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the complete review - economics
Why Globalization Works
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A- : thorough discussion of globalization
See our review for fuller assessment.
||Robert J. Samuelson
||Martin Vander Weyer
|Wall St. Journal
An important book, well presented
From the Reviews:
- "(T)he fullest and most sophisticated treatment to date of the case for globalisation. All the topics he addresses -- the varieties of anti-globalist thinking; the forces driving and impeding economic integration; criticisms, valid and invalid, of the prevailing economic order -- have been addressed elsewhere, but never before with such depth of thinking, and in one place. Why Globalisation Works is a long, serious book, addressed to economists and to academics in neighbouring disciplines as much as to the intelligent general reader. But Mr Wolf writes in plain, taut English, without gimmicks or condescension. His book is the definitive treatment of the subject, and an absorbing read for anybody with an appetite for moderate intellectual exertion." - The Economist
- "(A) patient and persuasive refutation of many of the arguments most frequently marshaled by critics of trade liberalization.(...) Wolf's book offers a series of highly effective rejoinders to the main criticisms marshaled by opponents of globalization. For those of us concerned with one of the most far-reaching issues of our time, this elegant and passionate defense of trade liberalization is essential reading." - Arvind Panagariya, Foreign Affairs
- "Wolf will probably not convince the anti-capitalist campaigners but, if he gives useful intellectual support to market reformers in China and India, that is a bigger prize -- and a bigger market." - Hamish McRae, The Independent
- "It is a necessary and compelling read for all who want to understand the logic of unfolding events." - Robert Skidelsky, New Statesman
- "Unfortunately, both Bhagwati and Wolf virtually ignore the dangers of crippling political or economic instability. Otherwise, Bhagwati and Wolf are convincing." - Robert J. Samuelson, Newsweek
- "Why Globalization Works is not an easy read, but it is a meticulous, well-structured and persuasive contribution to one of the great issues of our times." - Martin Vander Weyer, The Spectator
Please note that these ratings solely represent the complete review's biased interpretation and subjective opinion of the actual reviews and do not claim to accurately reflect or represent the views of the reviewers.
Similarly the illustrative quotes chosen here are merely those the complete review subjectively believes represent the tenor and judgment of the review as a whole. We acknowledge (and remind and warn you) that they may, in fact, be entirely unrepresentative of the actual reviews by any other measure.
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The complete review's Review:
Martin Wolf is convinced that globalization "works", i.e. that it is sensible, practicable, and desirable.
He's convinced it's the way to go in part because it's so clear to him that the alternatives -- especially the planned economies of Soviet design, but also other isolationist efforts -- have failed miserably, and that policies designed to integrate "economic activities, via markets" (as he defines globalization) have clearly proven to be the best (read also: least bad) means of increasing the welfare of the largest number of people.
Wolf is also well aware that there are a lot of people and organisations opposed to globalization, and Why Globalization Works offers both detailed responses to the (many) main objections to globalization, as well as demonstrating its superiority -- historical as well as theoretical -- over all practical alternatives.
Wolf is a realist, and much of the book focusses on the possible rather than wishful thinking.
Airy socialist utopias might make for nice theory, for example, but he makes sure the reader remembers that the real-life examples led to very different (and largely highly undesirable) outcomes.
Incentives to push individuals, communities, societies, and nations in certain directions can come in a variety of forms, but all indications are that some form of free market tends to be more successful than the imposed five-year plan.
Wolf presents a wealth of empirical evidence in support of his argument, and his examination of the shifts over the past 150 or so years are particularly interesting.
As he repeatedly notes, there was a great trend towards trade liberalization and globalization at the end of the 19th century, and then a radical turn-around with World War I, which lasted until after World War II (and, in the case of the Soviet-dominated states, considerably longer).
The world economy was, in many respects, more integrated around 1900 than a century later.
The example of the 1920s and 30s also shows how relatively easily the pendulum can swing away from globalization -- and the catastrophic effects this can have.
