Did too much faith in free markets undo globalization?
Published 21 November 2023
China’s revived mercantilism and state-led capitalism defy traditional laissez-faire trade theory, revealing a shift toward the statist approach to industrial policy and retaliatory trade actions. This interview by the Association of Foreign Press Correspondents-USA, in partnership with the Hinrich Foundation, unpacks the disruptive forces in the free market system.
The late 20th and early 21st-century globalization was driven by a consensus on the advantages of neoliberalism, maximizing economic welfare through efficient resource allocation. However, the sustainability and equity of this process rely on the universal adoption of this approach, which has not been the case. Even the World Trade Organization, the governing body of the global trading system, has not been able to enforce comprehensive regulatory alignment behind national borders.
As states that eschew market forces rise to prominence, such as China, many of the theoretical mechanisms that should have ensured the delivery of net benefits under the market system have broken down. In response, many nations are adopting a more mercantilist approach. Hinrich Foundation Research Fellow Stewart Paterson raises pivotal questions for nations on whether to become more like China, put an end to economic engagement with China, or carry on as before, hoping that economic pressure will prompt Beijing to shift away from the mercantilist economic structure. Watch a recap of the webinar for further insights into the future of international trade, centered around China’s influence.
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