What's happening to the globalization? It is retreating, it is regionalizing on the basis of political affinities or it is simply changing, moving from the prevalence of goods to that of services. We asked Richard Baldwin, one of the most eminent international economists, a scholar of globalization and technological innovation processes. Professor of International Economics at the Graduate School of Geneva, he taught at Columbia University and MIT and in the early nineties was an influential member of the economic council of the White House under the presidency of George HW Bush. However, the changing skin of globalization seems to have undergone a notable acceleration since (geo)politics put its boots back into issues of international trading. The post-pandemic world is moving very quickly, it has already produced two regional wars, in Ukraine and in the Middle East, and many of the cornerstones of the global economy born after 1989 already seem very old. “The complexity is really daunting. The world is in a 'polycrisis', as the historian Adam Tooze says, we are also witnessing a great economic change taking place. In the background is the growing economic, political and military power of China and the relative decline of United States".
What then will be the distinctive sign of the new course of international relations?
“I don't think China will ever achieve the exclusive dominance that the United States had for so many years after the fall of the Wall. The United States and China will have to find a way to share global power. As part of its rise, Beijing is aligning many large nations in the Global South to be more supportive of China and less supportive of the United States. I don't see it as a new Cold War, but as a deepening of the divide between the Global South and the US-led Global North. China's dominance will increase in East Asia, while that of the United States will decline."
The world seems chaotically divided into blocks, global and regional, countries holding raw materials against importing countries. The new power of BRICS emerges, the strength of ASEAN expands in the Pacific. What will happen to the globalization of markets?
“First, I would like to say that BRICS is dead, as the rivalry between India and China is becoming increasingly clear and important as China becomes more “assertive” on the world stage. Secondly, I believe that the globalization of markets is alive and well, but that it is changing in nature. The share of manufacturing production traded has been declining slightly since 2008, but trade in services, particularly digital services (everything except transport and tourism) is booming and shows no signs of slowing down. The same goes for data and capital flows. The deglobalization narrative is supported only by analysts who have not realized how globalization has changed. They cling to the now outdated idea that globalization is about trade in goods, especially manufactured goods.”
What are the economic trends that best illustrate international trade today?
“My favorite graph shows the deglobalization of manufacturing and the increasing globalization of services.”
In addition to the power of capital, the challenge of the most advanced technologies, artificial intelligence and robotics, quantum physics and biotechnology, is the new yardstick for measuring the strength of nations. What effect will this technological competition have on the ranking of world powers?
“The impacts will be different. As for the latest developments in AI, the so-called GenAI, I don't think it will shift power, because the tools are available to everyone around the world and are not difficult to use. Large models are very difficult to produce, but easy to use, and it is their use that will generate the large economic effects. The use of industrial robots will only produce a further increase in what we have seen over the past two decades, namely a decrease in the number of manufacturing workers in advanced economies. Quantum computing is still too far from being useful to talk about it in concrete terms now. It may or may not have huge implications, but certainly not in the next five years.”
When will artificial intelligence change the rules of the economy and globalization?
“I think GenAI, like ChatGPT, is already changing quickly. But I don't think it will change the major rules of the economy. It will surely bring disruption to advanced economies: well-paid office workers will have to face the pressures of automation that factory workers have faced since the XNUMXs. Additionally, they will face direct wage competition from online workers operating from abroad. I am referring in particular to the arrival of “Simultaneous Speech Translation” technology, which will allow companies in rich countries to tap into a huge talent pool in non-English speaking countries. This also applies to Italian companies."
Will technology and robotics replace humans at work to the point of marginalizing them?
“There have been two previous massive technology shocks that displaced workers. Steam power (and mechanization more generally) moved workers from farms to factories, and the ITC moved workers from factories to offices. In these cases, new jobs appeared, but the name of which was not even known. But the new jobs were in sectors where human labor was shielded from competition with technology, or actually created by technology. I believe the same will happen with digital technology."
Will new high-skilled, international, perhaps home-based jobs provide a sufficient employment base for millions of Westerners?
“New jobs will appear and involve humans doing things that AI can't do and remote workers can't do. This means jobs will be more human and require face-to-face interactions. Of course, the transition may cause some upheavals (as the last two major transformations did), but in the medium term we will all have jobs. Reflect on how technology has changed your work as journalists. Your profession changed to focus on the things technology couldn't do."
The job market in Europe is closely linked to the demographic issue. Is adverse demographics an unbeatable army for any economic system?
“Demography is a huge medium-term problem, but quite predictable. Smart immigration policies are the only solution.”
What worries you most about the global picture for 2024?
“I am quite optimistic about the world economy in 2024. The big downside risks are the war in the Taiwan Strait, the war between Russia and Ukraine which drags down NATO, and the fighting in the Middle East which could drag in other regional powers and spread the conflict in the region. I don't think these things will happen, but if they do they could reignite inflation and cause a global recession."
