The end of hyper-globalization should yield a better alternative

Source: The post is based on the article “The end of hyper-globalization should yield a better alternative” published in Mint on 17^th March 2023.

Syllabus: GS 3 – Economy

Relevance: About different Global Economic Narratives

News: There are different narratives in the global economic system. The article discusses those narratives and provides alternatives to it.

What was the global economic narrative until the late 19th century?

The global economy till the late 19th century was self-adjusting, self-equilibrating system in which stability was best achieved if governments did not interfere. This global economic narrative was referred to as the gold standard.

It was thought that free capital movement, free trade and better macro-economic policies would achieve the best results for the world economy and countries alike.

However, the gold standard collapsed and the Great Depression made this narrative false. After the collapse, the global economic narrative changed towards the Bretton Woods regime.

What was the Bretton Woods economic narrative?

The Bretton Woods regime emerged after World War II. It relied on Keynesian macroeconomic management to stabilize the global economy and gave the state a much more prominent role.

The regime believed that only a strong welfare state could provide social insurance and support the market economy.

This system altered the relationship between domestic and global interests. It made the world to focus on achieving the goals of full domestic employment and establishing equitable societies. 

However, other than this narrative, the narrative of neoliberal hyper-globalization became dominant in the 1990s.

What is Neoliberal Hyper-Globalization?

This narrative believes in free flow of finance and in many ways, it similar to the gold-standard narrative of self-adjusting markets.

It emphasized the role of the government in enforcing specific rules that made the world safe for large corporations and big banks.

It believed to end international conflict and strengthen democratic forces around the world, especially in communist countries such as China.

It also believed that goals of social equity, environmental protection and national security could be achieved through policy instruments that did not interfere with free trade and finance.

However, the Hyper-globalization narrative failed since the global crisis of 2008 because it could not overcome its inherent contradictions. Hence, the world might look for alternatives.

What can be the alternatives to Hyper-globalization narrative?

Productivism: It emphasizes the role of governments in addressing inequality, public health and the clean-energy transition. It emphasizes domestic political priorities along with supporting an open world economy.

Hyper-realism: It emphasizes the geopolitical rivalry between the US and China and applies a zero-sum logic to economic relations between major powers. This framework views economic inter-dependence not as a source of mutual gain but as a weapon to harm the global economic system.

What can be the way ahead?

It is anticipated that governments would move towards more protectionist approach, encouraging industrial policies for advanced manufacturing and more green measures that support domestic goods.

However, hyper-realist narrative would prevail if a country looks at the geopolitical aims. But this would endanger global economic stability.

Hence, it would be better to correct the wrongs of hyper-globalization and establish a better global order based on a vision of shared prosperity.