List of Boxes, Illustrations, and Tables ix
Preface xiii
Acknowledgments xvii
Introduction 1
1 Globalization and Risk in the Twenty-First Century 9
Globalization and Integration 10
Global Connectivity and Complex Systems 13
Globalization and the Changing Nature of Risk 23
Globalization: A Double-Edged Sword 30
The Way Forward 33
2 The Financial Sector 36
with Co-Pierre Georg and Tiffany Vogel
The Financial Crisis of 2007/2008 37
Financial Globalization in the Twenty-First Century 39
Complexity and Systemic Risk 54
Global Financial Governance 60
Lessons for the Financial Sector 64
3 Supply Chain Risks 70
Global Supply Chains 72
Supply Chain Risk 79
From Management of Risk to Risk Management 90
Lessons for Supply Chain Management 95
4 Infrastructure Risks 100
Transportation 101
Energy 105
The Internet 112
Lessons for Global Infrastructure 120
5 Ecological Risks 123
The Nature of Environmental Risk 124
Risks from the Environment 129
Risks to the Environment 133
Can Globalization Be Good for the Environment? 138
The Export of Pollution 139
Lessons for Managing Environmental Risk 141
6 Pandemics and Health Risks 144
Pandemic Risk 145
Globalization and Health Risks 147
Case Studies 150
Noninfectious Diseases 159
Global Cooperation and Disease Control 160
Lessons from Pandemic Management 164
7 Inequality and Social Risks 168
Global Integration and Inequality 169
The Channels of Inequality 180
The Risks of Inequality 181
Lessons for Challenging Global Inequalities 195
8 Managing Systemic Risk 198
Moving Forward, Not Backward 200
Confronting a New Challenge? 202
The Need to Reform Global Governance 206
Why Reform Has Been So Sluggish 209
Lessons for Global Policy Reform 212
Managing Systemic Risk 219
Notes 221
References 257
Index 285

How to better manage systemic risks-from cyber attacks and pandemics to financial crises and climate change-in a globalized world
The Butterfly Defect addresses the widening gap between the new systemic risks generated by globalization and their effective management. It shows how the dynamics of turbo-charged globalization has the potential and power to destabilize our societies. Drawing on the latest insights from a wide variety of disciplines, Ian Goldin and Mike Mariathasan provide practical guidance for how governments, businesses, and individuals can better manage globalization and risk.
Goldin and Mariathasan demonstrate that systemic risk issues are now endemic everywhere-in supply chains, pandemics, infrastructure, ecology and climate change, economics, and politics. Unless we address these concerns, they will lead to greater protectionism, xenophobia, nationalism, and, inevitably, deglobalization, rising inequality, conflict, and slower growth.
The Butterfly Defect shows that mitigating uncertainty and risk in an interconnected world is an essential task for our future.

Ian Goldin is director of the Oxford Martin School and professor of globalization and development at the University of Oxford. Mike Mariathasan is assistant professor of finance at KU Leuven.