WHAT IN THE WORLD IS GOING ON?

CHAPTER OUTLINE

The end of the world as we knew it? 1
Conflicting perspectives on 'globalization' 4
'Hyper-globalists' to the right and to the left 4
'Sceptical internationalists' 5
Grounding 'globalization': geography really does matter 6

THE END OF THE WORLD AS WE KNEW IT?

During the past 50 years the world economy has been punctuated by a series of crises. Many of these turned out to be quite limited and short-lived in their impact, despite fears expressed at the time. Some, however, notably the oil-related recessions of 1973–9 and the East Asian financial collapse of 1997–8, were very large indeed, although neither of them came close to matching the deep world depression of the 1930s. And recovery eventually occurred. Meanwhile, during the last three decades of the twentieth century the globalization of the world economy developed and intensified in ways that were qualitatively very different from those of earlier periods. In the process, many of the things we used in our daily lives became derived from an increasingly complex geography of production, distribution and consumption, whose geographical scale became vastly more extensive and whose choreography became increasingly intricate. Most products, indeed, developed such a complex geography – with parts being made in different countries and then assembled somewhere else – that labels of origin began to lose their meaning. Overall, such globalization increasingly came to be seen by many as the 'natural order': an inevitable and inexorable process of increasing geographical spread and increasing functional integration between economic activities (Figure 1.1).

And then ...

On 15 September 2008, the fourth largest US investment bank, Lehman Brothers, collapsed. It was an unprecedented event, heralding the biggest global economic crisis since the 1930s. And this crisis is still ongoing. The repercussions of the financial collapse that began with the disaster of the US 'sub-prime' mortgage market continue to be felt throughout the world, although to widely different degrees, as we will see throughout this book. Since 2008, for example, economic growth rates (production, trade, investment) have plummeted in most of the developed world, notably in parts of Europe but also in North America. In all these cases, job losses have been huge, and the fall in incomes of the majority of the population has been so serious as to place many more people and households on the margins of survival. At the same time, the incomes and wealth of the top 1 per cent have continued to increase even more astronomically, creating enormous social tensions and an upsurge of popular resistance in many countries. The most obvious recent example is the Occupy movement, which first emerged in late 2011 as 'Occupy Wall Street', using 'We are the 99%' as its rallying cry. In comparison, some developing countries – the so-called 'emerging markets' – have experienced relatively high growth rates, leading some observers to talk of the emergence of a 'two-speed world economy'. But that broad-brush picture, though valid in some respects, masks continuing and deep-seated issues of poverty and deprivation throughout the world. The notion that developing countries can somehow 'decouple' from the effects of financial crisis in developed countries is demonstrably far from the truth.

To individual citizens, wherever they live, the most obvious foci of concern are those directly affecting their daily activities: making a living, acquiring the necessities of life, providing the means for their children to sustain their future. In the industrialized countries, there is fear – very much intensified by the current financial crisis – that the dual (and connected forces) of technological change and global shifts in the location of economic activities are adversely transforming employment prospects. The continuing waves of concern about the outsourcing and offshoring of jobs, for example in the IT service industries (notably, though not exclusively, to India), or the more general fear that manufacturing jobs are being sucked into a newly emergent China or into other emerging economies, suddenly growing at breakneck speed, are only the most obvious examples of such fears. Such fears are often exacerbated by concerns about immigration, especially among lower-skilled workers who perceive, correctly or incorrectly, a double squeeze of jobs moving abroad and those at home being taken by immigrants on low wages. But the problems of the industrialized countries pale into insignificance when set against those of the very poorest countries. The development gap persists and, indeed, continues to widen alarmingly.

Hence, the world continues to struggle to cope with the economic, social and political fallout of the unravelling of the global financial system which occurred with such sudden, and largely unanticipated, force in 2007–8. The spectacular demise of Lehman was only one of many casualties. But its collapse was highly symbolic. Lehman was one of those institutions that epitomized the neo-liberal, free market ideology (sometimes known as the 'Washington Consensus') that had dominated the global economy for the previous half century. This was the ideology of so-called free and efficient markets: that the market knew best and that all hindrances to its efficient operation – especially by the state – were undesirable. But in 2008, all this was suddenly thrown into question. As one financial institution after another foundered, as governments took on the role of fire-fighters, and as several banks became, in effect, nationalized, the entire market-driven...