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Hitachi Research Institute

President Column

Commentary by our President, Hitoshi Shirai

President Column #14: The Dream of Globalization

  This year marks the 50th anniversary of the Beatle’s visit to Japan. The four members of the Beatles were born and grew up in Liverpool, a port city located in the northwestern part of England in the United Kingdom. Liverpool prospered as a commercial city when trade between England and North America flourished in the 17th century, and by the 19th century the city had developed as a hub for triangular trade with the American continent and the West Indies. In a park in this town facing the Atlantic Ocean, there is a statue of a young family that migrated to the American continent. In the past, many Europeans departed from the port of Liverpool with dreams of life on a new continent.
  The four young men from Liverpool who dreamed of success in the music world made their debut with the song “Love Me Do” in October 1962, and in the wink of an eye took the British music scene by storm. In January 1964, the Beatles crossed over to the European continent to perform in France. In February, they left for Washington D.C., the capital of the United States, where they gave their first U.S. concert at the Washington Coliseum. Although it may seem incredible in this day and age, almost no British musicians who took their music to the United States had succeeded in making an impact. Nothing stopped the Beatles’ momentum, however, and in June that year they embarked on a world tour that included Denmark, the Netherlands, Hong Kong, Australia and New Zealand. In 1966, after performing in Japan, they went on to perform in the Philippines. In 1965, the Beatles were awarded the Most Excellent Order of the British Empire (MBE), which was the first time it was presented to musicians. This award was supposedly presented to them because of their significant contribution to the acquisition of foreign currencies through sales of records and movies at a time when the British economy was in a slump. At that time the youngest Beatle, George Harrison, was 22 years old, and the oldest Beatle, John Lennon, was just turning 25.
  The United Kingdom, located on the western side of the Eurasian continent, is a country that has enjoyed the benefits of trade with the world more than any other country from the medieval ages to the present as globalization progresses. The success of the Beatles was also an early indicator that music for young people would develop as a business with its sights set on the world market, and many young musicians from the United Kingdom subsequently made their way onto the world stage.

  This United Kingdom, however, made a shocking decision to exit from the EU, the world’s largest single integrated market. The development of the global economy after World War II was supported by the expansion of globalization, in other words, through the promotion of the free movement of people, goods, and money in a multi-tiered approach, including bilateral, multilateral, and regional arrangements, to expand the free market. Even under the economic policy that came to be known as “Thatcherism” (introduced by Margaret Thatcher, who was appointed Prime Minister in 1979), which aimed to establish a market-centered environment to facilitate business activities of global corporations, the United Kingdom continued to lead. Thatcherism was later linked to Reaganomics in the United States, and markets developed and expanded globally following the end of the Cold War. At present, more than 90% of the global population has been incorporated into the mechanism of the global market economy, and even developing countries have taken various measures including open policies for foreign capital to enable them to obtain opportunities for growth.
  The ideology underlying globalization to date has been the optimistic belief in a simple market based on classical economics where optimal allocation of resources could be achieved globally if market mechanisms penetrated beyond the barriers of national borders of countries. Without a doubt, the advance of globalization has contributed to the economic development of many countries and regions. This is true for both developed and developing countries. On the other hand, even with the advancement of globalization, a “country” cannot detach itself from national affairs. In other words, a “country” cannot abandon its responsibility to endeavor to improve its domestic economic welfare. The situation where “individuals” depend on their “country” for much of their economic welfare will not change in the foreseeable future.

  At present, in both developed and developing countries, divisions within countries are becoming serious. Many countries have multiple domestic conflict axes such as the gap between the rich and the poor, conflicts between central and regional government, and racial and religious conflicts accompanying increased migration. Underlying these conflicts are a range of factors such as prolonged economic stagnation and ongoing high unemployment rates. Moreover, policy measures such as social safety nets have not kept pace with prevailing conditions, and uneasiness and frustration are increasing to critical levels. Interestingly, however, a reverse phenomenon was observed in the Brexit referendum in the United Kingdom. Many people living in cities such as London and Edinburgh, where the inflow of migrants is high, voted to remain in the EU, while many people living in regional areas where the inflow of migrants is low voted to leave the EU.
  To calmly and logically respond to excessive nationalism and regionalism today, it is necessary to re-imagine from both theoretical and policy perspectives the simple dream of economic prosperity globalization once held. While the evolution of open-economy macro-economics and other types of economics is important, the situation is too complex to relegate responsibility for solutions to the science of economics alone. A multi-faceted approach that encompasses a range of factors including race, religion and technology is essential.
There are five ranks in the Order of the British Empire. The four members of the Beatles were awarded the MBE (Member of the Order of the British Empire), which is the 5th rank. John Lennon, however, returned his award in 1969.