As a professional economist, I am much concerned about the current state of the debate over “globalization”. The debate is lively, often passionate, and has sometimes been violent. Since the debate is untidy and ill-defined, one could react by saying that it has no place for professional economists. But we economists cannot afford to ignore it, [31] (1. if 2. while 3. for) the views and attitudes expressed in it will inevitably affect public policy and the issues are critically important for the future economic growth and wellbeing of all the peoples of the globe.
What is globalization? In terms of people’s daily lives, globalization means that the residents of one country are more likely now than they were 50 years ago to consume the products of other countries, to invest in other countries, to talk on the telephone to people in other countries, to visit other countries, to know that they are [32] (1. affected 2. demolished 3. reflected) by economic developments in other countries, and to know about developments in other countries.
More technically, globalization is an ongoing process of greater interdependence among countries and their citizens, and it is much more than an economic phenomenon. As one leading sociologist puts it, globalization, [33] (1. as 2. where 3. since) we are experiencing it, is political, technological and cultural as well as economic. In other words, the forces that drive the process of economic globalization have massive noneconomic consequences and problems.
Many of the problems that the critics of globalization point [34] (1. in 2. to 3. on) are real. Some of them relate to economics. Others relate to noneconomic, but no less important, aspects of life. While some of the problems due [35] (1. account for 2. bring about 3. stem from) the process of global integration, others do not. Thus the noneconomic aspects are at least as important in shaping the international debate as are the economic aspects.
In order to understand the economic aspect of globalization, and to [36] (1. associate 2. accentuate 3 appreciate) the fact that globalization itself is not inevitable, it is important to understand its historical background. As is well known to economic historians, economic globalization thrived in the period before 1914. The rapid increases in global integration in this period were driven by the preservation of peace in Europe and the invention of the telegraph, the steamship, and the railroad. But globalization was set [37] (1. back 2. forth 3. down) by the two World Wars and the Great Depression of 1929. At the end of World War II, an international financial Order, called the Bretton Woods System, was established in order to restore the volume of world trade, and by 1973 world trade as a percentage of world GDP ](gross domestic product) was back to its 1913 level, and it has continued to grow almost every year since. Similarly, the movement of capital among the industrialized countries recovered during the 1950s, and by now, the relative volume to GDP far exceeds the levels reached in the period just before 1914.
This historical overview shows that globalization is not a totally new phenomenon. Some argue that globalization is [38] (1. forwarded 2. driven 3. thrown) by technology, and that it is an unstoppable force. But as shown above, the forces of globalization were stopped and [39] (1. advanced 2. collapsed 3. reversed) for nearly a third of the last century. We cannot take it for granted that the world will continue down the road of globalization, greater prosperity, and greater democracy. That may be an astonishing thing to say at the end of a century that witnessed the first sustained competition between two clearly defined economic and political systems — a centrally planned system and a market based decentralized system — and [40] (1. in 2. to 3. by) which the pro-democracy, pro-market, pro-globalization system won that contest decisively. Nonetheless that system is under attack. The attack is about much more than economics; political, cultural and religious forces could play the dominant role in shaping the future of globalization. In fact, many of those who object to globalization resent the political and military dominance of the United States, and they also resent the influence of foreign ](predominantly American) culture, as they see it at the expense [41] (1. in 2. on 3. of) national and local cultures.
As economists, we should not allow noneconomic concerns, however important, to blind us to the key economic problems in a global economy. Two key economic issues in the debate are the following: firstly, whether poverty and inequality are increasing or decreasing along with economic globalization; and secondly, whether integration into the global economy is good for growth. Since almost everyone [42] (1. declares 2. recognizes 3. interprets) that the world could be a better place, and that there is much work to be done to improve it, the debate is ultimately about policies. It is a separate question whether it is globalization that is [43] (1. responsible 2. comprehensible 3. suitable) for what has happened.
Regarding the first issue, there is considerable evidence that on average economic conditions have been improving in the developing countries. Although the discussion of the issue of global poverty should be a significant part of the globalization debate, the following issue still needs to be considered, that is, whether the problems in developing countries are in fact caused by increasing integration into the global economy. As globalization creates losers as well as winners in the short run, there is bound to be a growing [44] (1. diligence 2. divergence 3. convergence) among national average incomes. But, overall, according to a number of recent statistics, it is likely that economic inequality among the world’s citizens declined during the last decades of the 20th century.
As regards the second issue, the big challenge is poverty, and the surest route to sustained poverty [45] (1. situation 2. reduction 3. problem) is economic growth. Growth requires good economic policies. The evidence strongly supports the conclusion that growth requires a policy framework that prominently includes an orientation toward integration into the global economy. The bulk of evidence shows that the most spectacular growth stories all involve rapid increases in both exports and imports. Almost all of the outstanding cases — Singapore, Malaysia, China, India since the early 1980’s — involve gradual [46] (1. spreading out 2. opening up 3. breaking down) of domestic markets to imports and foreign investment. The success of this kind of outward oriented policies should persuade us that openness to the global economy is a necessary, though not [47](1. controllable 2. ideal 3. sufficient), condition for sustained growth. There is no way of [48] (1. lifting 2. counting 3. increasing) the populations of poor countries out of poverty without sustained growth. The overall challenge to economic globalization is to make the global system deliver economic growth more consistently and more equitably, as the best way to further reduce global poverty and inequality.
In thinking about the globalization debate, I am sometimes tempted to conclude that the debate is [49] (1.inclusiveluy 2. vaguely 3. mainly) a matter of temperament — between those who see the glass as half full versus those who see it as half empty; or those on the inside who are in a position to [50] (1. reduce 2. confirm 3. influence) policy directly and those who, for whatever reason, are outside critics. But then I reflect that the debate will affect economic policies in both developed and developing countries, and I realize again its critical importance for the economic future of countries in the world.
Finally, the world and the economic system we live in are highly imperfect. There is much that needs to be done to make them work better. But as we do that, we should maintain a perspective that reflects what Winston Churchill said of democracy. The pro-market, pro-globalization approach is the worst economic policy, except for all the others that have been tried.
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