Summary of The Great Convergence

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Many people believe that globalization began with the telecommunication and technology advances of the 1990s. But economics professor Richard Baldwin argues that globalization’s narrative is far more nuanced, with significant historical context dating back to the 1800s and with important prospects unfolding in the 21st century. He makes a strong case that the central theme of globalization relies on innovation mitigating the costs of moving goods, ideas and people. Executives, analysts and students will find this an intelligent and comprehensive exploration of globalization past, present and future.

About the Author

Richard Baldwin is an economics professor at the Graduate Institute in Geneva and the president of the Centre for Economic Policy Research.

 

Summary

The main drivers of globalization are the costs of transporting goods, ideas and individuals.

These three essential economic activities constitute the “constraints that limit the separation of production and consumption” in cross-border trade. The structure and outcomes of globalization over 200 years demonstrate distinct, clearly demarcated patterns, as human progress overcomes each constraint in a sequential, “cascading” fashion.

The first constraint, the cost of moving goods, fell away over the period from 1820 to the 1990s. The harnessing of steam power in the early 1800s substantially and abruptly reduced the expense of transporting merchandise over long distances. Those lower costs spurred industrialization. Removing this constraint was “globalization’s first unbundling,” in which producers and their customers no longer had to be geographically close for trade and economic activity to take place.

The Industrial Revolution spawned a “Great Divergence” in wealth.

But the costs of moving ideas and people remained high, which kept manufacturing centers concentrated in the Northern Hemisphere. Nations specialized...


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