Economic Globalization 3.0 and the Concept of Interconnection under the Belt and Road Initiative*

China Economist - - Articles - Jin Bei (金碚) Institute of Industrial Economics, Chinese Academy of Social Sciences (IIE, CASS), Beijing, China * Corresponding author: Jin Bei, No. 2 Beixiaojie, Yuetan, Xicheng District, Beijing, China (100836). E-mail: jinpei8859@163. com.

Abstract: At present, the third wave of economic globalization is emerging. After the setbacks in Economic Globalization 1.0 and rejuvenation in Economic Globalization 2.0, China’s economy is bound to occupy an important international position in the new chapter of Economic Globalization 3.0 and exert profound influence globally. The benefits of globalization cannot be realized without a number of realistic conditions, including the level of technology and infrastructure, geopolitical pattern and market power structure, international institutional arrangements (global governance structure), among others. Under Economic Globalization 3.0, the nature of international competition is good governance, rather than brutal force and hegemony. What matters for China is for it to become an innovative and vibrant country and demonstrate its economic vitality, competitiveness and creativity. Therefore, China’s position under Economic Globalization 3.0 depends on its transition from a “world leader of high growth” into a future “world leader of good governance and vibrancy.” In the new chapter of Economic Globalization 3.0, the interests of world economies become interwoven and interdependent. Despite unavoidable frictions and disputes, more inclusive and balanced development serves the interests of most countries in the world. For major countries with global interests, maintaining the new balance of power for economic globalization is consistent with their respective national interests. The shared interests of countries promise a more peaceful and interconnected world than ever before.

Keywords: economic globalization, industrial revolution, Belt and Road Initiative, global

governance

JEL Classification Code: O19, F63, N70

As an integrated historic process, industrial revolution, market economy and globalization have transformed the destiny of mankind and the landscape of the world. Over the past two centuries, human development generally followed this course of development and achieved great transformations. A thriving market economy, innovation and globalization are the hallmarks of today’s world. Of course, the landscapes of our world today are drastically different from those of two centuries ago. The period between the 19th century and the outbreak of World War II can be identified as Economic Globalization 1.0, which was followed by Economic Globalization 2.0 after the mid 20th century. At present, the world is at the dawn of the third wave of globalization, i.e. Economic Globalization 3.0. After the century of

humiliation (1840-1949), China has revitalized its national strength over the past six decades and is bound to occupy an important position globally. China’s Belt and Road Initiative (the Silk Road Economic Belt and 21st Century Maritime Silk Road) marks a milestone for Economic Globalization 3.0 based on the concept of global interconnection.

1. Economic Globalization: An Inevitable Trend of Industrial Revolution and Market Economy

Over the course of world history, the market economy is the greatest institutional innovation and industrial revolution is the greatest achievement of human development. The chemistry between market economy and industrial revolution ushered in the era of industrialization. By turning otherwise useless matters into useful things, industrial production spawned tremendous wealth and prosperity, giving rise to the spirit of capitalism as the mainstream social mentality, i. e. the pursuit of “happiness derived from

1 material possession.” An unlimited desire of possession and infinite potentials of economic growth require an immensely broad market. As long as the market space is large enough, growth will be extended across borders, involving the entire world in the wave of market economy. In the Wealth of Nations, Adam Smith created a systematic theoretical rationale for the expansion of market economy, i. e. based on the human instinct to exchange goods and services in the pursuit of wealth, increasing division of labor, market scale, economic efficiency and wealth accumulation propel the development of human society. That is to say, based on the exchange of goods and services, market economy entails deepening specialization and growing scale that inevitably lead to the infinite extension in the relations of exchanges beyond national borders. In this sense, market economy is essentially not only national but global in nature as well and requires the realization of an integrated global market and global economy beyond national borders.

On the basis of Adam Smith’s theory of absolute cost advantage (a country produces goods at a lower cost compared with other countries and exchanges them freely to the benefit of all countries), another classical economist David Ricardo further demonstrated the rationale of international trade with his theory of comparative cost (or comparative advantage), i.e. as long as countries engage in the production of goods with relative cost advantage through specialization (compared with other products made by them), international trade will lead to the most favorable results for all trading nations. If all countries in the world engage in trade, welfare can be maximized internationally. Although this theory was originally underpinned by the assumption of “immovable factors and movable products,” the theoretical argument of free trade has been extended to the international flow of factors (capital and personnel). In this manner, classical economists have laid the theoretical foundation that justifies economic globalization. In fact, the spectacular development of capitalist market economy in the 18th and 19th centuries gave rise to the first wave of economic globalization. The concepts of economic globalization back then were even more thorough than today’s, calling for the liberalization of not only trade in goods and international investment but the international flow of people, i.e. the freedom of immigration.

Karl Marx once made an apt argument on the global expansion of capitalist market economy. In the eyes of the writers of Marxist classics, industrial revolution knows no national borders and capitalist market economy is essentially international and global in nature to the extent that the barriers of national borders obstructing the free flow of goods, capital and labor cannot be tolerated. Hence, in their view, the economic form of the future society (communist society) will be global as well, while nations will inevitably cease to exist. Karl Marx also argued (to the effect) that “once in contact with Oriental countries (China included), the globalization of market economy

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