Globalization is a bad system, but a better one has not been invented

Globalization is a bad system, but a better one has not been invented
Globalization is a bad system, but a better one has not been invented

In the coming decades, the period from 1989 to 2022 can be seen as a golden era of peace and prosperity

Globalization is not just about trade and technology. It also concerns politics. Political change, above all the collapse of communism, created the conditions for the age of hyperglobalization. Now political change, especially rising nationalism, is threatening the dense web of economic ties built up over the past three decades, writes Financial Times chief foreign policy commentator Gideon Rackmon.

The enemies of globalization can be found across the political spectrum, from the nationalist right to the anti-capitalist left, and from the environmental movement to the intelligence services.

It is true that deglobalization has not yet had a real impact on trade data. As my colleague Alan Beattie recently noted, “most of the standard measures of globalization—the cross-border movement of goods, services, capital, data, and people—are in pretty good shape.”

One possible conclusion that can be drawn is that global economic linkages and supply chains are now too complex to untangle. Although there may be a will for deglobalization, there is no way it will happen.

A sudden retreat into autarky by the world’s leading trading nations would certainly cause chaos and hardship. But despite all the potential upheavals, international economic ties can suddenly fall apart. Over the past two years, the pandemic and the war in Ukraine have shown how vulnerable international trade is to unexpected shocks. Covid-19 has halted global travel and disrupted supply chains. The war in Ukraine has led to the severing of the West’s economic ties with Russia. And the combined political and social forces now pushing against globalization make new upheavals possible.

A decade ago, protectionism was still a dirty word in American politics. But Trump’s administration started a trade war with China, and Biden’s kept the tariffs in place. A bipartisan consensus in the US now calls for policies to reduce economic dependence on China and to repatriate key industries, particularly semiconductors. India has followed the secessionist trend, banning Chinese tech companies such as TikTok in response to rising tensions with Beijing.

The Chinese themselves are active participants in this process of secession. It can be said that they have made the first significant move, with the aim of encouraging the local production of key technologies. Beijing’s “Made in China 2025” policy was announced in 2015, before the election of Donald Trump.

When economic logic was more powerful than geopolitical rivalry, the dominant question was: where is it cheapest or most efficient to buy or produce? This has led to the construction of complex cross-border supply chains. But in a world of growing international rivalry, other questions are being asked. Where is it safest to make or buy? And should we even trade with countries we consider a threat?

The invasion of Ukraine not only made it seem imprudent to rely on political rivals for key economic components, but also allowed Western national security supremacy to gain the moral upper hand over free trade advocates. Jens Stoltenberg, the Secretary General of NATO, says that “freedom is more important than free trade“. There aren’t many influential voices to counter-argument.

The political and strategic rationales for severing trade ties are increasingly complemented by those for environmental and social sustainability. After the pandemic, governments are reluctant to return to a world where the production of vaccines, say, or even rubber gloves, is concentrated in just one or two countries. The insistence on local manufacturing capacity, which once seemed inefficient, now seems reasonable. As one top industrialist puts it: We are moving from just-in-time to just-in-case production.

A potential vulnerability that concerns national security officials everywhere is semiconductors, which are critical to everything from cellphones to missiles. According to US President Joe Biden, about 90 percent of the world’s most advanced semiconductors are made in Taiwan by a single manufacturer, TSMC. A senior US official says a Chinese invasion or blockade of Taiwan would create a “semiconductor nuclear winter”. Correcting this situation may take many years. But a push to do just that is now underway with the passage of the Chips in America Act.

The US has long had rules that can limit inward investment on national security grounds. The CHIP Act creates new rules that will limit foreign investment, discouraging American firms from making semiconductors in China.

National security hawks believe that through globalization Western democracies have naively sponsored the rise of hostile rivals such as Russia or China. The left associates the “neoliberal” era of globalization with widening inequality and environmental degradation. There are elements of truth in both types of criticism. But the pressure to sever trade and investment ties is not simply a product of rising nationalism and economic stress—it contributes in turn to both processes.

For all the discontent created by hyper-globalization, I suspect that in the decades to come, the period from 1989 to 2022 will come to be seen as a golden era of peace and prosperity. The world may soon discover that globalization is a bad system, but that a better one has not been invented.

The article is in bulgaria

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