The Impact Of Globalization On The Global Economy

In order for globalization to work Stiglitz argues that the world needs to focus it’s aspirations on making trade fair, getting rid of widespread poverty, and providing foreign aid (Stiglitz, 5-19). These aspirations are the result of globalization and many countries doing their part by participating in the global economy. If G20 countries withdrawal from multilateral trade agreements and pursue isolationist economic policies, globalization will slow down and these aspirations will be forgotten about. Many countries like the United States and Britain threatening to or are already leaving their multilateral trade agreements because they face internal turmoil over unemployment and fears of being overrun by immigrants. Due to this internal turmoil

Isolationist policies are supported by the infant industry argument, which argues that newly formed industries do not have the economies of scale that older competitors in other countries have, thus they need to be protected in order to attain an economy of scale (Stiglitz, 70-73). Yet as Stiglitz highlights in his book these protectionist policies must stay in place to protect infant industries because they “never grow up and demand to be permanently insulated from outside competition” (Stiglitz, 70). The products that the protected industries develop will be higher priced and low quality because there will be no need to continuously innovate due to the lack of competition. Ultimately people will be paying higher prices for lower quality products. This has been demonstrated with American cars in the 1970s, Ford produced high priced, low quality, standard cars but when Toyota, a Japanese company broke into the American car market with a better priced and higher quality cars Ford was forced to innovate a create better prices to gain the consumers back (Molto, 80-82). To put it another way, G20 countries are some of the leading consumers in the world, but if they stop consuming then the countries that they are buying products from will begin to fail. Isolationist policies will make core countries import less to reduce competition, which for semi-periphery countries who largely depend on foreign investors for capital and periphery countries who produce cash crops and raw materials to be exported to wealthier consumer markets, both will be facing an inevitable crash in their local economy and in the global economy (Wallerstein, 28). The peripheral and semi-peripheral countries depend on the core countries to spend money and invest in them to keep their economies afloat, but without money being invested into those