Handbook on the Globalization of the World Economy

Citation

Khilji, F. (1999), "Handbook on the Globalization of the World Economy", Journal of Economic Studies, Vol. 26 No. 6, pp. 510-520. https://doi.org/10.1108/jes.1999.26.6.510.3

The word handbook to my mind carries a connotation of a reference work; i.e. material that both more or less covers the field at a particular level of generality, and the material also has an enduring quality (to be useful as a reference for any length of time). The description on the inside cover describes the Handbook as “authoritative” and claims that the authors are “experts in the field”, and that the volume “provides a thorough account and analysis of the important issues of the international economy”. This description generally comes up to the expectations one has of a handbook. An introduction reveals that the idea for this Handbook “evolved during the preparation for and coordination of a new course entitled ‘Global Economics’ at the University of Wollongong” by the editor.

Let us now consider the contents of the Handbook. The Handbook is a compendium of 26 papers by 32 authors, 20 of whom are at Australian universities (mainly Wollongong), six from Berkeley, and six others with Berkeley/Australia connections (five from elsewhere in North America, and one from Britain). It is, therefore, a very special perspective on globalization.

The papers broadly fall into four broad topics: seven are on growth, five on transition economics, five on integration and internationalization of markets, and three on environment and resource issues.

What do the papers that make up the Handbook say? There is little here that can be characterised as new or controversial; but there is nothing wrong with that. After all a typical handbook would be expected to report on the existing knowledge and not necessarily raise new issues.

Let us consider specific contributions. Adelman traces economic growth in the world economy from 1820 to 1993 and finds little that is controversial. Exports drive growth, institutions and political structure matter in development and distribution, progressive agriculture underpins industrialisation, infant industry protection is a necessity in early stages, etc. Livermore and Chaudhry examine trends in inter‐country income differences over 1960‐90 for convergence or otherwise. In another paper the two authors show with help of data that the effect of public debt on national output is negative while that of private debt is positive, South Asia excepted. Nyatepe‐Coo’s examination of some Asia and Latin American country data shows that foreign direct investment is helpful to growth.

Lee and Powell argue that in a recession a country may default given that threshold consumption is a priority. Suh and Seo find that in the Asia Pacific region it is the private sector that is the principal force behind cross border economic linkages. Bora finds that the US MNCs have played a significant role in the development of the “global” economy over the past 15 years.

Rodgers briefly traces the development of multilateral economic institutions from Bretton Woods to WTO, and sees the Bretton Woods institutions adapting successfully to new challenges. Chichilnisky argues that in presence of economies of scale, a regional trade arrangement would further growth and negate the standard optimal tariff results.

Harvie’s paper, this one on EU, is on the whole supportive, but he sees a continuation of differences on political and economic direction among member states. Fane argues that rapid growth of intra‐regional trade in the Asia Pacific region is owed to policies as well as the play of market forces. Indraratna presents a vision of a fast growing South Asia: foreign investment is coming in “flying geese” formation from Southeast Asia, and the region is a lucrative export market for the Pacific rim exporters. APEC is suitably renamed INDO‐APEC in this scenario.

Adelman and Vujovic do an econometric piece on transition economies, and find, as one might expect, that history matters and economies with some previous experience of the market have done relatively better. Institutional changes are important in the longer term. Successful macro stabilization is helpful. Transition costs have been substantial. Harvie, in a second paper, examines the reform process in Czech Republic, Hungary and Poland, identifies difficulties and costs, and advocates continuation of the reform process. Markey discusses the changing nature of labour relations in the erstwhile planned economies and judges it early to predict the outcome in this respect. In his third paper Harvie compares the transition process in China and Vietnam, and finds that there is a commonality of problems (which pertain principally to state enterprises); and concludes that a question mark hangs over institutional development.

In one of the few conceptual efforts in this volume, Weber uses the exchange rate pass through idea to analyze the macroeconomic impact of changes in exchange rates. Naughton’s analysis of Asia Pacific equity markets data suggests advantage in diversification.

A paper by Castle, Chaudhry and Nyland discusses effects of globalization on labour in developed and developing countries. Tanner and Swinbank find that multilateral efforts offer relatively greater opportunity vis‐à‐vis regional efforts, in context of the agricultural trade issues.

Hodgkinson points to the transborder character of environmental issues and argues for international cooperation in resolving the problems that arise. Berck and Ward raise the possibility that in the long run air may turn out to be a more scarce resource than energy. Karp and Sacheti model the interaction of trade and environment in a North/South context.

I find globalization a vague concept. As I see it, at the very bottom of its economic aspect (there are to my mind, and as is widely accepted, important non‐economic aspects as well) is technological change in communications; a tremendous and unprecedented increase in our capabilities in information and transport. Regardless of its immensity, this change in essence amounts to perhaps no more than an expansion of market size, as distances shrink on account of technological development.

The effects of this change have been uneven between countries, and it has impacted differently on different socio‐economic groups. The impact has differed depending on the extent of access that has been achieved by a particular country or income/skills group to the new and larger market.

The reasons for differential impact are fairly simple, if not altogether obvious. The explanation for differential impact seems to lie in the existing distribution of economic power. For example “globalization” has meant greater change for movement of capital than say movement of labour. The expectation of profit motivates established financial institutions in USA and Europe etc. to push for freedom for capital flows, and information technology facilitates this aspect like never before. On the other hand notwithstanding the lower transport costs and the great desire of the masses of the third world countries to migrate to more affluent lands, the populations of the latter countries remain vigilant to contain any inward immigration.

With trade, matters move more ponderously, the frequent presence of ambiguity in benefits and costs that accrue to those who carry most influence in negotiations being a decisive element in the outcome. The ambiguity in the outlook of major economies on this score arises on account of differing, possibly conflicting, interests of different groups in the economy, for example, skilled vis à vis unskilled labour force, producers vis‐à‐vis consumers, hi‐tech industry vis à vis more traditional industry, etc. The interests of those who inhabit powerful and large economies are clearly not identical when it comes to trade.

As money and goods cross national borders issues of managing the flows, of jurisdiction and sovereignty, of regulatory framework, etc., arise.

In their essence the developments are not entirely novel. There has been at least once before a similar lowering of transport costs, reduction in transport times, and speeding up of information: with the coming of telegraph and steamships. Surely that last phase of “globalization” has its lessons for the present one.

The book to my mind seems to have gone off on a tangent. Discussion of technology, the motor working the whole process, is notably missing, as is any overall perspective, be it on global economic linkages, on global regulation of business, the dialectic between loss of national sovereignty and transnationalisation of business activity, and benefits and costs for different players.

Finally, the Palgrave dictionaries on various economic themes, and a number of economic handbooks produced by North‐Holland/Elsevier have set a competent standard of scholarship in the reference area. Edward Elgar’s own several volume series titled The Growth of the World Economy is informative and particularly useful in the material it brings together.

For better or worse the new reference work would be implicitly, if not explicitly, measured against these benchmarks. One should not however single out this perspective on globalization under review as an example of a work that falls short of the benchmark. There is indeed a steady flow of books of uneven quality tied up with various aspects of globalization and tying up various buzz words of our time (post‐modernism, feminism, Islamic fundamentalism, etc.) to globalization.