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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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