Martin Wolf’s Why Globalization Works focuses on the impact of globalization on global growth, including its impact on poverty. Wolf contends that liberalization of the global economy has helped many people alleviate poverty within the last few decades than it has been witnessed in history. This paper summarizes the book, providing detailed summaries for every chapter and identifying fundamental concepts in the book.
Chapter 1: Enter the ‘New Millennium Collectivists’
This chapter introduces the reader to the critics of economic globalization. The author introduces the antiglobalization.com group, composed of angry protestors who were increasingly unsupportive of globalization. The group mainly stormed business meetings, often forcing organizers to cancel or truncate the meetings or move them to remote locations where protesters would not access them. Significantly, the intellectual conflict between liberal capitalism and its opponents is the book’s primary theme. The antiglobalization.com members fall into two categories: old-fashioned economic interests and single-issue, non-governmental organizations with mass memberships. The group’s financial interests include many trade unions, focusing on domestic jobs and labor standards overseas, and farm lobbies and additional producer groups (Wolf, 2004). The author contends that the groups are increasingly economically rational. Besides, the antiglobalization.com group had several complaints, including the idea that globalization is American or Western capitalism, an oppressive and impoverishing force in world economics. Their main enemy is neo-liberal globalization, corporate globalization, or liberal internationalism. The critics believe that globalization hinders the ability of countries to regulate national economies, undermines democracy, amounts to power abdication, causes massive destitution and rising inequality in and between states, destroys peasant farmers’ livelihoods, deprives the poor of affordable medicines, reduces real wages and labor standards, eliminating the environment, causing global race to the bottom, allowing international financial markets to initiate crises, and supports greed (Wolf, 2004). One significant event that might highlight the resistance to globalization was the 9/11 terrorist attacks, perceived as the Islamic world’s resistance against Westernization. Overall, the book illustrates that anti-liberal perceptions put critics on the wrong side of the argument.
Chapter 2: What Liberal Globalization Means
In this chapter, Wolf explains the meaning of liberal globalization and its aspects. Using Anne Krueger’s definition, the author defines globalization as the phenomenon where economic agents in any region of the world are increasingly affected by events in other areas of the world (Wolf, 2004). It can also be described as the integration of economic activities via global markets. Liberal globalization has two primary driving forces, including technology and policy. While technology remains similar as it is currently, there are no policy barriers to the movements of products, people, information, capital, and services across borders. Wolf highlights that technology was instrumental in globalization. At the same time, the falling transport costs and communication and increased reliance on the market forces are linked with policy and technology that drive liberal globalization. Finally, the economic globalization discussed in the chapter entails cultural, political, and social impacts.
Chapter 3: Markets, Democracy, and Peace
This chapter concentrates on the markets, democracy, peace, and their connection with globalization. Wolf maintains that freedom is the significant value of a free society. The individual or humans are often embedded in society. A free society is based on the freedom of choice in the engagement forms. However, people require protection from the state if they are to be free. Besides, Wolf highlights the emergence of a stronger free state based on three forces: regulatory competition, moral reform, and internal representation (Wolf, 2004). Regulatory competition, including the competition among rulers, is the primary reason Europe outstripped India, China, and the Islamic world. Constitutional democracy and the rule of law also guide globalization. These features often ensure the long-term health of the countries since the government must protect life and property. Moral reform is also a feature of a liberal state, providing a highly moral market economy. While the rule of law is fundamental, values also matter for a state to be liberal. According to Wolf, liberal democracy is the only governance system where harmonious and cooperative inter-state relationships are a natural result. Liberalism is the bedrock of domestic democracy and peaceful global relations. However, liberalism is also linked with challenges such as fragility, as evidenced during the late 19th and 20th centuries. It is increasingly vulnerable to collectivist views, including communism, fascism, national socialism, and socialism (Wolf, 2004). Overall, modern globalization results from transforming advanced economies into liberal democracies.
