Historical experience shows that economic globalization lasts long only if it can develop sustainably. Over the past 200 years, the world has experienced two waves of economic globalization. The first began during the Industrial Revolution in the mid-19th century and early 20th century, especially between 1860 and 1914. This period is known as the golden age of free trade, when international trade and capital flow increased rapidly, and global trade reached an unprecedented scale. The outbreak of World War I marked the end of the first wave of globalization. The war led to trade disruptions, financial turmoil, and tensions between countries, causing the global economy to stagnate and decline for a time. However, the benefits stemming from globalization were not equitably distributed in the West, and the people living under the Western empires suffered particularly hard.
The second wave occurred after World War II, began to accelerate in the 1970s, and galvanized the whole world since the 1990s due to China’s pursuit of reform and opening-up, the disintegration of the Soviet Union, the radical transformation of Eastern Europe, and the opening up of markets and trade by other countries. Nevertheless, on the eve of the end of World War II, the new global economic order that the United States intended to build was not aimed at globalization but at entrenching US global hegemony. The US was willing to recognize that in addition to the free market, state institutions should play an essential role in economic development and market regulation, so it initially had a positive attitude toward the mixed economic system. In that system, the US dollar (USD) became the world currency, and the exchange rates of other countries’ currencies against the USD were fixed. However, with the development of technology, the sharp decline in communication and transportation costs, the increasing openness and freedom of trade, the decoupling of the USD from gold in 1971, the relaxation of regulations on capital markets and financial institutions, the more unrestricted flow of capital between countries, and financial globalization emerging one after another, the second wave of globalization surged forward unrelentingly. However, about a decade ago, the second wave of globalization led by the US became increasingly unviable. As protectionism, unilateralism and selfishness continue to rise in the West, especially in the US; the currents of “deglobalization” and “anti-globalization” are pushing ahead. Today, it can be said that the second wave of globalization is beginning to end.
The lack of sustainability in these two waves of globalization has international and domestic reasons. The international reason is well-known. It is that many non-Western countries and regions that actively, passively, or even forcedly, participate in globalization believe that globalization catering primarily to Western interests is unfair to them, lacks inclusiveness, and hinders development. Therefore, gaining international legitimacy for US-led globalization by promoting common development is increasingly impossible. However, since the non-Western world lacks the power to transform or overthrow Western-dominated globalization, it can often only compromise and accept its fate. Accordingly, the main reason the two waves of globalization were challenging to sustain came from within Western countries, especially the US. In other words, the failure of the two waves of globalization was due to the opposition and resistance of the Western people.
In the second wave of globalization, the US, the United Kingdom and some other European countries have seen some phenomena that have run afoul of the public, including deindustrialization, a continuous reduction in high-quality jobs in the manufacturing industry, the proliferation of the virtual economy, the unabated decrease in social welfare, the decline of trade unions, workers lacking bargaining power with capitalists, the widening gap between the rich and the poor, the domination of the financial and high-tech elites, frequent economic crises, the shrinking middle class, young people with few opportunities to move up, social injustice, stagnating living standards of the middle and lower classes, expanding trade deficits, accumulating and overwhelming public and private debts, and illegal immigration, which are becoming more serious. More and more Americans and Europeans believe they are victims of globalization.
Martin Daunton, professor of economics at Cambridge University, argued in his book The Economic Government of the World 1933-2023 (2023) “that globalization ended in the early 20th century partly because economic inequality led to a backlash. The multilateral institutions and recovery after 1945 rested on reducing inequality and a turn to inclusive growth in the Global North, based on a contract between labor, capital, and the state.” The emergence of gross disparities within those economies in the recent past provoked a powerful backlash when this contract ceased to exist with the collapse of communism in the Soviet Union and Eastern Europe and the rise of neoliberalism in the West, and when competition with socialism was no longer necessary. Consequently, the second wave of globalization lost its internal support in Western countries.
Although globalization has harmed the interests of workers, the lower classes and some regions in the US and Western countries, few countries’ leaders have formulated policies and allocated resources to compensate the victims. Therefore, the calls and actions against globalization are hard to contain. As a result, more and more people in the West have become ardent supporters of populist, nationalist, statist and racist forces that oppose globalization. New right-wing political forces have emerged in the US and European countries, either in power or participating in government, with US President Donald Trump being the most prominent example. Over the past decade or so, whether it was the Republican Trump or the Democratic Joe Biden in power, the US was moving doggedly toward isolationism, and “America First”, the second wave of globalization was challenging to continue due to the gradual withdrawal of the US.
“Chinese-style economic globalization” is not only in line with the central trend of world development but also conducive to strengthening support for it in China. Even if the US-led globalization is phasing out, China will take up the baton to become the designer, initiator and promoter of a new wave of globalization
While the US no longer trumpets and supports globalization, China has become its key defender and promoter. Over the years, President Xi Jinping has repeatedly stressed the importance of globalization to the development of all countries and humanity and asserted that globalization should be actively advanced rather than reversed. On Nov 15, Xi pointed out at the APEC CEO Summit: “Economic globalization is an objective requirement of growing social productive forces. It is a natural outcome of advancement in science and technology and a mighty historical trend. Despite headwinds and undertows, economic globalization has always been the general trend. The attempt to block economic cooperation under all sorts of pretexts and break up the interdependence of the world is nothing but backpedaling. Economic globalization is caught now in a tug of war between driving and obstructive forces, but the driving forces still prevail. ... We should steer economic globalization in the right direction. We must reject the beaten path that a few countries have taken to pursue dominance and hegemony. We should see to it that economic globalization generates more positive outcomes and is taken to a new phase that is more dynamic, inclusive and sustainable.” The Belt and Road Initiative, BRICS, the Regional Comprehensive Economic Partnership, and other economic and trade cooperation mechanisms have showcased the principles and goals of “Chinese-style economic globalization”. Among them, mutual respect and benefit, equal treatment, inclusiveness, mutual assistance and common development are fundamental. Since “Chinese-style economic globalization” aligns with the interests and demands of most non-Western countries, it has unlimited development space and potential.
