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Faultlines: The End of Globalization?

The world is somewhere in between full globalization and mulitipolarity now and an end of globalization does not seem likely. However, there is a growing narrative that the global economy is facing the risky combination of low growth and high debt, while the rise of new Asian powers is challenging historically dominant economic and political nations.

The Global Attitudes survey (2015) by the Pew Research Center (PRC), highlights that the rise of China is being watched with a growing anxiety. In the same time, the rebalanc­ing of America's military commitment and strategy towards Asia is regarded positively amongst most Asian countries. There is also a shift in a European point of view. The research shows that a median of 41 percent of Europeans consider China to be the leading economic power. The USA follows closely (median of 39 percent). On a more optimistic note the global financial crisis and ter­rorist attacks in recent years have arguably led to greater coopera­tion between nations. Still, there are risks to global­ization and this article outlines them.

Faultlines – Internet Freedom

Because of the internet development over the past two decades, information exchange has become a key driver of social and technological globalization. But internet security concerns are a growing threat and sovereign governments (like Chinese or Iranian) are trying to 'manage internet freedom'. In developed countries, however, the internet politics is not that strict.

Internet Freedom

Internet Freedom

Source: Freedom House, Credit Suisse

Religious Demographics

Many conflicts between and within states, in recent years, have involved religion. Christianity has the most followers globally, with Islam close behind, but with many variants in both the religions. Hinduism and Buddhism are localized to Asia while Islam has strong roots in the Middle East and North Africa. The borders between the areas of different religious influence and the expected evolution of those will have a big influence on how globalization evolves. A recent study by the PRC predicts that Islam will register the high­est growth rate by 2050 (73 percent) and will be almost on a par with Christianity as the world’s most followed religion.

Linguistic Demographics

Global linguistic demographics brings into perspective the status of Eng­lish as the de-facto lingua franca. Although Spanish and French are still the official languages in many countries the advent of English finds its roots in the British Empire and the emer­gence of the USA as a superpower in the 20th century.

Climate

Unsurprisingly, increasing global trade correlates closely with a rise in global mean temperature. Although the greenhouse gas (GHG) emissions intensity of exports has fallen sub­stantially for all major economies since 1997, net GHG emissions have nevertheless continued to increase – par­ticularly for the USA, China and India.

Despite efforts to control the damage, there is still much to be done. According to a study by a group of leading climatologists (Meinhausen et al 2006), with emissions equaling 1000 gigatons of carbon dioxide (GT), the probability of global temperatures increas­ing beyond 2 degree levels by 2050 would be limited to 25 percent. However, the most recent data published by Carbon Tracker Initiative, a London think tank, suggest that as of 2011 about 560 GT of this global carbon budget had already been exhausted in the first decade of this century.

How big is the threat to the global economy from climate change? There has been a visible acceleration in extreme weather events (thunderstorms, floods, droughts, heat and cold waves) since the mid-90s. Losses due to those events vary by the intensity of natural disasters. However, since the mid-2000s, economic damages due to extreme weather events have been more severe.

Central Government Debt

5-year averages of central government debt for major country poles (till 2012), show the usual suspects like debt-ridden Greece on the wrong end of the spectrum as opposed to Scandina­vian countries which are relatively debt-free.

Military Strength Indicator

The United States is superior in conventional war capabilities compared to its close rivals both when it comes to fleet and the budget. In today’s nuclear era, conventional forces are not the only indicator of military strength. Russia and the United States account for more than 90 percent of global inventories of nuclear weap­ons according to data provided by Stockholm International Peace Research Institute’s Yearbook 2015.

End of Globalization Risk Analysis

The debate about the end of globalization can be both chilling and entertaining, though for the moment it seems that we are far from an end of globalization scenario. The infographics helps to illustrate the progress of globalization in the midst of geopolitical risks. It takes a broad measure of globalization (measured on the y-axis) and adds a measure of multipolarity (size of bubble) over time (measured on the x-axis), giving us an idea of where we are today.

The measure for globalization is a weighted sum of trade, financial flows, technological advancement, technological outreach (measured by the share of high-tech exports in manufactured goods exports) and international migration stock. Imposing greater barriers to trade, higher debt bur­den and/or military expansion would result in a weakening of globalization. Such threats are color-coded.

We encourage all the interested in the topic to read a detailed 'End of Globalization Scorecard'. It comprises a range of variables – a trend slowing in economic growth and trade with the added possibility of a macro shock (from indebtedness, inequality, immigration), a rise in trade pro­tectionism, wealth inequality or a reversal in transitions to democracy.

Globalization Timeline

Globalization Timeline


Yellow 
bubbles indicate hurdles to globalization in the form of localized armed conflicts, growing debt (as a percent of GDP) and/or marginal increases in trade barriers.
Orange stands for more intense conflicts, heavy debt burden and/or constraining trade barriers.
Red stands for major threat to globalization from severe military expansion, unsustainable debt positions and/or barriers to trade.

Source: Freedom House, Credit Suisse