I Come to Bury Globalization, Not to Praise It
25 Pages Posted: 10 Nov 2009
Date Written: November 10, 2009
This paper measures and discusses recent developments of import volumes making appropriate comparisons against earlier historic episodes whenever relevant. The descriptive analysis covers the inter bellum, the major financial crises of the 1980s, the 1990s and early 2000, as well as the most recent crisis 2007Q1-2009Q2. The findings substantiated that recent developments classify as a unique phase in economic history. The analysis of these descriptive statistics suggests for the present import collapse as likely outcomes (peak to trough): a decline by some 20 to 25 per cent and a minimal duration of 5 quarters. It is quite possible that the collapse will continue - at least duration will in all likelihood increase further.
A preliminary cross-country investigation of competing theories regarding the drivers of the trade collapse in 45 individual countries finds the following. Countries that have strongly opened up to international trade and investment (as indicated by a high import inclination ratio) will reduce their imports comparatively to a lesser extent. It is especially relevant that the extent of (de)centralised decision making is significant. To put it simply, democracies trade too much for their own good – their decentralized reaction to trade uncertainty is suboptimal. The investigation refutes the popular thesis that the severity of the trade collapse is related to the occurence of international value chains. If anything these value chains appear to dampen the impact of the crisis on trade flows.
The cover design of this inaugural lecture is by Jan Pen.
Keywords: World trade, value chain, depression, financial crisis, import crunch, trade and conflict
JEL Classification: F01, F10, G01
Suggested Citation: Suggested Citation