The Ties That Bind

Globalization has suffered two setbacks. First, skyrocketing prices for oil and the financial crisis which destroyed trillions of dollars of wealth and sent the whole world into a recession. Evoking World War I and the Great Depression, observers such as Financial Times columnist Martin Wolf suggested that the economic crisis will stoke protectionism and nationalism and therefore halt globalization. But according to Nayan Chanda, "Globalization has been pronounced dead many times in the past. This time too those reports are greatly exaggerated." As long as there is human interaction and integration, globalization will live on. – YaleGlobal

The Ties That Bind

The age-old motives that have led human beings to connect will continue to integrate the world
Nayan Chanda
Thursday, February 26, 2009

In 2008, the process of globalization suffered two seemingly devastating setbacks. First, skyrocketing prices for petroleum and its derivatives raised the cost of international shipping and travel. Then came the crisis engulfing the world’s financial markets—a crisis that destroyed trillions of dollars of wealth and appears to have sent the West into a deep recession. Evoking World War I and the Great Depression, observers such as Financial Times columnist Martin Wolf suggested that the economic crisis will stoke protectionism and nationalism and therefore halt globalization. Plunging transportation costs, freer global trade, and cross-border money flows brought the world closer together. If those trends reverse, the logic goes, it will again drift apart.

Decades from now, however, the oil spike and the crash of 2008 will look like mere speed bumps on the road to an inexorably integrated planet. Globalization is not a purely economic phenomenon. It is a long-enduring and all-encompassing process that has been sustained over millennia, driven by the desire for a fulfilling existence. This process is not likely to reverse.

Globalization began when our ancestors started spreading out from Africa toward the corners of the world. Humans have been reconnecting with each other ever since, in all aspects of life, through a thickening web of relationships. Traders have been one set of agents for globalization; the others include preachers, adventurers, and warriors. As all of them left their homes in search of different kinds of fulfillment, they continually connected dispersed human communities and civilizations, gradually making the world smaller by shaping it into a patchwork of ethnic and religious groups.

Indeed, history teaches us that the forces driving global integration are remarkably durable, having survived myriad backlashes and long interruptions. Time and again, trade barriers have been raised, entire countries walled off, traders expelled, preachers executed, wanderers incarcerated, and foreign invaders repelled. Natural disasters and pandemics, like the Black Death and, more recently, SARS, have halted international contacts, often for long periods. The misery of the Great Depression and the destruction of World War II offered little hope for a prosperous, integrated world.

Once peace returned, however, the drive to connect—promoted by new technologies and institutions—resumed at full force. Migration grew. Trade volumes skyrocketed. Low-cost international travel and mass tourism turned ordinary citizens into adventurers.

Of course, the current worldwide economic crisis could again interrupt globalization. Trade may slow, and political or social turmoil may disrupt cross-border ties. But any swing toward protectionism and isolation, I believe, will be even shorter than the decade and a half of retreat that followed the Crash of 1929.

A number of factors make globalization virtually impossible to reverse. Diaspora communities are now connected, for the first time in history, in real time, through audio and video communication. From daily necessities such as food and clothes to automobiles to high technology, the products we use and consume today are truly global. Millions of goods have labels indicating a single country of origin but are in fact produced by supply chains touching the far corners of the earth. From iPods to granola bars, almost every manufactured item or processed food contains components or ingredients that traveled thousands of miles. These complex production systems will be hard and costly to dismantle, and consumers will not be easily weaned from such products and services.

The world is irreversibly integrated socially and culturally as well. Two hundred million people—more than the entire population of Brazil—are recent migrants living away from their places of birth. A global culture has emerged, from pop music to manga, TV soaps to video games, soccer to baseball, blogs to YouTube. Christians, Muslims, Buddhists, Jews, and members of other religious groups are connected as never before. Preachers will continue to spread their religions and religious ways of life.

As for the traders, the 2008 crash will not slow them for long; eventually, the global economy will recover. And while shipping and air travel could become more costly if oil prices soar again, sustainable-energy alternatives will appear. Technology will continue to make communication faster and cheaper.Globalization has been pronounced dead many times in the past. This time too those reports are greatly exaggerated. The age-old motives that have led human beings to connect will continue to integrate the world ever more tightly.

Nayan Chanda is director of publications at the Yale Center for the Study of Globalisation, and Editor of YaleGlobal Online.

© Copyright 2009 McKinsey & Company