Emerging Markets in an Upside Down World: Challenging Perceptions in Asset Allocation and Investment

Chapter 1

Globalisation and the Current Global Economy

‘Globalisation should not be just about interconnecting the bell jars of the privileged few.’

De Soto (2000, p. 219)

‘The benefits of globalization of trade in goods and services are not controversial among economists. Polls of economists indicate that one of [the] few things on which they agree is that the globalization of international trade, in which markets are opened to flows of foreign goods and services, is desirable. But financial globalization, the opening up to flows of foreign capital, is highly controversial, even among economists…’

Mishkin (2006)

In this chapter we discuss some of the background to attitudes towards money and debt. We explore the historical erosion of despotic power. We aim to understand globalisation, both ancient and modern, identifying the trends most important for current events and policy actions.

1.1 WHAT IS GLOBALISATION?

Globalisation has been through a number of cycles including in the nineteenth century period of free trade.¹ The term requires careful use: its range and ambiguity in common parlance can cause misunderstanding.

Globalisation is both a state and a process. It has an economic facet, perhaps best described as the greater interconnectedness of trade and investment as transactions costs and barriers reduce, but also the idea of lack of constraint on markets by government. It is this element that investors are ultimately most interested in. But globalisation also has a technological ...