If you look through recent studies on globalization, it
does not take long to find confident assertions that globalization is dead, and
we are now at a new turning point; one that is similar in scale and importance
to the consequences of the collapse of the Soviet Union and the end of the Cold
War according to Michael O’Sullivan.[1]
O’Sullivan’s primary focus is on the responses to the uneven spread of the
consequences of globalization such as inequalities – most notably massive
inequality within and between nations – and the ineffectiveness of current global
institutions to rectify them. Others like Prasad add the “2008-09 global financial crisis, the COVID-19 pandemic, and
various geopolitical ructions, such as rising U.S.-China tensions and the
Russian invasion of Ukraine” to explain why many countries are looking to
“retreat from globalization and begin to look increasingly inward”.[2] Globalization, so the argument goes, is about to be
replaced by “geoeconomic fragmentation”.[3]
Wherever there is
a strong opinion, there is always a strong counter-argument too. And it is
exactly the same when it comes to the health and destiny of globalization. That
said, most of those who argue that globalization is still far from over accept
that the future is unlikely to look like the past. For Bremner, just as the
period of “hyperglobalization” gave way to a new form of globalization after
the global crisis, we are now moving towards another new phase. In this era,
there is indeed likely to be reductions in financial and trade flows between
some countries as a result of geopolitical competition, but this is not the
same as the end of globalized economic interdependence (even between rival
powers).[4]
In Europe, it is
this second idea of moving to a new era that seems to reflect the dominant
thinking. At the risk of oversimplification, we can identify three main
arguments for moving away from previous patterns of globalized economic
networks to something new. The first is an often ill-defined feeling that power
has seeped away from the nation state to somewhere else, and national authority
needs to be restored. Whilst often manifest in calls to strengthen national
borders against immigration or the transfer of power from the nation state to the
European Union, ensuring greater national control over national economic
fortunes is also very much part of the equation.
The second is
concerns about economic security, and the argument that the more a country
relies on global trade to get what it wants and sell what it produces, then the
greater the chances that it might suffer from some sort of disruption to these
flows. Somewhat related, the third is national security arguments, and concerns
that untrustworthy states might manipulate globalized economic relationships to
try and gain political power and geopolitical goals as manifest in the renewed
interest in economic statecraft and its close relative, geo-economics. However,
it is the very extent and embeddedness of the global networks that are seen to
be a problem that makes breaking them so difficult and potentially
destabilizing. Given the role that non-state economic actors play in shaping
the nature of global economic flows, it also means that doing what needs to be
done to try and shift these flows cannot simply be done by governments alone.
Globalization,
States and Markets
As James and Steger note in their study of the evolution of
the study of globalization, it is never easy to identify when a new concept is
born; you think you have identified the first usage only to later find an even earlier
reference. And then there is the question of intersubjective meaning with the
same word or term or phrase often meaning very different things over time, and
also in different disciplinary settings.[5]
All that being said, it’s probably fair to say that the modern study of the
political economy of globalization really took off in the late 1980s and the 1990s,
with the promotion of a specific neoliberal form of capitalist preferences
being one of the drivers of both academic scholarship and public interest.
Susan Strange was one of the leading scholars of this
dimension of globalization, publishing four influential books in the space of
twelve years that all focussed to varying degrees on the power of non-state
economic actors (relative to the power of states) to direct and control
transnational flows of goods, resources and money.[6]
A quarter of a century after her death (in 1998), her insights on the balance
of power between state and market actors do not just help us understand the global
politics and international economics of that time, but also remain highly
pertinent for all students of international political economy today too.
The growth of the power of Transnational Corporations was
not, Strange argued, an accident. It happened because neoliberal governments –
most notably in the USA and the UK – wanted it to happen, and deregulated their
economies accordingly. However, once they had done this, all governments found
it increasingly difficult to control their own economic futures; including
those that had facilitated the spread of globalization in the first place.[7]
Key decisions that changed employment, interest rates, exchange rates and so on
were, at the very least, heavily influenced by what happened in corporate board
rooms as companies decided what they would produce where, and hedge fund
managers sought every greater returns on investments. Moreover, as many administrations
tried to make their economies more attractive to internationally mobile
capital, they changed their fiscal regimes in ways that often had consequences
for government spending on social safety nets. While it is probably impossible
to work out exactly how much inequality within any country is a result of
globalization (or globalization alone), the globalization of production in the search
for lower production costs has clearly benefitted some much more than others.
So some of the insecurities associated with globalisation
today have their origins in the spread of these neoliberal preferences and
policies in the last millennium. But this is only part of the story and two
other key concerns have been pivotal in shaping contemporary debates on
globalization.
