The Great Convergence

The Great Convergence

Globalization, according to Richard Baldwin, a professor in international relations at the Graduate Institute of International Politics in Geneva, began in 1820, and lasted until 1990.

There were other periods of globalization, of course. More than 200,000 years ago, human population had moved out and away from Africa to different parts of the world. Some survived the migration, many did not.

What made the globalization of 1820-1990 unique was the dominance and commercial conquest of merely seven countries. The G7 i.e. US, Canada, Italy, Germany, England, Japan and France controlled 2/3 of the world's trade.

From 1990 onwards, to the degree the industrial preponderance has slipped out of the hand of the G7, from 2/3 to 1/5, the loss has slipped purely into the hands of what Richard Baldwin called the Industrializing 6 i.e. China, India, Korea, Poland, Indonesia and Thailand, with China alone increasing its per centage of global GDP from 3 per cent to more than 20 per cent.

This book is a must read in terms of how it defined old and new globalization too. In old globalization, the introduction of steam ships and telegrams reduced the cost of commercial transactions. But labor was still in-bound, and clustered in the respective G7 countries. Hence, between 1820-1990, the level of world income in these countries increased by 70 per cent.

From 1990 onwards, the figure has returned to a mere 20 per cent; back to where things were in the 19th century. This phase of new globalization has been much more damaging. It favors those who can be moved in and out of the industry quickly. It is in some sense a more pernicious form of globalization where no one knows what will hit them.

But what did Richard Baldwin mean by the great convergence ? The great convergence signals the arrival of internet, computer technology and the whole process of clustering businesses together, not necessarily sharing them widely beyond a certain locale, but allowing economic divisions of labor to occur in only some countries.