Can Globalisation Benefit All?
The current age of globalisation – deeper integration of economic activity across national borders – began after the Bretton Woods era. For most part, it has supported rising prosperity, particularly in large low-income countries. China’s Premier Xi recently emerged as its unlikely champion. As long as prosperity is broadly aligned with other social objectives, such as inclusion, fairness and environmental sustainability, then globalisation is likely to be supported. However, several recent surveys of public opinion have indicated doubts about its efficacy. Western politicians have responded with increasingly nativist agendas, implying globalisation may have gone too far.
Macroeconomists typically approach globalisation in terms of greater market access. More goods and services are available for consumption, budget constraints are loosened by the ability to borrow and lend overseas and access to external asset markets allows greater diversification of risk. Yet the domain of economic policy is primarily the nation state; fiscal and monetary policies operate mostly through the domestic economy. At this simple level, globalisation can be shown to lead to higher standards of living. Economists also have specialised models for specific markets, which can raise challenges to this macroeconomic approach.
Globalization was the subject of our first Pre-Discovery Meeting, held at the National Institute of Economic and Social Research on 2 June 2017.
From our Pre-Discovery Meeting, the following questions emerged as particularly interesting. These points will act as the starting point for the Globalisation Discovery Meeting on 27 September, in Manchester, when we will seek feedback from members of the public. Other research questions may be developed as a result of these discussions.
Economists have long argued the case that trade is beneficial. But the gains from trade do not necessarily benefit all without a complementary domestic policy. Why should changes in relative prices from trade as opposed to, for example, technology justify a policy intervention and what would constitute fair and effective compensation? Is financial compensation enough or is something else required? 2. Macroeconomics does not fully integrate international trade and international finance theories. Can the distributional and spatial consequences of trade be incorporated into standard macroeconomic models? Does global finance intensify rather than diminish risk, and is the comovement of capital markets preventing countries from operating an independent monetary policy? 3. Macroeconomics takes its primary objective to be the nation state. Is this appropriate in a globalised economy and what might be the welfare benefits? We also look for research which examines the legitimacy and political economy of the Nation State in the world economy when the domain of domestic policy making is diminished.
Please find the full Background Note here.
Please find the Summary Note here.