The most significant difference between the “Chinese-style economic globalization” and the US-led globalization is the former’s strong support within China. Since China launched reform and opening-up in the late 1970s, it has enthusiastically embraced the tide of globalization and created an unprecedented economic miracle that has attracted worldwide attention. Over the past few decades, China’s economy has grown rapidly, and people’s living standards have continued to rise. Specifically, the Chinese people are improving in diet, clothing, health, height, weight, home ownership, household appliances, leisure and tourism. Therefore, China is a stellar beneficiary of globalization and is bound to be a staunch supporter.
Indeed, globalization has also generated problems of unbalanced regional development and a widening income gap among the Chinese people, and these problems are precisely the essential reasons why people in the US and other Western countries oppose globalization. However, as a country that practices socialism with Chinese characteristics, the Chinese government will inevitably face and deal with those problems seriously and ensure that all Chinese people can share the dividends of globalization. Chinese economist Cai Fang writes in his book Understanding the Future Chinese Economy: 14th Five-Year Plan to 2035: “In general, China’s reform and opening-up has brought about shared economic growth, and all groups’ income is growing, especially for low-income groups, which is also improving, allowing everyone to share the fruits of economic development. This is also why Chinese society can withstand a Gini coefficient above 0.4. Although economic growth will gradually decrease in the future development stage, the economic pie will still get bigger, though its expansion speed will ease. At that time, if the pie cannot be divided well, the result will be that it cannot be properly shared among people. … Previously, it depended more on primary distribution, relying on the labor market mechanism to solve the distribution problem. Now, it seems that to narrow the income gap to a more reasonable level, it is not enough to rely solely on the primary distribution mechanism. There must be a change in the income distribution policy; that is, there needs to be a reform of the income distribution system and more robust redistribution efforts. Only by doing so can the income gap be narrowed to a socially affordable level consistent with the development stage. … In general, as China’s economic development enters a new normal, the stage of rapid expansion of labor force participation and dramatic income growth has passed. Improving the quality of life of residents and expanding the middle-income group now depend more on redistribution policies, transforming the middle group in the demographic sense into the middle-income group in the economic and social sense to enhance the inclusiveness of economic development, facilitate the equal supply of basic public services and improve income distribution.”
Three other Chinese economists — Fan Gang, Zheng Yujie and Cao Zhongxiong — point out in their book Dual Circulation to Build a New Development Pattern for the 14th Five-Year Plan: “There are some obstacles in income distribution, which are mainly manifested in: the income distribution structure significantly biased toward enterprises, a high Gini coefficient showing a comparatively large income gap, and insufficient effective demand for consumption by low-, medium-, and high-income residents.” Therefore, the Chinese government’s role in changing the income structure is bound to become increasingly important.
From another perspective, building a fair and just society will further consolidate and strengthen the Chinese people’s support for globalization, stimulate domestic demand, and add a necessary impetus to China’s economic development. The central government is fully aware of all this. On July 18, the third plenary session of the 20th CPC Central Committee made these decisions: “The foci should be on improving people’s quality of life, improving income distribution and employment systems, strengthening the social security system, enhancing the balance and accessibility of basic public services, and promoting the comprehensive common development of people. … Integrating urban and rural development is necessary for China’s modernization. We must coordinate new industrialization, new urbanization, and comprehensive rural revitalization, comprehensively enhance the integration of urban and rural planning, construction, and governance, and promote the equal exchange of urban and rural elements and their two-way flow to narrow the gap between urban and rural areas and promote the shared prosperity and development of urban and rural areas. … Build a coordinated and complementary system of primary distribution, redistribution, and tertiary distribution, increase the proportion of residents’ income in the distribution of national income, and increase the proportion of labor remuneration in the primary income distribution. Improve the mechanisms of wage determination, reasonable growth, and payment guarantees for workers and improve the policy system of distribution according to various factors. Support the development of public welfare and charity. Standardize the income distribution order, standardize the wealth accumulation mechanism, and increase the property income of urban and rural residents through multiple channels. Create an institutional system that can effectively improve the income of low-income groups, steadily expand the size of the middle-income group, and reasonably regulate excessive incomes.”
Although “Chinese-style economic globalization” unavoidably has also brought about problems such as unbalanced regional development and significant income gaps, everyone has benefited from the continuous improvement of living standards stemming from globalization. China is a socialist country. The central government’s policy allows some people to get rich first, but the final goal is to achieve “common prosperity”. The Chinese government will continue formulating policies and measures to eliminate poverty, increase welfare and services, and narrow the gap between the rich and the poor. The government will also persist in regulating domestic and foreign capital to prevent the occurrence of financial crises that would seriously damage the interests of the people due to excessive expansion and free flow of capital.
Equally important, China will not follow the US’ mistake of “deindustrialization”. The proportion of manufacturing in China’s economic structure will still be relatively high and increasingly embody new quality productive forces. It will also provide many high-quality jobs, promote the continuous expansion of the middle class, and make them the beneficiaries and supporters of “Chinese-style economic globalization”.
In general, “Chinese-style economic globalization” is not only in line with the central trend of world development but also conducive to strengthening support for it in China. Even if the US-led globalization is phasing out, China will take up the baton to become the designer, initiator and promoter of a new wave of globalization.
The author is a professor emeritus of sociology, the Chinese University of Hong Kong, and a consultant for the Chinese Association of Hong Kong and Macao Studies.
The views do not necessarily reflect those of China Daily.
