Column Three strikes for globalisation

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: interference against globalisation. Government interventions in the 20th century were prolific. As recently as 1971, US government policy included wage controls and price controls. The intellectual climate has strongly shifted towards less government interference in the private decisions of individuals and firms.

The depth of this intellectual consensus is not fully understood. At are the top economists of the world, ranked by their intellectual influence. As an illustration, the top ten names of Indian origin in the list are: Raghuram Rajan (29th), Anil Kashyap (53rd), V. Chari (77th), Avinash Dixit (130th), Anjan Thakor (130th), Susanto Basu (130th), Sudipto Bhattacharya (223rd), Ravi Jagannathan (223rd), Debraj Ray (223rd) and Dilip Mookherjee (223rd). In this list, the two prominent intellectuals who advocate restrictions on globalisation are Joseph Stiglitz (29th) and Dani Rodrik (53rd). Apart from these two names, largely speaking, the bulk of the top 100 economists of the world are supportive of pro-globalisation economic policy. This marginalisation of the Left is quite a difference from the situation in the early 20th century, when Marxism was the opiate of the intellectuals and Keynes the economist of the age.

The second change is the rise of modern finance. The combination of telecommunications, computing power and financial economics has created a new world of international finance, where globalised firms finance themselves on a global scale, and globalised households invest all over the world. Any attempts at deglobalisation would directly hurt the households who are beneficiaries of superior risk-return tradeoffs and the firms who are finding cheaper debt and equity capital.

The third change is the rise of a core of stable democracies, the OECD, all of which have floating exchange rates and open capital accounts. They will not go to war with each other. They make up the heart of the world economy. Russia, China and the Middle East are economically important blocs who continue to have autocratic political regimes. The interfaces between the OECD and these three will continue to generate political crises. But there is now a core of democracies who make up the lions share of world GDP who will sustain globalisation.

Our ‘second globalisation’ thus has better foundations than the first. Anti-globalisation demonstrators will periodically trash McDonald’s outlets. Politicians in OECD will periodically indulge in pinpricks, like restrictions against imports of some kinds of steel to the US. But substantial restrictions against trade or capital flows in the rich countries will not happen.