Martin Wolf in his work “why globalization works” defines globalization
as a “movement in the direction of greater integration” (15). Wolf vehemently
supports the concept of liberal market economies and global economic
integration while acknowledging that “a necessary consequence…is the increased
impact of economic changes in one part of the world on what happens in the
others” (15). With globalization, countries are more and more dependent on the
economic activities of nations far outside their borders. The expected benefits
of these relationships are obvious--not only does the increase in trade allow
for growth in each country's market economy, but it also spurs domestic
competition and spreads innovative international technology. Wolf views even
the classic criticism of liberal trade (that it benefits the productive
economies of developed countries while taking advantage of developing nations)
as an advantage to the global economic efficiency, for it provides the highest
possible productivity. What Wolf does not touch on, however, is the danger that
lies with nations' interdependency in terms of capital. Without checks on the
rate at which globalization inevitably multiplies, an economic downturn
experienced by one nation will have devastating effects across the globe.
Nowhere can the danger of interdependent market economies be seen more
clearly than with the debt crisis in Greece. The creation of the Eurozone
allowed for a fluid trade environment within the European Union, but as Greece
threatens to default on its loans, all of the countries in the Union suffer
from the decreasing value of the Euro. The European Union must continue to
support Greece in order to stave off complete insolvency, but here Wolf’s
premise becomes harmful. Every country in the European Union faces economic
disaster if Greece’s struggles destroy the value of the Euro, and yet no
country, newly prosperous Germany in particular, wants to sacrifice their own
profit in order to aid an unstable nation fraught with political turmoil.
Yes, as Wolf lays out, the value of the Euro lies in the ease of
currency flowing across borders. A globalized economy allows for the most
efficient market, but do the risks of interdependency outweigh the benefits?
Wolf would say no, but Greece’s recent failures create pause. If their economy
continues to spin out of control and the country defaults on its astronomical
debt, the entire European Union will feel the effect.
Furthermore, Greece is not the only country threatening the fate of the
Eurozone. Like Greece, Spain’s economic situation is similarly troubling. High
unemployment in the nation demonstrates a stagnated growth that threatens Spain’s
market economy. Spain’s struggles in turn exacerbate the difficulty facing the EU.
Just as with Greece, much of the country’s fate rests in Germany’s hands. One
of the few countries facing economic gains, Angela Merkel’s nation must now
decide to what extent it must support almost single-handedly those nations that
have not successfully regulated their own economies.
Economist Joseph Stiglitz speaks extensively to the dangers of
globalization, highlighting the common criticism that Wolf glosses neatly over.
Highly industrialized nations have benefitted greatly from globalization while
leaving their less advanced contemporaries far behind. Yet in this instance it
is not developed versus developing, but rather a group of developed nations.
Should Germany focus on its own self-interest and increase its comparative
advantage? In a short-term, nationalistic sense, the country should leave its
struggling neighbor-states behind. Yet because of the interdependency promoted
by globalization, the short-term benefits of establishing market dominance may
lead to long-term costs across the continent.
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