Globalization
and Crisis
The first is the global financial crisis. The immediate
impact of the crisis was massive; particularly, but not only, in Europe where,
in addition to the very real consequences for individuals, the cohesion of the
European Union was put under stress. This is a crisis, though, that is not just
in the past. The emergency responses of many governments to prevent even worse
immediate consequences were extremely costly. And the costs of responding to
first the crisis and then the recession that followed are still being felt
today in a number of countries today. Though written in 2019, this assessment
of the persistent challenges in Europe remains salient today:
perennial macroeconomic
imbalances and high public deficits in a number of Member States, and the
ongoing risk of a doom loop between sovereigns and the banking sector. Post
crisis vulnerabilities also include rising inequalities, youth unemployment and
high in-work poverty risk levels[8]
While there were many complaints and protests at bailing
out the banks at the time, as years have passed the consequent frustration of
those affected by austerity responses has not always been directed at “globalization”
itself; which in this case would be the non-state actors who helped cause the
crisis in the first place. As Flaherty and
Rogowski note, the consequences of globalization of production are often
bundled together with other issues by political parties that want to utilise
this dissatisfaction. [9]Immigration is a common emphasis, and its impact on wages, access to
health education and welfare and a rather vague sentiment that the national
character (whatever that might be) is being undermined. There is also often an
anti-elite component to dissatisfaction, with the argument that domestic
indigenous communities and voices are being ignored, and at times a more
extreme idea that “globalist elites” don’t care about the nation at all.[10]
In essence, the concerns that were generated by the first wave of
globalization noted above have been built on and exacerbated by the
consequences of the subsequent crisis of globalization. This is threatening what Castells calls a
“rupture” between people and their governments that not just undermines the
neoliberal economic project, but potentially liberal democratic democracy
itself.[11]
The mantra “take back control” used by those who wanted the
UK to leave the European Union in the 2016 Brexit referendum had a specific
target; the control of the national destiny that was said to have been lost to
the EU. But it captures a broader shared desire in many populations for more
secure economic futures, often associated with the idea of a return to some
sort of previous golden age before things changed for the worse. Hence the idea
of “taking back” control in the UK, and in the US case under Trump, the idea of
making America great “again”. In
addition to contributing to the electoral success of a number of populist
political parties around the world, these sentiments have resulted in a more
widespread calls in many countries for stronger state intervention to protect the national
economy from external economic interests and forces.
Globalization
and Insecurity
The second key concern is that the globalization of
production has left countries vulnerable to disruptions to the supply of key
goods and resources. Such disruptions are not always deliberate. Natural
disasters and even bad seamanship through pinch points (as in the case of the
blocking of the Suez canal) can lead to delays or cancelations. Unexpected
crises can lead to an urgent demand for goods that are in short supply across
the global (like Personal Protective Equipment in a pandemic), and disruptions
to supplies through illness and lockdowns. And political turmoil and war can
stop production and/or trade with unintended consequences for consumers across
the globe. What were primarily worries about what might happen in the future became
real concerns about medical supplies during the pandemic, and energy and grain
supplies as a result of the war in Ukraine.
However, it is the potential for deliberate disruptive
action that has captured the political imagination
of a range of politicians. State intervention to support and promote domestic
national actors and give them an advantage in the global economy has long been
a key issue for both students of globalization and policy makers. Its ongoing
importance is reflected by the work of the WTO over many years, and also by
bilateral action taken by states to remedy perceived injustices. Examples
include the tariffs introduced by President Trump on certain imports from
China, and the EU’s strategic goal of achieving “reciprocity”
with China, where European firms have the same access to the Chinese market that
Chinese firms have traditionally had in Europe.[12]
What has changed is the understanding that states are not
just trying to gain commercial advantages for their companies, but seeking to
use economic levers to attain strategic political goals too. These concerns
have been captured by Farrell and Newman’s conception of “weaponized
interdependence”.[13]
This is based on the idea that power is not evenly spread across all parts of
the networks, with some actors in some states occupying pivotal positions.
These asymmetries give those host states the ability to exert influence over
national firms to gain access to politically usable data from other states, and
to disrupt the normal flow of goods and resources to punish or discipline
potential enemies and reward allies and friends.
Farrell and Newman note that countries have been using asymmetrical
advantages for political reasons for many decades. They also note that there
are only a few places where there are enough critical hubs in enough different
networks for them to provide the basis for weaponizable action; in the USA, in
the European Union and in China. Of these three, it is China that has become
the main focus of interest.
In the past, this was primarily an interest in the
consequences of Chinese “economic statecraft” in the global south. Now, though,
there is a very live debate in many developed countries about the political (as
well as economic) vulnerabilities that they face as a result of their reliance
on China-centric or China influenced globalized networks of trade and
production. Notably, many of these concerns are based on potential future
action. There are indeed concerns about what might be happening here and now (related,
for example, to cybersecurity and political interference). But the political
debate is primarily over how to reduce vulnerabilities from any future
deliberate state action designed to use economic advantages to exert political
influence.