Wolf considers the conditions that push the world towards globalization, including technological advances that have made communication and transportation over large distances both possible and ever less expensive -- though he also notes that distance will always remain a barrier to full integration: the labour market, for example, may be mobile, but it will never be that mobile.
Given the possibilities -- that it is now (at least theoretically) easier than ever before to benefit from economic activity elsewhere -- Wolf argues that it is foolish to keep and erect barriers that limit the ability to take advantage of these possibilities.
One of the mantras repeated throughout the text is Wolf's belief: "The problem today is not that there is too much globalization, but that there is far too little."
Many groups have strong vested interests in preserving economically limiting protectionist policies, from American steel workers who love their tariffs (and were handed them on a silver platter by George jr. Bush, despite the huge economic cost to the rest of the country, and their patent illegality under WTO rules) to well-subsidised farmers the world over.
The political power of these groups makes for tough choices, and has often made it difficult to implement sensible policies; indeed, the prevalence of trade barriers and similar protectionist policies, even in the countries that claim to fully embrace the ideals of free trade (such as the United States) is shocking.
Wolf notes that those who really suffer are in the poorest nations.
Also burdened by protectionism, and often the futile (if not outright absurd) dream of self-sufficiency, Wolf sees globalization as a great opportunity for these nations.
By and large his arguments, and the evidence he musters, are compelling.
He also does not ignore the significant correlative of good government and dependable legal protection (from clearly defined and enforceable property rights to an independent judiciary), a foundation without which any state policy likely won't benefit the population at large.
(The example of oil-rich but otherwise largely stagnant Nigeria, its great wealth repeatedly looted by its rulers, is among the most striking ones, though far too many other nations have been similarly run for the benefit of a small ruling class, rather than the general population.)
For Wolf economic liberalization goes hand in hand with political freedom (meaning specifically democratization, giving citizens greater choice (in all aspects of life) and a voice), and he sees the one as facilitating the other.
Nevertheless, his reliance on good government is one of the weaknesses of his case: highly and obviously desirable though it is, it is not always realistic.
While China -- arguably under the pressure of globalization -- appears to be moving towards more democratic norms, one can't help but think that Russia is again sliding the other way.
More significantly, resource-wealthy countries -- especially the oil-rich states -- can apparently afford to remain either entirely undemocratic (Saudi Arabia) or keep almost all the wealth for a few (Nigeria) or both, while the citizens of desperately poor countries such as the post-Soviet states in Central Asia and numerous sub-Saharan states are held hostage to leaders unlikely to be swayed by any benefits of globalization (beyond those that help to further enrich them, or stabilise their hold on power).
The case of Zimbabwe -- ostensibly (and, until recently, even fairly convincingly) democratic -- is a terrifying example of how quickly things can go wrong: culminating in Mugabe's land-nationalization (i.e. near total denial of property rights, with all the devastating consequences that has) and with the break-down of a reliable legal system (with the law itself -- as well as its enforcement -- almost entirely capricious now) it's a horrible example of how quickly things can turn bad.
Zimbabwe proves many of Wolf's points: Mugabe is doing pretty much the opposite of everything that Wolf recommends -- but the point is how easily Mugabe was able to do it.
For a realist (he constantly hammers the failed Soviet experiment) Wolf is reluctant to address the ease with which protectionism and even isolationism can be (and, in cases such as Zimbabwe, have been) embraced.
Wolf does address the example of Zimbabwe, and notes that once Mugabe runs out of money "he is likely to lose power".
Nevertheless, tyrants have shown remarkable staying power, even in desperately poor nations -- in North Korea, for example, another Wolf-favourite of how not to do things -- and in many nations (Saudi Arabia and other oil-rich states) their hold can be even firmer.
Much of Why Globalization Works is a close to point-by-point examination and rebuttal of anti-globalization claims, a useful and fairly comprehensive overview of all that supposedly speaks against globalization -- which becomes, given Wolf's answers and explanations, a solid argument in favour of globalization.
Wolf addresses most of the anti-globalization arguments, though there are few which can be taken very seriously; his frustration with some of what he has to deal with is evident ("This complaint is demented", he eventually protests about one particularly far-fetched claim).
