THE ROAD TO GLOBAL PROSPERITY
Michael Mandelbaum is an unequivocal supporter of globalization, and in his latest book, The Road to Global Prosperity, he lays out both the advantages and challenges that globalization faces in the coming years.
A leading authority on international affairs, Mandelbaum does not deny that globalization, like any productive economic change, causes some people to be worse off than they were before, at least in one aspect of their lives; but even for them, Mandelbaum notes, globalization has advantages. For example, globalization gives all consumers more product and service choices and better prices.
The political problem, writes Mandelbaum, is that the advantages of globalization are far more long term and subtle than the immediate and wrenching negative consequences. Product choices and better prices evolve over time; the job losses, however, are immediate and unambiguous. And because of the immediacy of the pain, it is the minority of globalization losers, not the majority of winners, who have a greater motivation to try to influence policy. That is why, despite the advantage for the majority, globalization faces an uphill battle in democracies.
In four brilliant chapters, Mandelbaum lays out the political hurdles that globalization must and, he believes, will overcome. In the first chapter he tackles the question of whether the world will continue to “be stable and peaceful enough to permit trade, investment and immigration on a large scale?” Mandelbaum compares global stability and peace to the roof of a house. Without a roof, the residents of that house would spend all their time battling the elements, severely limiting their ability to function productively. National economies also need a roof of security to function effectively, and for many years, he writes, that roof was provided by American military power. Today, however, there are two other sources of security that have made the roof sturdier, according to Mandelbaum: 1) the legitimacy of globalization, or more specifically of market capitalism and cross-border economic transactions, and 2) the new illegitimacy of war.
The second political challenge is the political backlash against cross-border flows. A global economy depends on the cross-border flow of goods, money and people. Unfortunately, as described above, the creative destruction of such a flow — that is, the difficult negative consequences required for a longer-term positive result — can motivate a minority of people to shut the gates. Mandelbaum believes, however, that because globalization makes all countries engaged in it richer, the gates will remain open at least to trade and investment.
The third political challenge comes in the form of global financial crises, such as the 2008 Great Recession in the United States. Mandelbaum turns again to a metaphor as he compares the flow of money across borders as having the attributes of a river: a life-sustaining force when under control, it can lead to widespread destruction when it overflows its banks and floods the land or streets around it. Financial bubbles are the equivalent of floods, and the most recent bubble, combined with the Euro crisis, has both the United States and Europe still trying to recover. Reducing a repeat of shocks in the future is vital to long-term economic growth, Mandelbaum writes.
Finally, he examines the challenges facing the BRICs — Brazil, Russia, India and China. Representing the largest and most powerful countries in four crucial regions of the planet and a total population of 3 billion people, the continued growth of the BRICs’ economies is vital to future prosperity. The Road to Global Prosperity is a tour de force of economic writing: at once brief and comprehensive, it offers an insightful framework that allows readers to grasp the complex political forces that may batter but not sink the global economy.