By Karishma Banga, PhD researcher at the Global Development Institute
We have been living in what Richard Kozul-Wright deems as the ‘Age of Anxiety’, with developing economies suffering from post-traumatic crash disorder, advanced economies finding it difficult to recover from the crisis and growing risks for everybody, everywhere. This comes on top of 30 years of hyper-globalisation, precarious work, rising levels of debt and inequality and- the cherry on the cake- ruthless corporations. Raising fingers at the bleakness of the current scenario, we have proponents pushing forward the mantra of ‘Inclusiveness for All’. While these words sound good to our ears, we continue to witness a slow-down of growth in the global economy.
To re-assess the current economic agenda, the Global Development Institute’s 21st century Globalisation and Development Research theme invited Dr. Richard Kozul-Wright (Director of the Globalization and Development Strategies Division, UNCTAD) to deliver a lecture on ‘Emerging Economies and end of Hyper-globalisation’, followed by a Masterclass for PhD students.
‘We require much more in today’s age of anxiety!’ announces Kozul-Wright at the beginning of his lecture. There have been serious concerns about the whole process of catching up of developing economies, particularly around the struggles to industrialise in the South. In the words of Christine Lagarde – growth has become too low for too long and for too few. A major reason behind this could be the structural slow-down of growth in the North, affecting global demand. Just like in Game of Thrones, ‘the North’ seems to be in trouble. This could also in part be explained by the slow and lopsided recovery of the North after the financial crisis, with too much dependence on Monetary Policy and the consequent slow investment recovery.
The South is not without problems either; in both the North and the South, there is rising inequality, insecurity in the labour marker and an increasingly informal economy. Interestingly, when the BRICS were the flavour of the month, there was talk about ‘strategic-decoupling’ in the South, with developing economies becoming independent engines of growth. Kozul-Wright argues that this has been true only in the case of China. East Asian countries have indeed done well, with China emerging as the big winner, but this success story presents an uneven picture. Elsewhere, such as Latin America and Africa, growth has been erratic since the 1980s and some countries have actually witnessed an increasing divergence from the US income level. These countries continue to be dependent on commodity prices and private capital flows, which remain volatile and contribute to the growing instability in these economies.
Kozul-Wright brings in an interesting point here; contemporary globalisation has not been about trade. What matters for globalisation today is how finance interacts with the real world, and this will decide the future of globalisation. Investment remains a key driver for growth but the conventional discussion on investment needs to be shifted from attracting FDI to capital formation. Kozul-Wright stresses on a profit-reinvestment nexus which is complemented with the access to external finance.
A self-proclaimed manufacturing fundamentalist, Kozul-Wright does not side-line the importance of manufacturing. Sustainable and inclusive development can be attained by countries building a strong manufacturing base and the ability or capacity to upgrade. Industrialisation has stalled in some parts of the world, such as India, Sub-Saharan Africa and Mexico. These have been cases of ‘premature deindustrialisation’ where industrial capacity has been lost at a time when one expected a rise in productivity performance. In order to promote export-led- growth in these countries, rising sophistication of the export basket can be important. In short, what you export matters!
Kozul-Wright closes with emphasising the need for a new discussion- a discussion that harps back historically and seeks a ‘global new deal’ based on the principles of; anti-austerity, reflation agenda, expansionary fiscal and monetary policy, strong regulation in finance and labour markets, and global re-distribution. As a last takeaway, Kozul-Wright throws in SDGs as the largest investment planning strategy in history. Meeting them requires mobilisation of investable resources at the domestic level, complemented and reinforced at the international level. The day concluded with a lively discussion in the masterclass on the importance of re-conceptualising investment, regional relations and bringing South-South trade back into focus.
- Listen to Dr. Richard Kozul-Wright’s full lecture on ‘Emerging Economies and end of Hyper-globalisation’.
Note: This article gives the views of the author/academic featured and does not represent the views of the Global Development Institute as a whole.