Oct 18, 2010 13:59 GMT  ·  By
Globalization is making it harder for the world's economy to come out of financial downturns
   Globalization is making it harder for the world's economy to come out of financial downturns

Researchers at the Rice University have demonstrated that increased trade globalization is having a negative impact on the world's economy, making it more prone to experiencing recessions, and making it more difficult for it to recover afterwards.

The team applied a series of rules similar to those seeking to explain the evolution of the genome to obtain the new conclusions, experts at the university write in an upcoming issue of the journal Physical Review Letters.

“Standard economic theory suggests that trade networks with a more modular structure tend to recover more slowly from recessions, but using evolutionary theory we predicted the opposite, and UN trade data indicate we were right,” explains Michael Deem.

He is the John W. Cox Professor in Biochemical and Genetic Engineering at Rice, and also a professor of physics and astronomy at the university. He authored the work with graduate student Jiankui He.

The team took a close look at United Nations trade data spanning back more than 40 years, and determined a causal relation between increased globalization and a deteriorating world economy.

Scientists with the group say that the key concept in this research is modularity, a term that is widely used in biology to refer to parts of larger systems that have somewhat autonomous functions as well.

In other words, a small part of a system can function with relative ease on its own, regardless of the part it plays in the greater system. This is true in all living things, starting at a cellular level.

Three years ago, Deem and Jun Sun, then a Rice postdoctoral fellow, showed that modularity appeared spontaneously in biological system that were evolving slowly, and which possessed information that could be swapped, such as for instance genes.

“What we showed in 2007 was that under certain conditions, a changing environment leads to the development of a modular structure,” Deem explains.

“We considered the world trade network to be an evolving system, and we know information in the form of business practices is readily swapped throughout the trade network,” he adds

“Since it matches the conditions for our theory, we hypothesized that it would also follow the same physical rules,” the expert argues.

“Another of our predictions was that recessions would cause the world trade network to become more hierarchical, and this is something that was borne out by the data as well,” Deem adds .

Funding for the new investigation was provided by the US Defense Advanced Research Projects Agency (DARPA).