Has Globalization Passed Its Peak?

Rawi Abdelal and Adam Segal

From Foreign Affairs, January/February 2007

Summary:  Not long ago, the expansion of free trade worldwide seemed inevitable. Over the last few years, however, economic barriers have started to rise once more. The forecast for the future looks mixed: some integration will probably continue even as a new economic nationalism takes hold. Managing this new, muddled world will take deft handling, in Washington, Brussels, and Beijing.

Rawi Abdelal is an Associate Professor at Harvard Business School and the author of the forthcoming Capital Rules: The Construction of Global finance. Adam Segal is Maurice R. Greenberg Senior Fellow for China Studies at the Council on Foreign Relations and the author of Digital Dragon: High Technology Enterprises in China.

Chinese leaders face even more serious challenges. The export-driven Chinese economy cannot survive without a flourishing global economy fed by U.S. consumption. Beijing must therefore work to counter the widespread hostility to China in the U.S. Congress by, for example, better protecting intellectual property rights. China must also try to lessen income inequality at home in order to limit the dislocation caused by globalization.

If all or most of these efforts are made, the world will no doubt find a way to muddle through. But this muddling must not be taken for granted; it will require hard and sustained effort by U.S., European, and Chinese leaders. Washington, especially, needs to think hard about how to sell globalization, and not just to the U.S. public but to the world. After all, the U.S. economy can ill afford a serious threat to the open markets on which it and, indeed, all of us depend.