Abstract
The dynamic process of economic globalization and deglobalization has been occurring in “waves” over the past 250 years. Diffusion models reveal how globalization policies occupy the policy-centre stage when the global economy is booming and is cast on the back-burner when the global economy nose-dives into a slump. According to the diffusion models, when the global economy is booming the nodes that establish crucial linkages in the economy exceed the social optimum generating negative externalities thereby eroding social welfare in such a context policy intervention is justified to reduce the linkages that facilitate the spread of negative shocks or contagion that reduce the capacity for risk- sharing. The globalization-deglobalization policy conundrum also resurfaces in relation to trade flows, cross-border capital mobility, current account sustainability and technology diffusion. The latter has exacerbate the “digital divide” that has accompanied the revolutionary changes in information and communication technology (ICT) revolution by overcoming the “tyranny of distance”. The recurrent global financial crises and speculative attacks on the currency peg have ignited the debate for reshaping the international financial architecture in order to reduce the vulnerability of the domestic economy to the disruptive effects of the global financial crises.
Highlights
The process of economic globalization that has occurred in “waves” over the past 250 year reveals the stylised fact that policies that promote globalization occupy the policy centre stage when the global economy is booming and gets cast on to the backburner when the global economy nose dives into a slump
The paper analyses mainly the dynamic processes of economic globalization whilst deliberately side-tracking the analysis of non-economic issues of globalization linked to cultural homogenization, climate change, human rights abuse and the war against terrorism based on the author’s own perceptions by drawing on other studies on the subject by O’Rourke and Williamson [1] and Dollar [2], five main waves of globalization and deglobalization have been identified in this paper
In this paper we have identified five waves of globalization and deglobalization of different duration, each propelled by its own major engine of economic force
Summary
The process of economic globalization that has occurred in “waves” over the past 250 year reveals the stylised fact that policies that promote globalization occupy the policy centre stage when the global economy is booming and gets cast on to the backburner when the global economy nose dives into a slump. The central aim of this paper is to explain this policy conundrum of globalization and deglobalization as the global economy flips from a boom to a slump. Conventional models shed light on the causes that underpin the policy conundrum and provide a rationale for the case for reshaping the global financial architecture aimed at reducing the vulnerability of the global economy to recurrent crises. The rest of the paper is structured as follows: Section 2 presents a critical review of the on-going heated debate between the proponents of globalization and deglobalization.
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