Globalization holds tremendous promise to
improve human welfare but can also cause conflicts
and crises as witnessed during 2007–09.
How will competition for resources, employment,
and growth shape economic policies among developed
nations as they attempt to maintain productivity
growth, social protections, and extensive
political and cultural freedoms?
The processes associated with economic globalization—
such as free trade, business outsourcing,
capital mobility, and so on—generate considerable
public apprehension because of the
economic uncertainty they portend. But crossnational
production supply chains have now
become so extensive that the recession-induced
decline in global trade is causing considerable economic
distress in developed countries.
In contrast, emerging countries—especially
Brazil, Russia, India, China, and South Korea—have
experienced only modest declines in economic
growth. As those nations continue to advance economically
and output growth in developed nations
recovers, the process of globalization will resume.
But with the Doha round of multilateral trade
negotiations stalled, bilateral and regional trade
agreements may come to dominate that process.
Regardless of how globalization progresses, policymakers
in developed nations remain concerned
about whether domestic output and employment
growth can recover as rapidly as after recessions
past. Those concerns are magnified by prospective
population aging in developed countries.
Intensifying foreign competition and employment
uncertainty could provoke calls by industry
lobbyists and displaced workers for additional
government protections. And worker migration
toward developed nations will continue, spurred
by wage differentials between developed and
developing countries. Younger immigrants may
eventually help developed nations to ease the economic
challenge posed by population aging, but
immigrants are often viewed as competing for
jobs, adding to public welfare costs, and reducing
social cohesion. This paper offers policy recommendations
for developed nations to reduce
globalization’s negative effects and, indeed, harness
it for solving aging-related economic challenges.
Globalization holds tremendous promise to
improve human welfare but can also cause conflicts
and crises as witnessed during 2007–09.
How will competition for resources, employment,
and growth shape economic policies among developed
nations as they attempt to maintain productivity
growth, social protections, and extensive
political and cultural freedoms?
The processes associated with economic globalization—
such as free trade, business outsourcing,
capital mobility, and so on—generate considerable
public apprehension because of the
economic uncertainty they portend. But crossnational
production supply chains have now
become so extensive that the recession-induced
decline in global trade is causing considerable economic
distress in developed countries.
In contrast, emerging countries—especially
Brazil, Russia, India, China, and South Korea—have
experienced only modest declines in economic
growth. As those nations continue to advance economically
and output growth in developed nations
recovers, the process of globalization will resume.
But with the Doha round of multilateral trade
negotiations stalled, bilateral and regional trade
agreements may come to dominate that process.
Regardless of how globalization progresses, policymakers
in developed nations remain concerned
about whether domestic output and employment
growth can recover as rapidly as after recessions
past. Those concerns are magnified by prospective
population aging in developed countries.
Intensifying foreign competition and employment
uncertainty could provoke calls by industry
lobbyists and displaced workers for additional
government protections. And worker migration
toward developed nations will continue, spurred
by wage differentials between developed and
developing countries. Younger immigrants may
eventually help developed nations to ease the economic
challenge posed by population aging, but
immigrants are often viewed as competing for
jobs, adding to public welfare costs, and reducing
social cohesion. This paper offers policy recommendations
for developed nations to reduce
globalization’s negative effects and, indeed, harness
it for solving aging-related economic challenges.
Jagadeesh Gokhale is senior fellow at the Cato Institute. His research focuses on entitlement reform, labor productivity and compensation, U.S. fiscal policy, and the impact of fiscal policy on future generations. This paper is a longer version of his article “Globalization, Economic Crisis, and the New 21st Century World Economic Order,” in A New Conservative Agenda for the 21st Century (forthcoming).