Wednesday, September 28, 2016

Peak Globalization

In my book Garden Earth (2012) I write that there are signs that the pace of globalization is slowing and possibly will reverse. 
The proportion of trade of the GDP is perhaps one of the most straight-forward indicators to look at. 
The WTO reports, that global trade has grown 1.5 times faster than gross domestic product over the long term, and twice as fast when globalization picked up in the 1990s. This year trade will grow only 80 percent as fast as the global economy, the first reversal of globalization since 2001 and only the second since 1982. The WTO sees this as a problem. 

Even if I were a strong supporter in globalization (which I am not) I would find it hard to argue for why trade should take an ever increasing share of the GDP. Where is the limit? Why is it better that trade is half the GDP than 25%?
Other indicators of that we might have reached Peak Globalization are:
  • Fear of global terrorism.
  • Fear of global epidemics (SARS, Zika, Ebola).
  • Brexit.
  • Both main US President candidates oppose the TPP.
  • Popular protests against the TTIP and CETA in Europe.
  • Climate change and awareness that flying is a major culprit for climate change.
  • Financial crisis and how it spread throughout the world.
  • Fear for security and food supplies.
  • Stagnant wages in most early developed countries. 
  • Rise of nationalist parties.
  • Migration crisis (rather the political crisis around migration).
  • Local food movement.
As with globalization itself the reversal of globalization comes with both good and bad things, you have to take the bitter with the sweet.
In Garden Earth I wrote: 

I am not against globalization. I believe that free movement of goods—and of people—are human rights. I believe that, in total, globalization has more benefits than drawbacks, but then I speak about globalization as more than a narrow economic thing. I think of the globalization of human rights, of the Internet, of the fact that dictators all over the world can’t get away so easily any more. I think of globalization as a force undermining the authority of the nation-state and nationalism. So while there are, in general, drawbacks and benefits of globalization, depending on how the rules are bent globalization can be good for one and bad for another. Globalization at present has been driven or, rather, hijacked as a capitalist project, opening up all aspects of human life to exploitation. As such, it deserves the protests.
I am less positive today in the sense that the benefits of globalization seems smaller and the drawbacks bigger.


  1. There is an on-going discussion within those covering the shipping industry regarding the need to decrease the record-carrying ship sizes and superfluous port expansions, which likely will make a dent on globalization (as shipping goods from one end of the planet to the other is held with greatest esteem). For example articles by Olaf Merk:

    Something rarely mentioned is the fact that the mega port expansions in Northern Europe – just to pick one area – took place after the 2008 financial and economic crisis: Rotterdam’s Maasvlakte 2, JadeWeser Port, London Gateway, amongst others. In Sweden there are ports that have expaned in last years (or are going to) such as Malmo (Norra Hamnen), Stockholm-Nynashamn-Norvik, Trelleborg, Ystad among others.

    This has been seen and presented to legislators and public as some sort of an Keynesian effort to counter-invest in infrastructure in recession (who would be against a bigger, better port?), but one wonders if these investments really create anything new or sustainable at all. They seem to ignore that competiting ports and shipping are investing in these great-size solutions too, creating over-capacity and price wars which will sink profits. The new megaharbour where 18 000 containers are unloaded from each ship doesn't need much of a work force if loading and unloading must go on 24/h and demands automation, or you get a temporarily large-workforce who never become specialists as they can't be hired for a longer time in port and most likely be part of the precariat, not someone you'd offer decent wages and benefits to as an employer. This would be the case outside of the super stars of ports (Antwerp, perhaps? Or Rotterdam? Shenzhen in China?)

    The result is capital destruction. Ships are not used, ports are not used, so goodbye to healthy return on investment. The opportunity costs related to the port bubble are possibly bigger than for ships, as they do not only relate to port infrastructure assets, but also to space, one of the scarcest goods in cities – still the places where most ports are located (though I wonder about Stockholm-Norvik, located as it is 50 kms south of Stockholm on a peninsula that lacks rail and road access to mainland Sweden to the west. The current rail is a commuter rail line with frequent stops which is bound to cause conflicts with train operators for time slots unless there are expansions and though the road 73 is motorway nowadays the road passes through some built-up areas in Stockholm that will most certainly lead to conflicts in future when authorities have to weigh in trucks carrying goods to the shops with disturbed neighbours and missing opportunities for city planners to build new houses). Ships are layed up – so put aside for the time being – or scrapped. The port equivalent to laying up is empty terminals; and its version of scrapping is waterfront development. Whatever the form, whatever the specifics, we get what was sowed: death from overcapacity.

    I think we're near peak container harbour (not at least because tax payers pay for hinterland connections (road, rail, water pipes, electrical connections) to the ports as well as the port works (dredging, quay stabilization). This isn't result of some free enterprise at all. Shipping companies get off for nil, but they in turn are burdened by cost-cutting pressures and wouldn't stand to pay any reasonable share of these projects, as much as they survive on state subsidies and externalizations of their pollution).

  2. Karl, thanks for those insights from the realm of ports and containers. Very valuable input which adds to the view that we might have reached a peak in trade.