Chapter 4: The ‘Magic’ of the Market
This chapter focuses on the market economy, including its rise, growth during the millennium, the functionality of an advanced market economy, and the characteristics and morals of the market economy. While trade and market-controlled behaviors were present earlier, they remained subordinate and marginal within civilized societies until around 1000 years ago (Wolf, 2004). Significantly trade and commerce were significant but remained marginal during the agrarian revolution. The market economy holistically transformed people’s lives when the commercial spirit and the accompanying rationalistic strategy for technological innovation and scientific research gained control of the powerful countries. Wolf highlights that the change towards using inanimate energy, including wind, fossil fuels, and water was the decisive shift in the economic revolution. It can be said that technological developments played a leading role in the emergence of the market economy. During the last millennium, the world has experienced a remarkable transformation, including the rise in population, and the global gross domestic product (GDP) increased thirteen times during this period. The standard of living had also increased, with growth accelerating after 1820, when the wealthiest nation had a real income per head around four times higher than the poorest. Since then, the world’s economy has experienced tremendous growth, with the ratio reaching fifteen to one by 1913, twenty-six to one by 1950, forty-two to one by 1973, and seventy-one to one by 2000 (Wolf, 2004). The developed market operates through information flow, trust, competition, and property protection. At the same time, Wolf highlights market economy features, including corporations, intellectual property, innovation, and the financial markets. The market economy is also characterized by morality issues such as inequality, freedom, and ethical sustainability.
Chapter 5: Physician, Heal Thyself
This chapter concentrates on economic planning, public partnership, the role of the state in the economy, reasons for government failure, and state reformation. During the anti-liberal counter-revolution era, the belief was that the whole national economy should be controlled and directed. The success of modern business organizations reinforced the idea that central planning was fundamental. People mainly perceived a planned economy as desirable, necessary, and logical. However, planners cannot identify what should be done to control the contemporary economy’s production, while feasible plans are not guaranteed implementation (Wolf, 2004). Besides, planners cannot identify the hundreds of millions of people’s needs, calculating what production should increase or reduce is impossible since prices are not linked to costs, there is a misguided comparison with the war effort, planners cannot predict the potential for new product generation, and integrating foreign trade into the plan can be challenging (Wolf, 2004). To make the market economy function, the state must provide public goods, internalize externalities or address market failures, and help people doing worse in the market. Significantly, the state has a pervasive role in the contemporary market economy. Effective policy interventions must be transparent, consistent, predictable, and credible. At the same time, Wolf mentions that states fail for several reasons, including government flaws. Finally, reforming a state requires the implementation of internal reforms and regulatory competition.
Chapter 6: The Market Crosses Borders
This chapter focuses on cross-border markets, including domestic and international transactions. Today, thanks to globalization, people can transact worldwide, which has made it possible to undertake global trade. However, domestic and global transactions are associated with economic, political, and value variations (Wolf, 2004). Economic differences entail legal and non-legal obstacles, while political variation encompasses the existence of several legal jurisdictions that cross-border transactions affect. The chapter also presents the economics of integration, reporting that economic transactions contain goods and services and the factors of production. Restrictions make a nation real economically, especially the restrictions on goods and people. Wolf highlights that it is possible to mix trade restrictions and capital and labor movements (Wolf, 2004). Regulations have enormous costs, such as freedom, the creation of black markets, and corruption. There is a need for integration within trade, capital, people and geography, and policy. The performance of the economy depends on trade in products and services. At the same time, increased trade in capital would be significant. Nevertheless, capital trade is scarce as the debt-creating capital flow is increasingly unstable. Poor countries and people can benefit from the movement of people and labor trade, but this might face political barriers.
