Hyperglobalisation

In News

Two wars are raging in 2022, which have undermined the hyperglobalisation.

• The first war is Russia’s invasion of Ukraine and the second is an economic war, a geopolitical confrontation between two superpowers (US and China).

Hyperglobalisation

• Features of  a hyperglobalised world:
  • Wars are not the norm and economies broadly follow the principles laid down by the late-18th/early-19th century economists Adam Smith and David Ricardo. 
  • Smith said in his ‘Wealth of Nations’ that if a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it  from them.
  • Ricardo said that countries could produce even things in which they had no “absolute advantage”. What mattered was “comparative advantage”. 
  • The second golden age of “hyperglobalisation” was propelled by the belief in comparative advantage.
• Different Phases:
  • The first “golden age” of globalisation was between 1870 and 1914, when world trade in goods surged from 9% to 16% of GDP. 
  • The second golden age of globalisation – The era of “hyper globalisation”: Between 1990 and 2008, global trade in goods soared from 15.3% to 25.2% of world GDP. 
  • Hyperglobalisation’s chief protagonist was China that emerged as the “world’s factory” and a “mega-trader”. China’s share in world merchandise trade has risen from 1.8% in 1990 to 11.1% in 2012.
  • The end of the era of hyperglobalisation: This era formally ended in 2022, which has seen not one, but two wars.
• Assumption of “doux commerce”: 
  • The idea states that trade makes men less prone to violence or irrational behaviour.
  • The French philosopher Montesquieu said that “commerce is a cure for the most destructive prejudices” and “peace is the natural effect of trade”.

Hyperglobalisation’s Impacts on the Indian Society

• It promoted production based on comparative advantage in India. 
• India is granting incentives amounting to 30-50% of project cost for semiconductor units manufacturing less-sophisticated 28-65 nm range chips that can be used in mobile phones, home appliances and cars. 
• Five years ago, it may not have considered this to be worth spending taxpayer money.

Source: IE