Hyperglobalisation and period after, Social Audit Current Affairs 18th July, 2017DEVENDRA VISHWAKARMA
Hyperglobalisation and period after
The post-World War II period witnessed a rapid rise in trade between nations. By the end of the 1980s and early 1990s, global trade integration had reverted to levels last seen before World War I.
Term ‘Hyperglobalisation’ is used by the Economists to describe the phase between early 1990s up to the global financial crisis of 2008, during which the international trade witnessed dramatic increase.
After 2008 global financial crisis, many economists have argued that the phase of high trade has come to an end and went to the extent of claiming that hyperglobalisation was a one-time event unlikely to be repeated. Scepticism is expressed regarding a revival of global trade.
The below article assesses the following areas –
- Why there was a rapid rise in international trade post-World War II? What factors led to high growth phase?
- Whether the recently concluded hyperglobalisation phase is really a one-time event or is it likely to be repeated? Are there any signs of revival of global trade in future?
- What policy measures should India follow to escape the global slowdown?
Factors that led to rapid rise in international trade post-World War II
- Post World War II (from 1945) there was gradual development or rise in global trade partly due to reductions in policy barriers—first in the advanced economies, under the auspices of the then General Agreement on Tariffs and Trade (GATT), and later in developing countries, through unilateral liberalization actions or under programs with the International Monetary Fund (IMF) and World Bank.
- Trade was also facilitated by technological advances, especially in shipping and transportation.
- Increasing connectedness among nations lead to a virtuous cycle of economic expansion.
Whether the recently concluded hyperglobalisation phase is really a one-time event?
Proponents of this view argue that – the 19th century globalisation was underpinned by technological advances that facilitated trade. The advent of the telegraph enabled the communications infrastructure intrinsic to trade and the invention of the internal combustion engine enabled the fast, reliable and cheap transportation of goods across seas.
They view that these technological advances dwarf anything since, including the Internet, in terms of their capacity to expand trade. And, none is foreseen in the immediate future. Hence, claims that hyperglobalisation is a one-time even unlikely to repeat.
However, history shows that this type of ‘Hyperglobalisation’ or ‘high trade’ phase is not a new concept and similar kind of phase was experienced during last quarter of the 19th century when, for close to 50 years, the world saw an expansion in trade that was actually as great or even greater than during the recently concluded hyperglobalisation phase.
Then had also occurred an unprecedented movement of capital and of people. British capital flowed into building the railways across the world, immigrants moved from Europe to the United States and Asian labour was moved to the sites of deployment of western capital.
The fact is that the world has seen ups and downs of global traffic in goods, capital and people.
The phase of high trade which started from 1870 came to an end with the First World War and was to revive, slowly, only after the Second. Then, following the collapse of East European communism in the early 1990s, there was a resurgence in global trade. Now even this phase has somewhat abruptly ended with the global financial crisis.
Advances in technology had no doubt fuelled trade but the role of the growth in demand for these technologies is of high relevance. Trade expanded as the demand for goods and technology grew. Therefore, when global demand expands, countries can exploit the trade route to grow their economies again.