The Great Convergence: Information Technology and the New Globalization
The Emergence of Globalism: Visions of World Order in Britain and the United States, 1939-1950
Princeton University Press, 2017, 352 pp., $37.50
Globalization has become unpopular. Celebrated as the vehicle for lifting hundreds of millions of people out of poverty and offering consumers a wider selection of products at lower prices, it has, seemingly overnight, provoked a formidable political backlash, which has emerged as a threat to the stability of Western democracies, like an iceberg that they are unknowingly approaching. Populist leaders, movements, and political parties, all strongly opposed to trade, immigration, and the elites deemed responsible for foisting them on vulnerable publics, have appeared on both sides of the Atlantic. Donald Trump is the most conspicuous but by no means the only example.
The political reaction against the cross-border movement of goods, services, money, and people has more than one cause. Globalization has become a scapegoat for those angry at the long-term reduction in the West’s economic growth rate, which has its roots in the exhaustion, during the past century, of a series of remarkable, world-changing innovations.1 Populism responds as well to the globalization-induced disruption in economies, societies, private firms, and individual lives caused by the use of machines for jobs that humans were once well paid to do. Millions of jobs have been outsourced not only to India and China but also, in Thomas L. Friedman’s term, to the past. Disruptions also arise, according to Richard Baldwin, a Professor of International Economics at the Graduate Institute of International and Development Studies in Geneva, from a sea change in the process of global economic activity, which is the subject of his informative and provocative book, The Great Convergence.
Baldwin defines globalization as consisting of three kinds of cross-border flows: of goods, ideas, and people. Its history, he says, falls into two distinct eras. In the first, which he dates from 1820 to 1990, the cost of moving goods—mainly cloth and grain in the 19th century and a host of manufactured products in the 20th —plummeted because of the revolutions in the technologies of transportation. Steam-powered vessels replaced sailing ships on the oceans; the railroad and the automobile supplanted the horse-drawn wagon on land.
From these developments emerged several major features of the modern world. Both the value and the volume of trade soared, and as they did a great economic reversal took place. For centuries Asia had led the world in wealth and power. The Industrial Revolution—the harnessing of inanimate power for the first time on a large scale, which made possible, among many other things, the extraordinary advances in transportation—conferred that distinction on the previously backward region known as Europe. The Industrial Revolution did this because it began, for reasons historians still debate, in Europe, inaugurating there something without precedent in history: sustained economic growth. What Baldwin calls “the global North”—consisting of Europe, its North American offspring, and later the archipelago of Japan, the only non-Western country to master industrialization before the second half of the 20th century—was the great winner in globalization’s first era. These rising powers, led by Great Britain, built factories that, clustered in their growing cities, turned out the products they sold around the world, mainly in the North itself but also in the countries of the suddenly declining global South, such as China and India.
All this is a familiar story. What is less familiar, because it is more recent, is what Baldwin designates as globalization’s second, post-1990 era. In this period, the revolutions in information and communication technology have driven down the cost of what he defines as globalization’s second component, the cross-border movement of ideas. “The ability to send ideas down cables for almost nothing to almost anywhere,” he writes, “triggered a host of reformations in work practices, management practices, and relationships among firms and their suppliers and customers.” Together they made high-quality manufacturing easier in the South, which already enjoyed the competitive advantage of lower labor costs. As a result, a large chunk of global manufacturing migrated from the North to the South, much of it to China.
Of course, jobs have moved from richer to poorer countries for decades, but the plunging cost of conveying information over long distances, which is new, greatly accelerated this movement. With this migration of manufacturing, known as “offshoring,” economic growth in the South surged. Where the first globalization produced a sharp divergence in global wealth favoring the North, in the second era the gap narrowed, to the South’s economic benefit. Output, growth, wealth, and standards of living across the globe are now converging: hence the book’s title.
The second era of globalization has changed economic life in another way: It has fragmented production. In the past, a product generally emerged from a single factory. Component parts, if any, were made in the factory itself or somewhere nearby. Now component parts for a finished retail product come from all over the world, thanks to the new technologies of information and communication. “The telecom and Internet revolutions triggered a suite of information-management innovations that made it easier, cheaper, faster, and safer to coordinate separate complex activities spatially.” They “revolutionized people’s ability to manage multifaceted procedures across great distances.” Products now come not from single factories but from the combined efforts of many workplaces, which have come to be called, collectively, supply chains. (Baldwin calls them “value chains.”) These consist of multiple factories, offices, studios, and laboratories, often scattered around the world, the outputs of which are coordinated by information technology. As Baldwin notes, manufacturing is increasingly divided into three distinct stages: pre-fabrication, including innovation and design; fabrication, during which the product is assembled (this is China’s specialty); and post-fabrication, which involves marketing, distribution, and licensing.
The first and third stages tend to be considerably more lucrative than the second. This limits the economic gains that the Southern countries that specialize in assembly can expect to reap in the future, which explains the Chinese government’s commitment to mastering the tasks that come before and after the assembly of products. It also means that Western workers engaged in assembling products are doing far less well economically than their compatriots involved in the first and third stages of the production process.
