion of overseas earnings outside the USA to avoid US corporation tax. Apple alone holds 94% of its $246 billion cash hoard overseas, Microsoft some 95% of its $131.2 billion cash hoard, Alphabet some 60% of its $86.3 billion, Cisco 87% of its $71.8 billion and Oracle some 88% of its $52.8 billion. © The Author(s) 2018. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved. For permissions, please email: journals.permissions@oup.com

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Cambridge Journal of Regions, Economy and SocietyOxford University Press

Published: Mar 1, 2018

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