{"id":10456,"date":"2022-11-03T18:18:21","date_gmt":"2022-11-03T16:18:21","guid":{"rendered":"https:\/\/www.liberalglobe.com\/?p=10456"},"modified":"2022-11-03T18:18:23","modified_gmt":"2022-11-03T16:18:23","slug":"globalisation-is-shrinking","status":"publish","type":"post","link":"https:\/\/www.liberalglobe.com\/?p=10456","title":{"rendered":"Globalisation is “shrinking”"},"content":{"rendered":"\n

There are increasing signs that the historical trend towards what we used to call globalization is reversing. Today, however, everything shows that it may reverse itself as a historical trend and in fact “shrink” without “embracing” the entire planet.<\/p>\n\n\n\n

The reason is for globalization, which as early as the 1980s and much more after the collapse of “existing socialism”, had been considered an irreversible dynamic.<\/p>\n\n\n\n

The break-up of the powerful bloc of socialist states and the choice of the Chinese leadership to favor rapid capitalist development seemed to shape a world dominated by the market economy and where countries above all wanted to engage with ever-increasing international trade, large capital movements and goods. Export orientation towards an expanding world market became a strategic priority, the volume of capital seeking internationally better investment conditions grew even more, and new forms of international division of labor expanded, with a massive relocation of businesses to the Global South and China. China’s entry into the WTO seemed to validate this trend. New York, Moscow and Shanghai from symbols of different regimes, became hubs in the ever-interconnected system of financial globalization.<\/p>\n\n\n\n

And nation-states may not have been abolished, as even the largest multinationals needed their “base”, but the international dimension began to become central to the economy.<\/p>\n\n\n

\n
\"\"<\/figure>\n<\/div>\n\n\n

The era of great upheavals<\/strong><\/p>\n\n\n\n

All this is threatened by the major geopolitical rifts that are underway. The war in Ukraine has already led to a significant disruption of economic relations between Russia and the West, with sanctions that we all understand are here to stay. That is, Russia will be effectively cut off from major Western markets and correspondingly there will be no Western investments in Russia.<\/p>\n\n\n\n

But mainly the question of the effects of the geopolitical rift concerns China. The United States already sees China as a potential threat and therefore applies sanctions for security reasons, banning the export of high technology to China and trying to enforce this ban by countries considered allies of the US. In perspective, there is the possibility of extensive sanctions in the event of an attempt at violent reunification with Taiwan. And of course it is evident that the US in particular is beginning to treat China as part of the same bloc as Russia and thus as part of the same effort to “disengage”.<\/p>\n\n\n\n

Accordingly, both Russia and China are preparing for this \u201cuncoupling\u201d from Western economic and networking practices. From plans for alternative trade settlement systems that are not mediated by the dollar, to apparently all the effort to focus on economic relations and trade with countries that do not choose the path of sanctions.<\/p>\n\n\n\n

But an eventuality where major Western economies, their banks and businesses will significantly limit trade not only with Russia and especially with China, means an eventuality with a decline in world trade, a decline in investment and ultimately less globalization.<\/p>\n\n\n\n

The first period when globalization seemed to shrink<\/strong><\/p>\n\n\n\n

The first period when globalization seemed to “shrink” was the period of the 20th century. Until the 1st century BC it was a period of particularly high growth of international transactions, international trade, interdependence between economies. Then, after all, the “Atlantic” flow of capital and investment between North America and Western Europe took shape. But two world wars followed, the Russian Revolution, the formation of the “socialist bloc”, the Chinese Revolution. The internationalization of the economy increased in the “Western” economies, but much of the world was excluded from these transactions. The “iron curtain” also concerned the economy. Only after the “fall” could there be a new upsurge of internationalization, which today is again reaching a limit and again on the ground of geopolitical ruptures. And we must not forget that WWI in particular was a war between countries that shared the same social system \u2013 unlike the Cold War.<\/p>\n\n\n

\n
\"\"<\/figure>\n<\/div>\n\n\n

Today’s trend<\/strong><\/p>\n\n\n\n

The growth of international trade and international investment does not bring peace, although this was often heard in the era of the rise of globalization.<\/p>\n\n\n\n

On the contrary, it seems that rivalries, economic and geopolitical, can always develop, ultimately contesting primacy or relevance in the international system, rivalries that charge regional conflicts and turn them into fuses for global confrontations.<\/p>\n\n\n\n

However, this does not negate the complexity of the situation. First of all, it is very difficult to engineer a complete “decoupling” with the Chinese economy, considering that China is the world’s largest exporter and second largest importer, with a significant portion of that trade being with the US. China’s weight in trade with the developing world is even greater. It is also an important investment destination for Western economies. Between 2010 and 2020 the total volume of foreign investment in China increased from $587 billion to $1.91 trillion. If we do not include how many of the global supply chains we understand how deeply rooted it is in the global economy. To these one can add the scale at which China holds foreign debt. For example, China holds approximately one trillion dollars of US debt and is the second largest creditor of the US government after Japan.<\/p>\n\n\n

\n
\"\"<\/figure>\n<\/div>\n\n\n

The claim of primacy<\/strong><\/p>\n\n\n\n

All this also shows why a rupture would have a large cost. It is enough to think that if e.g. severe sanctions were imposed on China in the wake of an attempt at violent reunification with Taiwan, then we would be experiencing on a larger scale and worldwide the problems that Europe is called upon to face today, only with the difference that instead of energy the “cutoff” would be about a very large volume of consumer products. It is enough to consider the anxiety of the countries that one could get protective equipment and masks from China in the first phase of the pandemic.<\/p>\n\n\n\n

But it is clear that at critical moments, the logic that dominates the international system is political rather than economic. Or even long-term economic logic “condensed” into political strategy. The US has been debating for several years in research, studies and think tanks what will happen when the power of China (and an alliance with Russia) reaches a limit that would challenge American hegemony. Now they are faced with the need or opportunity to implement these plans. So let them face their real difficulty.<\/p>\n","protected":false},"excerpt":{"rendered":"

There are increasing signs that the historical trend towards what we used to call globalization is reversing. Today, however, everything shows that it may…<\/p>\n","protected":false},"author":1,"featured_media":10460,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[859,5],"tags":[161,1591,215,70],"class_list":["post-10456","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-economic","tag-china","tag-globalisation","tag-us","tag-usa"],"_links":{"self":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/10456","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10456"}],"version-history":[{"count":2,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/10456\/revisions"}],"predecessor-version":[{"id":10462,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/10456\/revisions\/10462"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/media\/10460"}],"wp:attachment":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10456"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10456"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10456"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}