Deglobalization is the process of decreasing interdependence and integration between certain units around the world, typically nation-states. This term is widely used to describe periods in history when economic trade and investment between countries declines.
It contrasts with globalization, in which units become increasingly integrated over time, and generally spans the time between periods of globalization. Although globalization and deglobalization are antithetical, they are not totally opposite phenomena.
The term deglobalization has derived from some of the very profound changes in many developed nations, where trade as a proportion of total economic activity until the 1970s was below previous peak levels in the early 1910s. This decline reflects their economies becoming less integrated with the economies of the rest of the world despite the deepening reach of economic globalization. Globally, only two longer periods of deglobalization occurred , namely in the 1930s during the Great Depression and 2010, when the Great Trade Collapse occurred, the period of the World Trade Slowdown.
The emergence of deglobalization has strong advocates who have affirmed the death of globalization, but it is also contested by leading academics such as Michael Bordo, who argues that it is too early to give a good diagnosis and Mervyn Martin, who argues that the policies of the The United States and the United Kingdom are rational responses to essential temporary problems of even strong nations
While with globalization, the studies and analysis of the phenomenon can refer to economic, commercial, social, technological, cultural and political dimensions, much of the work carried out in the study of deglobalization refers to the field of international economics.
The deglobalization of 1930 versus the deglobalization of 2010
Periods of deglobalization have primarily been seen as interesting times of comparison to other periods, such as 1850-1914 and 1950-2007, in which globalization had been the norm, given that globalization is the norm for most people. and because the interpretation of the global economy has mainly framed it as inevitably increasing integration . Therefore, even periods of stagnant international interaction are often mistakenly considered periods of deglobalization.
Recently, scientists have also begun to compare major periods of deglobalization to better understand the factors and consequences of this phenomenon. The two main phases of deglobalization are not identical twins, although there are some similarities between the two. The two phases of deglobalization were equally triggered by a demand shock following a financial crisis. In both the 1930s and 2000s, the composition of trade was a second key determinant: manufacturing trade was hardest hit by the contraction.
An important finding is that countries’ experiences during both the Great Depression and the Great Recession are highly heterogeneous, making one-size-fits-all policies to counteract the negative impacts of deglobalization inappropriate. In the 1930s, democracies supported free trade and deglobalization was driven by autocratic decisions to strengthen self-sufficiency. In the 2010s, political institutions are equally important, but now democratic decisions, such as the election of President Trump with an America First agenda and Brexit, drive the deglobalization process around the world. In fact, although industrialized countries in the 2010s avoided the traps of protectionism and deflation, they have experienced different political dynamics that have gradually led them to become more isolated in terms of international trade from the rest of the world.
Deglobalization measures
As with globalization, economic deglobalization can be measured in different ways. These metrics focus on the four main economic flows:
Goods and services, Exports plus imports as a proportion of the gross national income or per capita of the population.
Work/people, Net migration rates; inward or outward migration flows, weighted by population (and resulting remittances as a percentage of GDP )
Capital, Direct internal or external investment as a proportion of national income or per head of the population
In general, it is not believed to be possible to measure deglobalization due to a lack of technology flows, the fourth main flow. Those areas that are measurable suggest other possible measures, including:
- Average rates for international trade.
- Border restrictions on work
- Capital controls, including restrictions on foreign direct investment or foreign direct investment
The Swiss Economic Institute’s KOF Multidimensional Globalization Index shows a clear break for economic globalization from 2009 to 2015, the KOF observed this for its overall index: ” The level of globalization worldwide increased rapidly between 1990 and 2007 and has increased only slightly since the Great Recession. In 2015, globalization declined for the first time since 1975. The decline was due to declining economic globalization, with social globalization stagnating and political globalization increasing slightly.” Other indicators of deglobalization include the development of Foreign Direct Investment, which according to UNCTAD fell further in 2017 and in stark contrast to production.
Risks of deglobalization
A reduction in the level of international integration of economies and the global economy in general is generally expected to exert second-round effects related to four feedback mechanisms:
- A reduction in (the growth rate of) international trade
- A negative impact on long-term growth.
- A loss of interaction, the co-movement of economies.
- Trade policy feedbacks that less international interaction and less growth will stimulate protectionism and non-economic areas where less cooperation between countries and even an increasing risk of international conflict can be expected.