Nevertheless, he shows remarkable patience and tries to respond to practically every conceivable argument.
At times, this becomes near-overwhelming, a litany of pointing out the often obvious, supported by real-life examples as well as the theoretical underpinnings.
His case, from environmental issues to how world poverty can be alleviated, is both compelling and relatively straightforward.
There are few issues on which the anti-globalization case has any merit whatsoever (outside the realm of those opposed to any and all increase in economic activity -- a defensible if bizarre position), but there are some which he acknowledges aren't entirely clear-cut, or require additional conditions which are not always easily met.
The most controversial, certainly, is his defense of capital account liberalization (something which even some strong defenders of globalization are wary of, including Jagdish Bhagwati (see his book In Defense of Globalization)) -- and Wolf is less than reassuring in his willingness to embrace it with the caveat that such liberalization should be carried "through in a carefully thought out and disciplined manner."
Given how few government policies are carried through in anywhere approaching such a manner that seems like an awfully big risk to take.
Wolf also does an excellent job of pointing out how misguided much anti-globalization sentiment is, especially when the welfare of the very poor is at stake.
Again and agin he shows that they stand the most to gain by globalization.
(Wolf seems to have more respect for the self-interested anti-globalization forces, economic actors who benefit from protectionism and thus throw their entire (often -- as in the case of farmers -- formidable) weight behind it.)
(One anti-globalization argument that's not addressed is the problem of the spread of disease.
Not a new one (think of the Spaniards importing venereal disease into the new world), it again has come at a huge cost in the form of AIDS, specifically in Africa, where globalization -- in the form of vastly increased intra-continental activity -- played an arguably decisive role in facilitating the spread of the disease.
Certainly, governmental actions could have prevented much of this disaster -- but globalization can leap ahead of policy (if, indeed, there even is any), and in a case such as this (or also environmental effects, which Wolf does address) this can be devastating.
Generally, increased economic activity generates enough wealth to outweigh the costs, but in the case of AIDS in Africa -- given the poor governmental responses -- it may actually prove to be a close call.
Wolf would surely argue that the solution lies with government action, but international reaction to the AIDS crisis shows how unresponsive governments can be to even the most obvious threat.)
The economic case for globalization is overwhelming, the obvious and easiest route to improve the human condition globally.
It is not without costs, many of which Wolf addresses (certain local effects, some of the perils of financial liberalization), though there are a few (global media, for example) that warrant more attention.
Wolf reminds readers that the world was already fairly integrated, a century ago, and that bad times came when countries (led by the US) moved away from it; those recent historic events -- and contemporary reminders like Zimbabwe -- show that globalization can be fairly easily thwarted and undermined.
Indeed, Wolf (correctly) finds: "Globalization is not rampant. It remains remarkably limited."
It's this that is the biggest mystery.
Wolf discusses many of the reasons why globalization has not been embraced more completely, but his main focus remains on demonstrating the obvious (why globalization is the way to go) rather than on the very difficult issue of how to achieve it.
He understands the need for good government, but is perhaps unwilling to fully acknowledge what a tall order that is.
Why Globalization Works is an excellent defence of globalization (and answer to anti-globalization arguments), willing to consider the issues from most angles and very thorough.
The economic arguments for globalization are very well presented, the policy difficulties (perhaps something more for a political scientist to grapple with) not quite as well (or willingly) dealt with.
Certainly strongly recommended for anyone with any interest in the subject.
Note: for a book that relies so much on facts and statistics -- many are cited -- the copy editing is a bit sloppy.
It's not terrible, but there are obvious mistakes -- Table 11.1 claims world GDP declined from $ 10,805 billion in 1982 to $ 1,672 in 1990 (and then shot back up to $ 31,900 in 2001) -- which lead one to wonder whether the cited numbers are reliable.
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Why Globalization Works:
Other books of interest under review:
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About the Author:
Martin Wolf was born in 1946.
He worked at the World Bank and now writes for the Financial Times.
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© 2004-2011 the complete review
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