Working Paper: CEPR ID: DP14990
Authors: Maurice Obstfeld
Abstract: Recent events have highlighted areas of conflict between economic integration with the outside world and the demands of domestic electorates. Historically, the tradeoffs have always become sharper in periods of crisis, such as the present. After reviewing the U-shaped progress of globalization since the nineteenth century, this essay reconsiders John Maynard Keynes’s views on “national self-sufficiency” in the early 1930s. I argue that the postwar Bretton Woods system he helped to create evolved from those views as a balanced middle ground between market forces and governments’ desires for domestic economic stability. The gradual erosion of that balance in favor of the market has helped produce discontent over globalization and more nationalism in politics. Enhanced multilateral cooperation in key areas offers the hope of supporting globalization while better meeting voters’ aspirations. Despite daunting political obstacles to global cooperation these days, collective action challenges in areas like climate, cybersecurity, and health – alongside economic policy – are only becoming more pressing over time.
Keywords: globalization; deglobalization; nationalism; populism; multilateralism
JEL Codes: F52; F53; F60; N20; N40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Globalization (F60) | Nationalism (F52) |
| Nationalism (F52) | Globalization (F60) |
| Economic Crises (G01) | Nationalism (F52) |
| Nationalism (F52) | Economic Integration (F15) |
| Erosion of Bretton Woods System (F33) | Nationalism (F52) |
| Economic Downturns (F44) | Political Polarization (D72) |
| Political Polarization (D72) | Nationalism (F52) |
| COVID-19 Pandemic (H12) | Nationalism (F52) |