“After decades of rapid economic and financial integration, we now live in a highly interconnected world. There globalization it has increased the international flows of goods, services and capital, as well as those of people, ideas, knowledge and information. It has helped promote lasting growth and reduce poverty on a global scale. Some of the factors that determined it, however, seem to come back into question today”. With these words begins the intervention of the director general of the Bank of Italy Luigi Federico Signorini, at the meeting "Geopolitics, geodemography and the world of tomorrow" - University Pole of Social Sciences of Florence, in which he explains the evolution of this process from the point of view of the economist indicating, or at least in an attempt to do so, the risks of the present and the prospects of tomorrow.
The evolution of globalization
“For a long time the eldest economic integration it has been accompanied by an improvement in political and diplomatic relations between countries, reinforcing the widespread belief that precisely these interdependencies would have contributed to preserving peace and creating the right conditions for shared development – continued Signorini -. The improvement of diplomatic relations between China and the West after Deng Xiaoping's rise to power and the normalization of relations with the countries of the former Soviet bloc after the fall of real socialism were also decisive elements in the process of economic integration" .
Recently, explains the CEO of Bankitalia, the race towards integration has lost momentum. “In the advanced countries there is a more widespread narrative according to which globalization is at the origin of a slowdown of the growth of the countries themselves and of a sharpening of inequalities; the world economy has begun to be perceived more and more as a field of competition, in which advanced countries are described as losers, and less as a vector of greater well-being for all. In some emerging countries, economic growth has not been accompanied by a strengthening of human rights and democracy, as perhaps had been hoped for in the West. With the political framework that had favored it weakened, and perhaps some of the factors that had accelerated it in the previous decades having disappeared, the same economic globalization he started to slow down”.
Pandemic and war put the globalization model in crisis
Concerns, which had already been fueled by the repercussions of the 2008 financial crisis, have become more evident in recent years. "There pandemic of 2020 seemed to undermine the mechanisms on which globalization was based, highlighting the potential physical fragility of long-distance flows of goods". While the war in Ukraine in 2022 "it questioned the principle of peaceful coexistence between nations within internationally recognized borders, highlighting political-strategic risks and fueling in many countries the anguish of dependence and the search for self-sufficiency within 'friendly' ambits".
So, elements of fragmentation are beginning to be perceptible for the general manager of Via Nazionale, who underlines: “According to the International Monetary Fund, the introduction of massive restrictions on trade in goods and services could lead to losses of up to 7% of world GDP. We do not yet know if the changes induced by the war will be more lasting than those following the pandemic, but the risk should not be underestimated".
So what to do?
Signorini indicates the viable ways. “It is in any case to be hoped that, on a global scale, the protection of national interests will avoid translating into protectionism indiscriminate trade and trade wars. Locking yourself strictly within national (or, for us, European) borders is not only expensive; it is probably impossible. A little bit of restoring perhaps it will take place, but it is doubtful that this process will radically change the international division of labor, given the huge investments of the past and the extraordinary connectivity that characterizes the world today”.
The alternative? "The friendshoring, i.e. confining value chains to countries considered friendly, may be feasible; but it collides with the weight of sunk investments of the past, with the physical distribution of natural resource inputs and with the difficulty of establishing once and for all who is part of the trusted group and who is not. In particular, preserving trade integration between advanced countries alone does not seem like a sufficient prospect in the current context. Among other things, the G7 no longer has the predominant economic weight of a few decades ago. It is hard to imagine the G7 building its future in growing isolation, except in extreme circumstances."
The new route of globalization: goodwill, reasonableness and foresight are needed
“I think it is advisable to work to maintain, as far as more general political and strategic considerations allow, channels of economic cooperation open not only with countries that share the founding values of Western democracies, but also with all those which, although different in more or less important aspects, demonstrate in practice willing to interact internationally on the basis of a minimum set of coexistence and the principle of peaceful resolution of conflicts", continued Signorini concluding: "As suggested by Raghuram Rajan, we should work to create safe spaces in which countries, albeit with different values and systems, can interact regardless of their respective domestic policies or tensions international. There challengeI repeat, it is difficult. If winning it is in everyone's interest, it is certainly not only on one side that goodwill, reasonableness and foresight are needed."
