What Happened to Globalization?

Abstract

The paper gives a short review about the development of globalization during the past 25 years and its key drivers. The central part is an empirical analysis of global trade patterns and the shifts which puts developing countries on an unfavorable perspective. Since global demand for fossil energy like oil, natural gas or coal is shrinking in the developed countries this leads to problems in the producer and exporter countries. Similarly the end of the supercycle in raw materials in particular metals had an effect amplifying this development. The same problem is visible in the area of agricultural products. Furthermore consumer expenditure in global tourism industries from developed countries is on a retreat. Even the high-tech strategy of countries heavily invested in the production and export of ICT goods suffers from a digital deflation of their commodity prices due to the increase of performance associated with lower prices. So many areas where developing countries in the past had the specialization pattern are becoming inferior areas considering the long-term perspectives. Recycling of materials, energy savings, higher standards of quality control of the supply chain of agricultural products and textiles, etc. put developing countries on an unfavorable development path if they get stuck in their current specialization patterns. A review of the current debate of the crisis of globalization offers little hope that this structural impediment for a recovery of global growth in trade is under way. Instead there is a rising skepticism that policy makers return to more inward looking protectionist policies. Without accepting that the structural changes are the fundamental factors causing the stalemate of globalization many recipes to overcome the stagnation of globalization will not succeed in the end.

Keywords: globalization, international trade, structural change, developing countries

JEL Classification: F01, F14, F18, F51