Chapter 7: Globalization in the Long Run
This chapter discusses the concept of globalization in the long run. Wolf highlights the existence of limitless opportunities for positive-sum interaction among people. Throughout human history, there have been significant trends, including improvements in transport and matter processing, energy processing, and information processing. Together with rapid technological advances, these improvements form the logic of economic integration. With the rise in travel technologies, communication and transport have massively improved. With technological changes increasingly inevitable due to the relentless innovation of humanity, global integration has become a priority. The long-run perspective of globalization lies in various technological advancements, including the Internet era. Wolf examines the four aspects of globalization in the long term: the sense of humans as a component of the global community, ideas and culture global transmission, global technology transmission, and the globalization of the economy (Wolf, 2004). The author also contends that religion submerged traditional cultures while new technologies have transformed people’s way of life. Again, communities have suffered from the disease. The European discoveries in the fifteenth century ensured that globalization stayed for the long term. The Europeans have been at the center of creating complex international domination and exchange webs. Thus, with technological improvements and innovations, globalization is a long-term concept that will continue advancing.
Chapter 8: Rise, Fall, and Rise of a Liberal Global Economy
This chapter examines the stages in the rise, fall, and rise of the liberal global economy, focusing on its transformation and challenges during different centuries. During the nineteenth and twentieth centuries, massive economic growth and integration existed. The rhythm of the global economy changed during the nineteenth century. In the late 19th and 20th centuries, the global economy grew tremendously. However, the U.S. made two fundamental policy mistakes in the 1920s and 1930s, resulting in the implosion between 1924 and 1945 (Wolf, 2004). Significantly, the liberal global economy was restored in high-income nations. There was also progression in technology, especially communications technologies. Three periods of rapid economic growth were experienced since 1820, as real income per head grew between 1870 to 1913, 1950 and 1973, and between 1973 and 1998 (Wolf, 2004). The late 19th century saw a massive decline in global trade and factor mobility barriers. However, political and policy mistakes brought significant economic reduction, particularly by the U.S. The policies saw the death of 19th-century liberalism, while the world experienced two wars between 1914 and 1945 (Wolf, 2004). After these wars, there was a massive effort to restore the global economy, including post-war reconstruction and the inclusion of China as a member of the World Trade Organization. Despite the challenges, the global economy has often found a way to restoration, thanks to policy and technological advancements.
Chapter 9: Incensed about Inequality
This chapter focuses on inequality and its perception in the world. Wolf begins by exploring the growth of the global economy before focusing on inequality and its consequences, including poverty. The author reports that globalization has massively increased the rate of inequality within and between countries. It has created a world where the 200 richest people hold more assets than the 2 billion poorest people combined (Wolf, 2004). Globalization has fueled massive economic growth, with many people enjoying immense riches and high living standards. Despite this growth, globalization has also been responsible for the rising rate of inequality. Again, the development has had an impact on the poverty levels. Wolf explains that global inequality increased until around the early 1980s. Inequality among people appears to have reduced because of the rapid growth in most of the Asian continent. For instance, China’s income grew by around 440% between 1920 and 2000. Between 1820 and 1960, the population of people living in extreme poverty increased from 900 million to 1.3 billion (Wolf, 2004). By 1980, 1.4 billion people lived in poverty. The population of people living below the dollar also increased, highlighting the challenge of globalization on the poverty rate. With poverty rising, human welfare has been affected. Specifically, human welfare has improved, with the population of desperate people actively reducing.
Chapter 10: Traumatized by Trade
This chapter examines how trade has traumatized different components and aspects of the world, including the environment. Wolf highlights that world market exploitation has provided a cosmopolitan character to the consumption and production within each nation. Different complaints labeled against liberal trade include imports coming from low-wage developing countries that hollow out the industries within the developed nations, making it challenging for the high-wage rich states to compete without their wage levels dropping. Wolf also outlines that the increase in production within developing countries threatens an international glut, depression, and deflation (Wolf, 2004). At the same time, the chapter maintains that the competitive advantage in developing nations is often based on employee exploitation, including child labor, while global free trade destroys the environment. Wolf notes that climate change has been one of the primary challenges of free work. Again, Wolf suggests that liberal international business needs to be replaced by localization to reduce the rate of global warming and other challenges like depression and deflation in the global economy. Free trade also undermines the development approaches in the developing world, while these countries do not draw any benefits and rewards from liberal trade. Finally, Wolf explains that the WTO is increasingly anti-democratic, often operating and favoring the interests of multinational organizations, threatening national autonomy, human welfare, and the environment (Wolf, 2004). Overall, developed countries are highly hypocritical in imposing free trade on developing nations.
