The new globalization, driven by the ICT revolution, has not been a tide that lifts all boats equally. Instead, it has created a profoundly asymmetric world, where the impacts have been felt very differently across and within nations. Understanding how the new globalization created this asymmetry is key to grasping the political and social tensions that have emerged in its wake, from rapid growth in some regions to economic anxiety in others.
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⚡ The Sudden, Swift, and Individual Nature of Change
Unlike the gradual changes of past industrial revolutions, the impact of the new globalization has been incredibly fast. The ability to offshore knowledge and production stages happened suddenly, disrupting industries and labor markets with little warning. The impact was also more individual; it didn’t just affect entire sectors but could target specific jobs and tasks within a firm. A company could offshore its accounting department while keeping its design team, for example. This unpredictability has made it much harder for workers and governments to adapt.
🌏 The ‘Great Divergence’ and ‘Great Convergence’
The story of globalization can be seen in two acts. The ‘Great Divergence’ occurred from the early 1800s until around 1990, where a handful of nations (the G7) industrialized and saw their share of world income skyrocket, while the rest of the world’s share plummeted. The new globalization triggered the ‘Great Convergence.’ Starting around 1990, the G7’s share of world income began to fall rapidly, while the share of a few key developing nations—those that joined the new global supply chains—rose dramatically. This has been the biggest and fastest reversal of economic fortune in modern history.
😟 The Plight of the G7’s Working Class
While this convergence has been a tremendous success for poverty reduction in emerging markets, it has come at a cost for the working class in G7 nations. The offshoring of manufacturing jobs hollowed out many industrial communities. Now, the rise of ‘telemigration’ is putting similar pressure on the service sector. Workers in high-wage countries are now competing more directly with labor from around the world. This has contributed to wage stagnation, job insecurity, and a growing sense of economic anxiety, which in turn has fueled a political backlash against globalization itself.
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Baldwin, Richard. The Great Convergence: Information Technology and the New Globalization. Harvard University Press, 2016.
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