What next after hyper-globalization and export-oriented industrialization?

Abstract

This paper delves into the evolving landscape of the global economy and its implications for countries like the Philippines. It explores the emerging paradigms that are reshaping economic policies worldwide. Traditionally, economic policies were anchored domestically in exportoriented industrialization models for rapid economic growth. However, the efficacy of this model is waning in the face of technological advancements and changing global dynamics. The hyper-globalization era, marked by financial integration and expanding free trade agreements, prioritized global competition over national interests. But geopolitical tensions, particularly between the US and China, are disrupting the notion of deep economic integration that was once deemed normal. Amidst these shifts, the paper envisions three potential scenarios: a 1930s-style collapse of the world economy (bad), increased weaponization of interdependence and rising geopolitical conflicts (ugly), and a better balance between domestic political autonomy and global integration, fostering a conducive environment for reconstructing national social contracts (good). The paper proposes a shift towards a different economic model focusing on the creation of “good jobs”, characterized by productivity levels that enable the creation of a middle class. These are expected to predominantly emanate from the services sector, particularly non-tradable services. This paper offers some insights for policymakers and stakeholders navigating through these transformative times. As the world economy undergoes profound changes, embracing new approaches and an experimental mindset become imperative for charting a sustainable path forward.

JEL classification: F6, F15, O14, O25v