Offshoring production has been particularly hard on industrial workers in the North, including in the United States; they are, in Baldwin’s vivid description, “competing with robots at home and Mexicans abroad.” It has fueled the 21st-century populist uprisings in Europe and North America. The low-skilled workers who have lost their jobs to machines or to their Southern counterparts, along with those who, with good reason, fear losing their jobs in the future make up a substantial part of the constituency for populism in the United States and Europe. They have voted for Brexit, for Trump, for Marine Le Pen in France, Geert Wilders in the Netherlands, and the Five Star movement in Italy. Fragmentation has also helped create that constituency by increasing insecurity and inequality, and therefore resentment at the elites whose policies are seen as having caused them.
The economic interests of the losers of globalization’s second, information-technology-driven era increasingly conflict with the economic interests—and cultural preferences—of those of their countrymen who have had more education and thus possess rarer and more valuable skills. The better educated have made gains, sometimes substantial ones, in globalization’s second era. Politics in the Western democracies have come to revolve around the clash between the losers and winners from the seismic economic changes that stem, in Baldwin’s analysis, from the falling costs of conveying information.
Baldwin’s depiction of globalization as a two-stage, technology-determined historical process is oversimplified—abstracted from reality—and deliberately so. The author is presenting a model to illustrate a major dynamic of the global economy, not telling a story designed to account for everything that has happened in the past two hundred years. He writes as an economist, not an historian, and in the tradition of the best writing about economic subjects The Great Convergence comes equipped with a large number of helpful charts, graphs, and tables. His approach gives short shrift, as he recognizes, to the other great determinant of globalization besides technology: politics.
Politics is, however, central to all economic activity. A market of any scope, whether local, national, or global, requires a secure political framework to function effectively.2 In the three decades between 1914 and 1945, politics overrode technology: Cross-border flows of all kinds contracted rather than expanded, for political reasons. Politics gave the world two great wars, from 1914 to 1918 and 1939 to 1945, during which globalization not only shrank but also changed in content: The people moving across borders were not migrants or traveling businessmen but refugees, often fleeing for their lives, and soldiers, usually invading other countries. In between the wars came the Great Depression, whose origins lay in economics but that further reduced international flows because of the political responses to it, in particular the erection of barriers to trade.
The Depression affected economies throughout the world; both wars, too, were waged on a global scale. World War II in particular inspired ideas for reordering the world to prevent the recurrence of the three calamities that had befallen it. These ideas are the subject of The Emergence of Globalism. They included proposals, in the words of Or Rosenboim, a research fellow in politics at Queens’ College, Cambridge University, for “new forms of political associations beyond the state: regional and world federations, religious networks, transnational liberal communities, functional agencies, and constitutional unions.” The proposals with which the book deals were expressed in the writings, between 1940 and 1950, of two dozen “public intellectuals,” all of them European or American. Almost all are now more or less forgotten; a few, notably the Frenchman Raymond Aron, deserve to be remembered.
Rosenboim’s selected writers addressed political subjects because it was politics, above all in the form of the ideologies that led to war, that dominated their era. Most of them did not go into the details of reconstructing the global economic order. None foresaw that the postwar global economy, at least in the West, would operate successfully by reviving the political conditions under which the pre-1914 globalization had flourished: a political framework provided by a single country, with the United States filling the role after 1945 that Great Britain and its empire had played before World War I.
Rosenboim ends her account in 1950 because by then the onset of the Cold War had put her chosen writers out of the business of imagining a new, better, less divided, less conflict-filled global order. The political, economic, and military division between the Western democracies and the Communist countries that marked the next four decades of world history made that impossible.
Here the two very different books under review converge, for in his final chapter Baldwin offers a speculative account of the future of the global economy, just as the authors with whom The Emergence of Globalism is concerned supplied visions of a new global political order. The future that Baldwin envisions emerges logically from his three–part definition of globalization. The Industrial Revolution lowered the cost of transporting products; the digital revolution lowered the cost of transporting ideas; the next step is lowering the cost of transporting people. That has already happened, of course: the railroad, the steamship, and the jet aircraft gave rise to migration on a larger scale than ever before.
Now, however, technology is beginning to provide the tools for virtual migration, with people in one place performing tasks in other countries far away that used to require their physical presence. The combination of the digital revolution with advances in artificial intelligence and robotics raises the possibility, for example, of American physicians performing heart surgery in Kenya, or of women in Bangladesh cleaning hotel rooms in London by remote control.
To the extent that such things come to pass, the range of jobs affected, and the consequent insecurity of those who do them, will increase, perhaps exponentially so. In that case, the political impact, especially in the global North but in the South as well, might exceed in turmoil and anti-globalization energy what has taken place thus far in the Western democracies. Trump, Brexit, and Le Pen may turn out to be only the tip of a very large iceberg.