A new global economy is emerging in the wake of the recent financial crisis, with production coordinated across countries and firms, and China and other Asian nations becoming more attractive markets for both domestic and foreign producers, says a Duke University expert who will speak Monday morning at a World Bank conference in Washington, D.C.
"The crisis of 2008-09 has not reversed globalization," says sociologist Gary Gereffi, director of Duke's Center on Globalization, Governance & Competitiveness. "The world economies are increasingly integrated, interdependent and specialized."
Far from putting the brakes on globalization, the world's financial crisis has accelerated the importance of "global value chains" (GVCs) that span companies and nations to bring goods and services through their various stages to global markets, Gereffi says.
"GVCs have proven resilient and have emerged as a long-term structural feature of the world economy," he writes in the opening chapter of "Global Value Chains in a Post-Crisis World," a new World Bank publication being showcased at the day-long conference. Gereffi wrote the chapter and edited the book, which is available online, with Olivier Cattaneo and Cornelia Staritz of the World Bank.
They write that "a large and growing percentage of international trade occurs within various kinds of coordinated networks"-- everything from Wal-Mart's global array of suppliers to complex systems that bring Liberian rubber, Asian microchips and other components to European factories to produce cars for North America and other markets.
As the financial crisis has demonstrated, problems in one country are now felt quickly elsewhere. "When the largest supermarkets of the world or other large companies have sudden and severe declines in sales, foreign suppliers have to close down factories, and these shocks are transmitted throughout entire regions," Gereffi and the others write.
Even as the world slowly recovers, "there is no room for complacency or triumphalism: surging public debts and deficits, increasing global imbalances and tensions in the monetary system are just a few of the challenges facing the post-crisis world economy."
Gereffi, who leads a Duke team that has analyzed the global value chains for industries ranging from apparel to automobiles to IT services, says large, low-cost producers in East and South Asia have been increasing their share of the world export market at the expense of nations that focus more on regional opportunities. This poses a challenge to Mexico and Central America, which traditionally supply the U.S. market, and to North Africa and Eastern Europe, which supply Western Europe, as well as to less-developed nations such as those in sub-Saharan Africa.
Simultaneously, China and other Asian nations are emerging as a force on the consumer side, becoming an increasingly important market not only for companies at home but also for producers in the United States, Europe and elsewhere. While the United States has been de-industrializing in recent years, China has been building a massive manufacturing base that now boasts substantial research and development, design and marketing capabilities.
The trend poses a global economic challenge to the United States, which is struggling to define its manufacturing future. Simultaneously it highlights the move to a new development model that offers China, India and other large emerging economies greater opportunities for local innovations and growth based on advanced manufacturing and services.
According to Gereffi and his co-authors, "it is essential to understand conditions in specific industry value chains in the post-crisis world and the opportunities and challenges they create for developing countries seeking to enter and upgrade within these chains."