Does globalization bring the world closer or farther apart?
On Thursday, May 27, the Boris Mints Institute at Tel Aviv University presented a special webinar, ‘The Challenges of Globalization – Where Do We Go from Here?’
By ALAN ROSENBAUMTEL AVIV UNIVERSITY, home of the Boris Mints Institute for Strategic Policy Solutions to Global Challenges(photo credit: CHEN GALILI)
From iPhones to Twitter, the world has become interconnected as never before. Consumer goods and services, culture, and ideas move about the globe at lightning speed. The interdependence of the world’s economies, cultures and population – known as globalization – has benefited millions but is also fraught with danger.On Thursday, May 27, the Boris Mints Institute at Tel Aviv University presented a special webinar, ‘The Challenges of Globalization – Where Do We Go from Here?’ featuring world-renowned economists and social scientists from Israel, the United States and the United Kingdom, who discussed current economic issues and the sustainability and future of democratic institutions.The group of distinguished speakers included Prof. Manuel Trajtenberg, head of the Institute for National Security Studies, Tel Aviv University; Dr. Nadine Baudot-Trajtenberg, former deputy governor of the Bank of Israel; Prof. Anat Admati, Stanford University Graduate School of Business; Prof. Itai Sened, dean of the Faculty of Social Sciences, Tel Aviv University and head of the Boris Mints Institute; Prof. Simon Hix, professor of Political Science and pro-director, London School of Economics; and Prof. John Carey of Dartmouth College. The recording of the webinar is available here.IN A wide-ranging interview with The Jerusalem Post, Prof. Trajtenberg, an economist and former member of the Knesset, renowned for his expertise in the economics of technological innovation, development and growth, explained that the current wave of globalization began after the fall of the Soviet Union in the late 1980s and early 1990s, along with the expansion of the World Trade Organization. Many trade barriers, such as tariffs and regulations that limited the free flow of goods, were removed.“Globalization was also a huge expansion in what was being traded,” he added. “It was not only goods but also services, people, financial capital, ideas, culture, and intellectual property. It was a major expansion both in terms of the volume of trade and the type of things that were moved around and traded.”Another significant aspect of globalization, he noted, was the growth of multinational corporations that began to operate in different countries around the world, which allowed them to take advantage of wage differentials and access to raw materials. The rise of multinationals also led to fewer jobs in some regions of the world.“If a US corporation set up shop in the Philippines, for example, there would be fewer jobs in specific areas in the US.”Finally, he explained, the different locations and countries in which multinational corporations operated frequently allowed them lucrative tax benefits in their locations.“The benefits of globalization,” he noted, “are obvious. Whenever you expand trade, you expand gains from trade. If in Israel, I can import goods from another country, I will do so if they are cheaper or better than those here in Israel, so there is a benefit.”AdvertisementTrajtenberg also pointed that the free flow of capital engendered by globalization allows capital to reach locations with investment opportunities. In addition, outsourcing employment to diverse areas globally has led to the reduction of extreme poverty in many areas of the world.
On the other hand, globalization has caused dramatic increases in inequality and the loss of local industries that have been moved to other locations around the world.“Within the United States and many Western countries,” he explained, many people are disenchanted with globalization because they have not seen any benefits.”In the United States, for example, the lowest socio-economic group of the population has not seen an improvement in their income for several decades and has not benefited from these processes. Trajtenberg added that the largest multinational corporations hold a vast concentration of economic power.“They are not just multinational – they are trans-national and they are like a power unto themselves. There is a backlash in countries, which are starting to fight back against these corporations,” he said.Trajtenberg said that while the process of globalization has been easy to trace in terms of volume of trade, movement of people and capital, other events have been occurring around the world, such as the financial crisis of 2008, which have threatened both political and governmental institutions.“The instability of the global financial system, the fragility and the financial crisis of 2008 have threatened both political institutions and government institutions,” he said.PROF. MANUAL TRAJTENBERG, economist and head of the Institute for National Security Studies, TAU (Credit: MIRIAM ALSTER/FLASH90)TRAJTENBERG POINTED out that numerous challenges to democratic institutions have appeared in recent years, such as the rise of populism, weaknesses in the political party system in the US, France and the UK, and the lack of accommodation and agreement between political parties. He noted that the pandemic highlighted the weakening of global institutions, such as the ineffectual performance of the World Health Organization.He suggested that the pandemic, which isolated most countries from each other, has started a process of national introspection and self-examination within many countries, which may counter globalization to a degree. Governments are questioning if they have the proper institutional setting to cope with today’s challenges.“Countries have discovered that they don’t have good health systems and they will pay attention to it. That means looking inward and not so much outward to globalization.”In addition, countries that have discovered that they cannot manufacture life-saving medical devices because the parts are made elsewhere may decide to develop a local capacity for manufacturing their own parts.The Israeli experience with globalization, said Trajtenberg, has been a mostly positive one. Israel’s strength lies in its hi-tech sector, which is entirely directed to other countries. In addition, he pointed out, most of the capital involved in hi-tech flows outside the country, as the large number of Israeli companies listed on the NASDAQ illustrates.“From that point of view, we have benefited enormously from globalization,” he said.At the Boris Mints Institute’s webinar, in addition to outlining the issues of globalization, Trajtenberg discussed his solutions for “reforming the rules of the game in the Knesset” in order to improve its functionality. He suggested that the functioning of the Knesset can be changed in such a way to positively impact its members’ behavior in a fundamental way by changing the legislative process.“It is a well-known phenomenon,” he pointed out, “that institutions are slow-moving objects. Technology moves very fast. Demography changes. The Knesset is the same Knesset. Over time, you have increased friction between the slow-moving institutions and the fast-moving circumstances in which these institutions operate. From time to time, you have to revisit them and ask how one can improve the functioning of these institutions. To do that, you need to think of it as a mechanism. Our thinking of political institutions is tainted. We are looking through it with the wrong lenses. Think of it as a machine that you can change the way it functions.”Globalization and the weakening of the institutions of democracy everywhere present a threat to a harmonious world. “The Challenges of Globalization – Where do we go from here?” presented by the Boris Mints Institute contributed further thought and understanding to solving these issues.This article was written in cooperation with the Boris Mints Institute for Strategic Policy Solutions to Global Challenges.