Chapter 11: Cowed by Corporations
This chapter focuses on the multinational corporations and their power within the global economy. In the 21st century, the battle between multinationals and people has been defining and extensive. Wolf contends that these corporations have become more powerful than states, influencing governments’ trade policies and strategies. Global brands have an absolute tyranny, which makes them extremely powerful to influence trade operations and policies globally. Wolf reports that transnational companies usually exploit poor nations and workers. For instance, such companies often use cheap labor from poor countries and source cheap raw materials from these nations. Again, corporate investment overseas is seen as impoverishing workers. Specifically, exporting capital harms employees by forcing them to accept low wages or lose their jobs (Wolf, 2004). At the heart of the criticism against globalization is the power and influence of multinational corporations. Today, the role of multinationals in democracy increasingly makes people uncomfortable, but it cannot be eradicated. Overall, international organizations have become more powerful than countries while exploiting poor countries and populations.
Chapter 12: Sad about the State
This chapter focuses on the states’ mood and contribution to globalization, including its impacts on economies and populations. Wolf begins by highlighting that sovereign countries are starting a war of competitive deregulation that the global free market imposes. Wolf highlights that globalization is a choice as countries open their economies to trade, labor, and capital movement (Wolf, 2004). Besides, technology often dictates the most affected sectors, while regulating capital flows when there is free movement of goods and services is challenging. Other aspects of globalization include taxation and regulation. States must raise taxes, and competitive advantage makes it difficult to derive the same taxes. At the same time, the author maintains that globalization has subjected developing nations to enormous constraints. Significantly, it does not make states necessary. However, the perception of globalization making states unnecessary appears to be inaccurate. The quality of public goods, including personal security, property rights, education, and corruption, determines the capability of society to benefit from the opportunities that international economic integration offers. Again, countries usually choose a human identity, while the ability of states to offer and guarantee order influences all kinds of global governance. Overall, globalization provides opportunities and is a challenge in different aspects.
Chapter 13: Fearful of Finance
The chapter focuses on financial fear. Wolf begins by highlighting that the degree of control over all life that the economic power exerts is better illustrated in the foreign exchange field. Wolf notes that as struggling economies try to integrate into the world capital markets, there has been high dissatisfaction. Significantly, the gains of globalization have been questioned, and its cost of crises is massive. The primary problem, according to Wolf, is helping emerging-market economies engage with their world capital markets (Wolf, 2004). This can be achieved through extensive changes in domestic regulation of the financial markets, enactment of laws, and behavior in various areas, including the role of financial institutions like the International Monetary Fund (IMF), the position of foreign institutions, insurance deposits, bankruptcy, and policies on exchange rate. Nations will also need to reconsider their engagement with increased foreign currency borrowing.
Chapter 14: Today’s Threats, Tomorrow’s Promises
This chapter focuses on the threats to globalization and the promise of a better tomorrow in the global free market. Some primary threats to globalization include international rivalry, instability among various states, protectionist interests, and increased anti-liberal ideas. These factors have immensely contributed to the disintegration of the initial liberal global order and free trade. There is a need to prevent global economic integration from collapsing by implementing various international changes. Lessons from critiques can be instrumental in making global integration better. Some critiques include permitting new companies in the developing world, high-income nations should open markets to favor exports from developing countries, awareness of the risks of liberalization mismanagement, and the need for direct economic international integration (Wolf, 2004). Overall, while globalization has had massive benefits for the global economy, it has shortcomings that must be addressed to achieve free trade.
References
Wolf, M. (2004). Why globalization works (Vol. 3). Yale University Press.
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