The Return of Global Asymmetries

Abstract

Abstract `The last three decades have witnessed the reversal of the ‘great divergence’ between the centre and the periphery that characterized the nineteenth century and most of the twentieth. The promise of this ‘great convergence’ was a much more symmetric world where prosperity and power would be much more equally distributed, where nations would abide by a rules-based international order and where effective global institutions would help ensure an adequate provision of global public goods. Economic analysis helped foresee how such a world would function. In contrast to those in vogue in the early post-war decades, the workhorse models for international trade, money, and finance of the late twentieth century all emphasized symmetry in international relations. Countries could be big or small, developed or poor, capital exporters or importers, but the same mechanisms and rules applied to them. It was only a matter of time before they would converge, or possibly trade places. More recent models, however, have started to challenge this benign view. Asymmetries between centre and periphery do matter in the network-based models of trade, investment, and finance that have been developed to account for emerging patterns of interaction. This is even truer of data flows and the networks that structure them. Meanwhile, the centrality of the dominant global currency and the asymmetries that it entails in exchange-rate adjustment are being rediscovered. Today’s world is much more asymmetric than we thought. This change of perspectives has significant implications for international economic relations and for global governance.