With Globalization at Risk, Hufbauer and Suominen have produced a very useful book for both the specialist and the general reader. Their volume provides an updated monitor of some key vital signs of globalization with a neat selection of the evolution of pertinent indicators on global trade and finance – although international migration of labor is conspicuously absent. The authors distill and present clearly and lucidly the best supporting evidence of globalization as a force for good, while skillfully refuting some of the arguments put forward by the skeptics or outright opponents of the process. Convincingly they submit that the ‘Great Crisis’ of 2008–2010 has been the biggest challenge to contemporary globalization, and sketch in a very accessible way its gestation, outbreak, and fallout.
There is no question that this book will easily join the select group of serious and convincing contemporary pro-globalization works alongside the celebrated volumes by Martin Wolf and Jagdish Bhagwati. The authors do an excellent job proving what they call their main theses: that globalization has delivered heady economic benefits; that it has not been automatic, having required active policies to foster it; and that preventing its derailment will require tireless work, domestically and internationally.
In writing this book, the authors task themselves with three worthy objectives: assessing globalization, identifying the biggest challenges to its future, and producing an action plan to both further it and make it better. They do a fine job on the first two, but it is questionable whether they even come close to delivering on the third. Their scattered, and for the most part uncritical, recollection of a number of ideas that have been floated to improve one or another aspect of global macro-economics, finance, and trade does not really add up to the road map they purport to produce.
This insufficiency seems to arise from a basic inconsistency between the authors' diagnosis and a central premise they use to formulate their prescriptions.
On the one hand, they tell us that economic policymaking is no longer about fine-tuning the business cycle or boosting growth rates; that the design of the economic system is now up for grabs; that we are in for years of reexamination of the policy framework; and that incremental realignments may no longer suffice. On the other, they take the stance that a major recalibration now seems virtually unattainable; that this is not the time for a full-blown revision of global governance, nor could it be accomplished; that leaders cannot abandon aspects of national sovereignty that their people treasure – in short, that incremental change will remain the name of the game. They clearly abide by the latter in formulating their prescriptions. To their merit, they warn us that this approach may not do the trick; but, if this is so, then their claim that they set out to deliver a blueprint to preserve and improve globalization is not fully warranted.
Their avoidance of dealing with the hard dilemmas involved in the provision of the kind of international coordination and cooperation that is urgently needed to manage the challenges to twenty-first century interdependence is well illustrated by their vague as well as naïve proposition that changes to the governance of the global economy will happen bottom up within the system. This suggestion seems to ignore the role that governments and other institutions must play, among other tasks, in correcting cross-border externalities and delivering international public goods. True, without the impulse of civil society, local communities, and governments, national leaders could easily opt for inaction in the face of some key global challenges. But it is equally true that such impulses may not always propel politics in the right direction and, more importantly, ultimately great doses of statesmanship – well above and beyond the domain of parochial politics – are usually needed to catalyze indispensable collective international action, the chances of which happening are not significant according to Hufbauer and Suominen.
The weakness in this book's prescription is better illustrated by the treatment of global financial imbalances, which they rightly identify as one of the key causes of the great crisis. They excel in explaining why large imbalances helped to create so much trouble and why they must be stopped from reemerging as an essential ingredient of global financial crisis prevention. And, yet, they immediately submit as immovable two fundamental propositions: one, that fiscal policy will continue to be ruled by domestic political economy; and, two, that financial oversight will remain a sovereign prerogative of the same rank as the power to print money. If the authors truly believe this, then they are not giving any chance to the G20's declared objective of rebalancing global growth, since practically unprecedented macroeconomic policy coordination is needed to achieve it.
In fact, if they stick to their conviction that governments of the key economies are not about to give up or share any of their respective fiscal and monetary sovereignty, then it is hard to see how any of the ideas that Hufbauer and Suominen discuss to somehow improve global economic governance will be adopted and put into practice anytime soon. Unfortunately, events on the ground give credence to the authors' skeptical – bordering on the cynical – attitude towards the feasibility of meaningful improvements in global economic governance.
The fourth G20 summit that took place in Seoul after the publication of this book, and that was supposed to produce robust policy recommendations to implement the September 2009 Pittsburgh framework to ‘ensure that fiscal, monetary, trade and structural policies are collectively consistent’ was a failure. Now, it is not hard to envision that as deficit developed countries try to overcome their economies' sluggishness while the surplus emerging economies stick to the export-led strategies that yielded them high growth and strong recovery, the global imbalances will widen again. Even worse, the imbalances may not widen again but for the wrong reason. What if each key player engages in a tit-for-tat strategy to undo strategies of its perceived competitors and in the end the imbalances do not widen because economic growth and trade are destroyed?
True believers in globalization, as Hufbauer and Suominen undoubtedly are, should be willing to push the envelope to argue in favor of more ambitious reforms of the international economic system, even if short-term political realities are not propitious for those reforms. This lack of ambition in putting forward the kind of adaptations that would have to be undertaken – even at the expense of traditional sovereignty – as economic and geopolitical power continues to shift substantially in the years to come, constitutes this book's shortcoming. Fortunately, the volume has many other virtues and I, for one, will ask my students to read it carefully.
