Is globalization the norm today? In his new book, Global Capitalism: Its Fall and Rise in the Twentieth Century, Harvard University Professor Jeffry A. Frieden explores the evolution of globalization since the 1880s, arguing that globalization is a choice formed by politics and policy decisions, rather than a fact of life. At a March 29 Book Forum sponsored by the IMF and moderated by Steven Pearlstein (Washington Post), panelists Harold James (Princeton University) and Virginia Haufler (University of Maryland) joined Frieden for a discussion about globalization.
For Frieden, the problem of globalization during the 20th century was whether to restore international economic integration and, if so, how to do it. The issue today, as it was circa 1900, is “how to build and sustain both international and domestic political and economic orders that allow societies to reap the fruits of international integration while maintaining the commitment to social cohesion and social insurance that is necessary to cement support for a globalized international economy.”
We’ve been here before
Before 1914, there were large movements of goods, capital, and information. In some ways, Frieden said, the world economy was more tightly integrated because of the gold standard. Tensions were similar, as industrial countries worried about the flow of cheap products from developing countries and feared the loss of national identity, the outbreak of ethnic conflict, and antiglobalization sentiment. Governments saw international economic commitments as a priority and were willing to allow restructuring of domestic economies for the greater global good, convinced that the long-run benefits far outweighed any short-run costs.
So what happened? The commitment to international economic integration became less feasible between the wars, Frieden said, because of significant economic and political changes resulting from the modernization of industry, the organization of labor, and “an ever-increasing march of countries committed to nationalism and self-sufficiency and increasingly hostile to the idea of building an internationally integrated economy.” Although globalization provided enormous benefits, it also imposed severe costs on people, firms, countries, and regions. History showed, he said, that “ignoring the discontent of those harmed by the international economy . . . could quickly and stunningly lead to a reversal of fortune on the part of those who benefited from it.”
Globalization and its discontents
Globalization produces discontents that need to be managed effectively, Harold James said. He described two mutually exclusive ways of looking at today’s world that also existed before 1914 and during 1919-39—one that accepts an international order with common rules and standards, called “globalization”; and one that sees the world in terms of arbitrariness and empires. “In the world of empire, rules are imposed by a hegemon” to reflect its interests, and “those who have the rules imposed on them do not feel those rules are morally binding or legitimate.” According to James, a search of newspapers revealed that, since 2000, references to globalization have declined, whereas references to empire or imperialism have increased. This indicates, he said, that “the world thinks more of empire now than in terms of global rules,” leading people to resist globalization because “there is nothing good about securing global goods on an international level.” James welcomed the timing of Frieden’s book because, he warned, the more people who hold the second view, the “greater the likelihood the world will become more dangerous.”
Virginia Haufler agreed that “market integration needs to be embedded in a society” to compensate those negatively affected, but felt that Frieden did not present the available choices boldly enough. Strengthening global governance and connecting free trade to social issues like the environment and human rights are possibilities, she suggested. Haufler championed measures like corporate social responsibility and private-public partnerships to strengthen support for globalization. A greater understanding of its costs and benefits is required, she said, to better gauge the impact of such initiatives on those adversely affected by it.
IMF External Relations Department