The
Future of Globalization
So where does all of this leave us? On one level, the
failure of globalization, as manifest by the global financial crisis, still
casts a shadow over domestic politics in many states. Moreover, the financial
and other economic costs of the crisis have now been compounded by the costs of
dealing with the Covid 19 pandemic. And at least partly as a result,
nationalist and protectionist agendas designed to “take back control” have
gained support. On another level, there is increasing concern that globalised
networks could be politicised and weaponized. The very economic interdependence
that was once championed as the road to not just prosperity but also peace and
security is now increasingly seen as a major source of insecurity because it
might become captured and controlled by states seeking to attain geostrategic
goals. Globalization has become a security issue.
Or perhaps more correctly, as noted above it is
specifically China related globalization that tends to be identified as the
security challenge. To be sure, the war in Ukraine has focussed attention on
present and future energy security, and how quickly relationships that were
once taken for granted can change. However, despite Russia’s importance as an
energy supplier, it has nowhere near the same level of importance across a wide
range of sectors for European economies as China does. In the oft repeated phrase,
Russia is seen as like a storm; an immediate and admittedly big issue that
needs to be dealt with. China, though, is like climate change; something that
builds up over time and leads to a fundamental change in the long term in the
way that everybody lives their lives.[14]
In fact, the Russian invasion of Ukraine seems to have focussed more attention
on the long-term consequences of economic interdependence with China, than it
has on economic relations with Russia itself.
Is a form of globalization without China really feasible? Whilst
there are some calls to move in this direction[15],
it is hard to see how this could happen without causing significant economic
problems for everybody involved. And it is notable that in Europe, the language
of “de-coupling” from China has now largely been replaced by an emphasis on
“de-risking without de-coupling”. The goal is to remove those economic
connections that create vulnerabilities that might be exploited, whilst keeping
those relations that are not seen as problematic. The EUs identification of
four priority critical technology sectors that need to be secured gives an
indication of the most urgent areas of concern (advanced semiconductors
technologies, artificial intelligence technologies, quantum technologies, and
Biotechnologies).[16]
A report for the Rhodium Group and the Bertelsmann Stiftung has a more
extensive list, identifying “46% of
China’s FDI in the EU and 32% of the EU’s FDI in China in 2019” as carrying
potential security risks, often revolving around access to (and the
potential future use of) “sensitive
individual data, critical infrastructure and emerging computing technologies”.
When it comes to trade, the risks are slightly less “acute” with 56% of EU
exports to China and 83% of China’s exports to the EU considered to be problem
free.[17]
Identifying risks, though, is not the same thing as solving
them. If we return to Susan Strange’s argument outlined at the start of this
paper, companies make many of the decisions that have created globalised
networks, and companies will need to make many new decisions if delinking is to
happen. Clearly, governments can do much to shape the actions of non-state
actors. For example, they can legislate to ban investments in certain sectors
(and many already have), or ban trade in specific commodities or supplies, or
impose other barriers to trade which make them economically unattractive (which
has also happened). They can legislate to defend domestic producers from
competition from cheaper external rivals, invest in domestic capacities, and
provide other forms of incentives to encourage companies to either reshore (back
home) or “friendshore” (to trusted allies) their productive capacities away
from untrustworthy locations. If it doesn’t make economic sense, how many
companies are going to place national security logics above corporate
commercial ones?
However, all of these solutions have costs. Either costs to
governments (and thus ultimately to taxpayers) or to consumers (in the form of
higher prices); and often costs to both. Given the health of many national
finances are in after both the long term response to the global crisis and then
the pandemic, there must be serious questions about whether some of them have
the money that they will need to spend to generate a significant difference.
There
is considerable diversity across Europe, and there is certainly no single
position, opinion, or view that holds true across the continent as a whole.
There is also often quite dichotomised debates within individual European
countries. That said, it is notable that criticisms of globalization and the
status quo ante are coming from different directions and for different reasons.
Moreover, there is certainly more of a focus today on the potential security
challenges that emerge from globalization than before. It is really not very
long ago at all that a number of European countries were competing to become
China’s best friend, rather than trying to find ways of de-risking the
relationship. To say that there is a consensus that the status quo has to
change might be putting things too strongly. But it is certainly an assessment
that has a number of adherents in a number of different polities. That much
seems clear. What is much less clear is how you can unravel and untangle
existing networks without generating other problems along the way.
