GLOBALIZATION REALITY

Nov 10, 2018 Editorial

U.S President Ronald Reagan and Britain’s Prime Minister Margaret Thatcher who came to office almost 40 years ago had a profound effect on the world’s political economy. Their intent was to defeat communism and the Soviet Union influence, and strengthen democracy, capitalism and free trade as the pillars of a new world order to secure global peace and prosperity.
The collapse of communism in the Soviet Union and the rise of globalization paved the way for the Reagan/Thatcher vision of the new world order.
Globalization was airborne. Institutions like the World Bank, the International Monetary Fund and the World Trade Organization were restructured to support this new world design, which promised prosperity to all.
However, this promise was not realized. During the last 20 years, the world economy grew at an annual average rate of 2.9 percent, which was marginally better than the average of 2.7 percent during the preceding 20 years.
Globalization has also shifted the distribution and share of world growth. Twenty years ago, the G7 countries—United States, Japan, Germany, Britain, France, Italy and Canada—accounted for 58 percent of the world’s GDP. Today, the figure has fallen to 46 percent. The emerging economies of Brazil, Russia, India, China, South Korea, Singapore, Taiwan and Hong Kong are the main beneficiaries.
Their global output increased from 18 percent to 29 percent and their collective average annual growth rate was 5.5 percent compared to the global average of 2.9 percent. The increase was due mainly to China’s GDP which rose from 3.9 percent to 12.7 percent with annual growth of about eight percent. The others recorded a modest increase in GDP from 13.9 percent to 16.6 percent and average growth of 3.3 percent.
However, the developing countries have not fared well. Africa, with 54 countries and a population of more than one billion people saw its GDP rose from 1.6 percent to 2.2 percent. Latin America’s GDP declined from 8.1 percent to 7.5 percent and the Caribbean countries GDP reduced from 0.095 percent to 0.081 percent. Jamaica’s decline was even steeper from 0.027 percent to 0.017 percent. This is only part of the globalization story.
The much anticipated robust growth in world trade has not materialized. World Bank data indicate that the average annual growth in the trade of goods and services over the last 20 years, adjusted for inflation, was 4.7 percent compared with 5.5 percent for the preceding 20 years.
Shared prosperity which was the main selling point for globalization has not panned out. Inequality among and within countries has worsened.
According to the IMF, more than half of the countries of the world have seen increased income inequality, with it being most acute in Latin America, Africa and the Caribbean. Country data on income distribution is imprecise, but the data available suggest that 30 percent of the world’s population control 97 percent of its aggregate wealth.
This did not begin with globalization, but has been exacerbated by it.
The lack of measurable positive results from globalization and the growing economic disparities among countries have revealed some of the flaws of globalization that should be fixed to prevent countries to return to a jungle where interdependence is discarded and the strong survive at the expense of the weak.
While globalization is not inherently bad for the Caribbean, it is not working the way it was promised to work for the region. Its biggest dilemma is the growing suspicion that it is an elite project that primarily benefits the rich countries.
The Caribbean may not be front and centre of globalization, but instead of being a bystander, it should work steadfastly to establish a macroeconomic framework to become a bigger player in the global economy.

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