The continued globalization of the modern economy is not necessarily unstoppable nor irreversible, said Ernesto Zedillo Ponce de Leon, director of the Yale Center for the Study of Globalization, professor of international economics and politics at Yale University, and former president of Mexico. “Technology is important, but we should never underestimate the destructive power of government regarding trade,” Zedillo said during the Myron Scholes Global Markets Forum Series, which is sponsored by the Initiative on Global Markets and funded by the CME Trust. He spoke at the Charles M. Harper Center on May 11.
Beginning with the Great War in 1914 and continuing through the end of World War II in 1945, all the progress in international financial markets, international trade, and migration was destroyed, he said. “From a very long-term perspective, it is true. Something forces us to get together after our fights,” Zedillo said. “But we also have periods of great disruption and isolation.”
The global economy has performed well despite some unsound economic policies by governments of some key countries, he said. Central bankers want credit for this growth, but Zedillo believes other key factors are at play.
“Let me suggest the big compensating factors have been international economic integration and interdependence,” Zedillo said. “The capacity of the market economy to fulfill human needs has been enhanced to an unprecedented extent by international trade and investment. The increasing interdependence of the national economies has added scale, flexibility and productivity to the global economy.”
Contemporary globalization is a powerful force capable of doing much for the progress of humanity, but it is not an inexhaustible force, he said. To avoid the reversals of history, leaders must recognize the risks threatening globalization’s resilience, including global imbalances, global public health crisis, and imaginable catastrophes, Zedillo said.
“The fear of nuclear detonation has come back again, with the near-collapse of the non-proliferation regime,” he said. “When people ask me, ‘What is your worst fear that could stop and even end the process of global integration that we have known?’ I say, ‘Nuclear detonation.’ That would be like going to a dark age again.”
The most important issue facing economists and politicians is determining how to convert to the free market societies without the economic background to understand its benefits, Zedillo said. “First you have to deliver,” he said. “If you speak of free markets but do not deliver, people will not make the connection. You have to explain it is not always a win-win situation. It is about competition. Some people win; some people lose. But you have to make sure the playing field is level, and the rules must be fair.”
Speaking on the then-unresolved Doha Round of the World Trade Organization’s globalization negotiation, Zedillo predicted a change in offers between the United States and the European Union on protectionist policies. Zedillo said the two sides would offer a modest improvement of what’s already on the table. “This change will be presented—and I will say the same—as a big breakthrough,” he said. “It will then be clear that the reform ambitions this round had have been dramatically scaled down.”
—Phil Rockrohr
