Hyper- Globalisation

About Hyper Globalisation

• Hyper Globalisation is the concept that believes that globalisation is happening and there is an emergence of a homogenous global culture.
• In a hyper-globalised world, countries produce things in which they have comparative advantage and import those others can make at lower opportunity cost.

• For example, Indonesia and Malaysia produce palm oil; and Ukraine and Russia produce sunflower oil.
• They have comparative advantages in the palm oil and sunflower oil. Therefore, Indonesia alone is the largest exporter of palm oil.

Difference between Globalization & Hyper-Globalisation

• International Monitory Fund defines Globalization as a means that world trade and financial markets are becoming more integrated.
• Hyper-globalisation is used to describe the dramatic increase in international trade witnessed for about a decade and a half from the early 1990s.
  • It led to an unprecedented movement of capital and of people.
• The main difference is rate of speed at which the process of globalisation takes place.
  • Period between 1870 and 1914 is the Golden Age of globalization in which world trade in terms of gross domestic product went from a 9 percent to 16 percent share.
  • In the current age of hyper-globalization, which includes both goods and services, the gross domestic product share has reached 33 percent.

Philosophical Base of Hyper-Globalisation

• French philosopher Montesquieu said that “commerce is a cure for the most destructive prejudices” and “peace is the natural effect of trade”.
  • Duox Commerce takes inspiration from Montesquieu, in propounding that trade makes men less prone to violence or irrational behaviour.
• Adam Smith in his Wealth of Nations: “If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage”.
• Norman Angell book titled ‘The Great Illusion in 1910’, argued that war in the modern era was an “economic impossibility”.
  • The sheer extent of financial and commercial interdependence between countries made conflict as futile for the conqueror as the conquered.
  • However, On 28 July 1914, World War-I broke out and ended the first “golden age” of globalisation between 1870 and 1914, when world trade in goods surged from 9% to 16% of GDP.
• Thomas L Friedman in 1996, wrote in The New York Times that “no two countries that both have a McDonald’s have ever fought a war against each other”.
  • Between 1990 and 2008, global trade in goods soared from 15.3% to 25.2% of world GDP. Inclusive of trade in services, the increase was from 18.8% to 31.7%.
  • Example: Russia supplying close to 40% of the European Union’s total natural gas consumption in 2021;
  • Apple having its biggest iPhone factory in China’s Zhengzhou (operated by a Taiwanese contract manufacturer Foxconn);
  • Taiwanese companies producing 65% of the world’s semiconductors;
  • India grabbing a 30% share of the global IT services market;
• Bangladesh exporting readymade garments valued at almost $43 billion last year.
• However, Hyperglobalization era formally ended in 2022, with:
  • Russian’s invasion of Ukraine.
  • Economic war: A geopolitical confrontation between two superpowers, viz, USA and China.

Reasons for Failure of Hyper-Globalisation

• Hyper-globalization exacerbated distributional problems in many economies. It extended tension between the gains from specialization and the gains from productive diversification.
  • Example: Gains from trade was the redistribution of income from its losers to its winners.
  • And as globalization deepened, redistribution from losers to winners grew ever larger relative to the net gains.
• Hyper-globalization undermined the accountability of public officials to their electorates.
• Neglect of Strategic Autonomy: The zero-sum logic of national security and geopolitical competition was antithetical to the positive-sum logic of international economic cooperation.
  • Example: With China’s rise as a geopolitical rival to the United States, and Russia’s invasion of Ukraine, strategic competition has reasserted itself over economics.
• Perception of Global Supremacy: USA tends to regard American predominance in global affairs as the natural state of affairs.
• Delayed Diagnosis: Hyper-globalization had been in retreat since the global financial crisis of 2007-08.
  • The share of trade in world GDP began to decline after 2007, as China’s export-to-GDP ratio plummeted by a remarkable 16 percentage points.
  • Populist politicians openly hostile to globalization became much more influential in the advanced economies.

Way Forward

• Yet, it is possible to envisage a good scenario whereby we achieve a better balance between the prerogatives of the nation-state and the requirements of an open economy.
  • Such a rebalancing might enable inclusive prosperity at home and peace and security abroad.
• Policymakers to mend the damage done to economies and societies by hyper-globalization, along with other market-first policies.
  • It will require reviving the spirit of the Bretton Woods era, when the global economy served domestic economic and social goals – full employment, prosperity, and equity.
  • Shared prosperity makes societies more secure and more likely to countenance openness to the world.
• Countries to not turn a legitimate quest for national security into aggression against others.
  • Russia may have had reasonable concerns about NATO enlargement, but its war in Ukraine is a completely disproportionate response that will likely leave Russia less secure and less prosperous in the long run.
• Acknowledging multi-polarity and abandoning the quest for global supremacy.

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