Disclaimer:
This is an English Language version of a paper first published in Chinese with a different title. The original is Shaun Breslin, “全球化已死？——反思全球化的关键问题 [Is Globalization Dead? Reflections on Key Issues of Globalization], in 探索与争鸣 [Exploration and Free Views], (4), 2024: 14-17, and is available with open access here and the original version can be downloaded below.
[1] Michael O’Sullivan (2019) The Levelling: What's Next After Globalization
(New York: Public Affairs).
[2] Eswar Prasad (2023) “The World Will Regret
Its Retreat From Globalization” Foreign Policy (online), 24th
March, available at
https://foreignpolicy.com/2023/03/24/trade-economy-globalization-united-states-china-ira-chips-reshoring-decoupling-industry-china/
[3] Aiyar, S., J. Chen, C. Ebeke, R. Garcia-Saltos, T. Gudmundsson, A.
Ilyina, A. Kangur, T. Kunaratskul, S. Rodriguez, M. Ruta, T. Schulze, G.
Soderberg, and J. Trevino (2023). “Geoeconomic Fragmentation and the Future of
Multilateralism,” IMF Staff Discussion Note No. 2023/1 (Washington, DC:
International Monetary Fund).
[4] Ian Bremner (2022) “Globalization Isn’t
Dead: The World Is More Fragmented, but Interdependence Still Rules”, Foreign
Affairs, 25th October, available at
https://www.foreignaffairs.com/world/globalization-isnt-dead
[5] Paul James and Manfred Steger (2014), “A Genealogy of
‘Globalization’: The Career of a Concept”, Globalizations, 11 (4):
417-34.
[6] Perhaps it’s more correct to say three and a half books as the last
was in many ways an update of the first. Susan Strange (1986) Casino
Capitalism (Oxford: Blackwell); Susan Strange (1988) States and Markets
(London: Pinter): Susan Strange (1996) The Retreat of the State: The
Diffusion of Power in the World Economy (Cambridge: Cambridge University
Press); Susan Strange (1998) Mad Money (Manchester: Manchester
University Press)
[7] Strange, Retreat of the State; 44-5.
[8] Marcin Szczepanski (2019) “A decade on from the crisis Main
responses and remaining challenges”, European Parliamentary Research Service,
PE 642.253 (October), available at https://www.europarl.europa.eu/RegData/etudes/BRIE/2019/642253/EPRS_BRI%282019%29642253_EN.pdf
[9]Thomas M.
Flaherty and Ronald Rogowski (2021) “Rising
Inequality As a Threat to the Liberal International Order”, International
Organization, 75 (2): 495-523.
[10] Manfred Steger and Paul James (2019) Making
Sense of the Populist Challenge to Globalization (Cambridge: Cambridge
University Press), chapter 8.
[11] Manuel Castells (2019) Rupture: The Crisis of
Liberal Democracy (Cambridge: Polity).
[12] See High Representative of the Union for Foreign Affairs and
Security Policy (2019) “EU-China – A strategic outlook”, Joint Communication to
the European Parliament, The European Council and The Council, 12th
March, available at
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52019JC0005
[13]Henry Farrell and Abraham Newman (2019) “Weaponized Interdependence:
How Global Economic Networks Shape State Coercion”, International Security (2019) 44 (1): 42–79.
[14]This simile seems to have originated with
Rob
Joyce, Director of the Cybersecurity Directorate of the US National
Security Agency (NSA) in 2019 when he said “I kind of look at Russia as the hurricane. It comes in fast
and hard. China, on the other hand, is climate change: long, slow, pervasive”. See ANDY LANGENKAMP
(2022) “From Russian
rain to Chinese storm”, The Hill, 8th May, available at
https://thehill.com/opinion/national-security/3479964-from-russian-rain-to-chinese-storm.
[15] See, for example, The Select Committee on
the Strategic Competition Between The United States and The Chinese Communist
Party (2023) “Reset, Prevent, Build: A Strategy to Win America’s Economic
Competition with The Chinese Communist Party”, December, available at https://selectcommitteeontheccp.house.gov/sites/evo-subsites/selectcommitteeontheccp.house.gov/files/evo-media-document/reset-prevent-build-scc-report.pdf
[16] European Commission (2023) “Commission
Recommendation of 3.10.2023 on critical technology areas for the EU's economic
security for further risk assessment with Member States”, 3rd
October, available at
https://defence-industry-space.ec.europa.eu/system/files/2023-10/C_2023_6689_1_EN_ACT_part1_v8.pdf
[17] Agatha Kratz, Matthew Mingey, and Daniel
H. Rosen (2020) “Exploring a “Green List” for EU-China Economic Relations”, The
Rhodium Group and the Bertelsmann Stiftung, September, available at
https://www.bertelsmann-stiftung.de/fileadmin/files/BSt/Publikationen/GrauePublikationen/Green_List_DA_09_20.pdf
