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Book Review: The Great Convergence: Information Technology and the New Globalization

Rising globalization denotes the widening and deepening of interdependencies among the world’s sovereign states, where the very natures of once distinctive economic, political, and social systems become transformed by the crossborder movement of goods, services, monies, ideas, technologies, and people. In a narrower sense, this process denotes the sustained integration of economic agents across space, a condition that leads to price convergence in both factor and final markets at all locations. The complexity of globalization is sometimes seen through the lens of global production networks, where the pivotal roles of embedded knowledge and financial efficiency are highlighted (Dicken, 2011). Richard Baldwin’s compact and well-written book exposes the economic logic behind several phases of globalization and uses these observations to shed light on future directions in the world economy. Although the book’s material is mostly theoretical, or conceptual, Baldwin peppers his discussion with both examples and case histories, and throughout he shows a keen appreciation of the perspectives of other scholars in location theory, economic history, and political economy. The book begins with a short but useful exposition of the slowly changing global situation during the many centuries of Asian economic domination. In order, climate change allowed several clusters of production and consumption to appear near 30° north latitude; overland transportation then tenuously tied Asia to Europe; and a series of events, including the Black Death, severely disrupted the social fabric and economic equilibrium of feudal Europe (Diamond, 1998). But during this lengthy time period, the European mind-set became sufficiently outward looking to encourage both remarkable geographic exploration and tentative scientific experimentation. Moreover, once the so-called Columbian Exchange was established, and staples like fish, potatoes, and maize regularly flowed back to Europe from the New World, more leisure time was available for the European elites, and higher population densities arose in the most favored agricultural regions. This era of protoglobalization, which centered on the North Atlantic basin, laid a solid foundation for the dramatic changes that followed. The historian Keith Pomeranz coined the phrase The Great Divergence to denote that time period, between 1820 and 1990, when the Industrial Revolution qualitatively changed our views about the environment, led to the emergence of highly specialized industrial metropolises, and significantly diminished the importance of physical distance as a constraint on the movement of raw and finished goods. During this period patterns of production and consumption dramatically shifted and trade volumes steadily climbed, as a virtuous cycle of “industrialization, agglomeration, and innovation yielded . . . a huge North-South knowledge gap” (p. 19). In the United States, this cycle led to the emergence of an extensive manufacturing belt, stretching along canals and rail lines from New York City in the east to St. Louis in the west, which even today influences location decision making and the geography of American innovation (Pred, 1966). Over the years, the share of world income flowing to the world’s handful of rich (G7) nations grew remarkably from some 20% to almost 70%. Baldwin sensibly divides this period into three intervals, where the middle interval (1914 to 1945) witnessed a reversal caused by the two World Wars and a severe global depression. During those 30 years, international trade became riskier and more expensive, and tariff walls were set up to protect agricultural and industrial production in most nations. But globalization eventually resumed after World War II, in large part because of the success of the General Agreement on Tariffs and Trade/Word Trade Organization (GATT/WTO), which encouraged nations to substitute rules-based trade for results-based trade. The transparency and nondiscriminatory features of this agreement, forged by American leadership, are lauded by Baldwin for creating a trusted basis for production and exchange across the entire world stage, and trade volumes, aided by early containerization, soared again after 1945. After 1960, national trade volumes invariably grew much faster than national output figures, and the exchange of goods and services then became the dominant characteristic of globalization. In fact, this gap became especially pronounced in the world’s emerging markets where, by 1990, the importance of trade (value of exports plus imports) had climbed to 940523 EDQXXX10.1177/0891242420940523Economic Development QuarterlyBook Reviews book-review2020