International political economy of deglobalization
Deglobalization has also been used as a political agenda item or a term to frame the debate about a new world economic order, for example by Walden Bello in his 2005 book Deglobalization. One of the most prominent examples of the deglobalization movement could be found in the United States of America, where the Bush and Obama administrations instituted the Buy American Act as part of the massive stimulus package, which was designed to favor products manufactured in the United States. United on traded goods. Likewise, the European Union has imposed new subsidies to protect its agricultural sectors for its own protection. These deglobalization movements can be seen as the example of how developed nations react to the financial crisis of 2007-08 through deglobalization movements.
A change in the pattern of anti-globalism has recently been observed: anti-globalism now has a strong foothold in the Global North and among right-wing (conservative) politicians, with very different attitudes in the Global South, particularly among the BRICS countries ( Brazil, Russia, India, China and South Africa.
The 2020 coronavirus crisis and the rupture phenomenon
In its heyday in the 19th century, Lowell, Massachusetts, boasted the nickname “Spindle City,” a nod to the vibrant textile mills that sparked America’s industrial revolution. Nearby towns had their own claims to fame: Leominster was the “Plastics City,” Gardner was the “City of Presidents,” Holyoke was the “Paper City,” and Waterbury, Connecticut, was known as the “Brass City.” . After World War II, some of these industries migrated to the southern states before eventually moving to Japan, South Korea, and Taiwan. In the end, everyone gathered in one place: the Chinese coast, the workshop of the world.
However, the coronavirus that in 2020 caused factories there to close signals a new phase in what is becoming a major reversal of the industrial journey from west to east. Companies are reassessing China’s role in global supply chains. Analysts have estimated that many manufacturers have begun planning to relocate at least some of their production elsewhere. Deglobalization is accelerating.
The arrival of the coronavirus in China in 2020 marked a new turning point for globalization and brought back the idea of localizing much of the production of essential goods, in search not only of self-sufficiency but of security.
Of course, traditional industries have been leaving China for years due to rising labor costs and environmental regulation, moving to places like Vietnam and Bangladesh. But this trend is part of the natural rotation of globalization. The same economic forces that hollowed out New England in the last century are sharply reducing its production in the city of Dongguan, in China’s Guangdong province, where much of American manufacturing ended up.
However, the coronavirus calls into question the premises that underpin globalization itself. Deglobalization is driven by the uncomfortable realization that the entire system now has a single point of failure: China. A series of cascading profit warnings dramatizes that point.
Globalization was about price and manufacturing efficiency, regardless of location, and their mutual dependencies were supposed to ensure their stability. The economies of the United States and China were linked by supply chains that both relied on. But it turns out that place matters a lot: for individual companies, for entire industries, and for the global economy. The 2020 epidemic that began in the Chinese city of Wuhan blocked key arteries of international trade.
With the crisis of 2020, mutual dependence became a source of fear, according to The Economist. Pentagon and European defense officials, for example, that same year became concerned about the national security implications of China’s dominance in the active pharmaceutical ingredients sector.
As the magazine points out, building new factories elsewhere to guarantee the supply of ingredients for essential medicines would be relatively simple, but “it would involve upending well-established political and economic theories, starting with the wisdom of allowing private companies to seek the best relationship of value of goods, with little attention to their origin.
Jörg Wuttke, president of the European Union Chamber of Commerce in China, put the argument bluntly at the time: “The globalization of putting everything where production is most efficient, that is over.”
In some ways, China prepared for this reversal by reinforcing trade and strengthening its domestic consumption. Japan has never forgotten the lessons of 2010 when China disrupted supplies of rare earth raw materials critical to the electronics industry during a standoff over a set of disputed islands.
In this sense, critical events such as pandemics, diseases that quickly endanger production where it was thought to be most efficient and competitive for the global economy, are calling into question the foundations of economic globalization. The phenomenon of deglobalization gains strength when these fears are more evident, especially when there is strong distrust between national states and the lack of transparency about production processes and rules also leads to thinking that it is better to produce locally.
The new economic policies, especially the Trade War started by Donald Trump in 2017, emphasize the phenomenon of international distrust that is also extended by nationalist and populist discourses and by a strong return to identity politics used to Leaders can gain legitimacy when economic development figures are no longer desired or do not satisfy the public.
