I recorded a long, fascinating interview this week with Richard Baldwin, professor of international economics at the Graduate Institute of International and Development Studies in Geneva, and author of new book called “The Great Convergence: information technology and the new globalisation”.
The audio and transcript can be found on The Constant Investor, and are well worth the investment in listening to it, or reading it in full. But here are some of his main points.
The Black Death of the 14th century – a pandemic that wiped out as much as 50% of the population of both Europe and Asia – led to the development of modern commerce by destroying the old feudal structure of society, and the first wave of globalisation in the 19th, which eventually flowed from that, directly resulted from a collapse in the price of shipping.
“I like to say that the steam revolution started the old globalisation, because it allowed countries to arbitrage goods, and that the ICT revolution started the new globalisation because it allowed the knowledge to move across international boundaries.”
“In essence, what happened to the factories over the last 20 years will be happening to the offices in the next 10 or 20 years, because you’ll be able to import assistance through telecommunications.”
As a result, protectionism like that pushed by Donald Trump, is like old generals fighting yesterday’s war: “they are trying to fix a 21st century problem with 20th century tools, and it will backfire, just won’t work.”
“The next wave of globalisation will be driven by more trade in services, not just trade in goods. I mean, I think that will continue to go on global value chains, but the big change will be this trade in services. Now, as you pointed out, one of the big barriers in trade in services is there aren’t that many people in Africa who speak English well enough to interact directly with people in English-speaking countries.”
That means translation tools such as iTranslate will become an important part of the new globalisation.
“I think (instant translation) will completely transform the world of trade in services, because, for example, all the doctors in Africa can provide healthcare service remotely while you speak English and they speak whatever the local language is. I think it will be very, very transformative.
And there’s much more, such as the need for a universal basic income, and thus the need to restructure the tax system, so that companies are taxed, not individuals (going against the current global mindset). That’ll put our debate about the corporate tax rate in the shade!