Globalisation: Is it over? What’s next?

As we mark the second anniversary of the Russian invasion of Ukraine, serious talk is turning to questions that haven’t been heard in a couple of generations: the need to be on a war footing, for rearmament, even conscription. Since the end of the Cold War, we have all become used to spending the “peace dividend”, cashing in on the “end of history”. The rupture with our recent past can hardly be overstated.

If you believed the sayings that where goods cross borders, soldiers don’t – or that there can’t be wars between two countries that have a McDonald’s – then the era of globalisation really does seem to be over. Globalisation and the end of the Cold War aren’t the same: the UK’s Big Bang, which heralded London’s rise as a globalised financial centre, took place two years before the fall of the Berlin Wall. We’re all the products of globalisation: even if you spend all your time campaigning against some aspect of it, you’ll be using one of the great symbols of globalisation – a mobile phone – to coordinate your action.

This is what makes Elisabeth Braw’s new book “Goodbye Globalisation” (Yale University Press, 2024) so compelling. She describes the growth and decline of globalisation through the personal stories of those who built it, benefited from it, worried about it, began to question it and then realised that it was disappearing forever: pioneering businesspeople and bankers, economists, politicians, children who grew into politicians, campaigners and, finally, today’s younger generation who use the products of globalisation while challenging its future. She covers the main drivers of globalisation from mobile telephone networks to energy pipelines, manufacturing and finance, in Europe, China, Russia, Africa and – logically – pretty well everywhere else. She sets the benefits of wide access to cheap goods against the costs to communities that lost their livelihoods, and to the environment.

The conclusion is clear: globalisation as we have come to know it is over. The unprecedented speed with which the West reacted to the invasion of Ukraine dealt it a killer blow: if geopolitics can upend business calculations almost in an instant, risk calculations will change and businesses will start to invest in safer markets.

The signs of deglobalisation have been with us for some time: Braw chronicles the process by which many Western countries have reduced their dependence on Huawei’s 5G technology, where she picks apart the links between practical security concerns and politics. Now Apple is producing phones in India as well as China, and, with the Great Firewall of China, the dreams of a universal internet seem over. Quite often, just as globalisation at its peak wasn’t complete (protectionism never went away), so deglobalisation isn’t either. I remember hearing before Brexit that it would be “impossible” for the British automotive sector to operate without “just in time” supply chains. Whatever the downsides of Brexit, the industry is still there. More importantly, a new Cold War can’t be like the last: the US and China can’t decouple completely when China owns so much US debt.   

Inevitably, it’s impossible to match the magisterial narration of where we’ve reached with an equally clear or comprehensive vision of where to go next. The medium term is of course easier to see than the far distance. Braw’s vision is of a partial deglobalisation (“regionalisation”), hard to adapt to in some respects but also with benefits both for the communities which lost out under globalisation and for the environment. She argues that this regionalisation could in time be a step towards a new better model of globalisation inspired by Gen Z.   

Regionalisation in the form of “friendshoring” is certainly already happening. Though it is striking where it is happening – moving of manufacturing from China to Bangladesh and Vietnam, for example – it is taking place as much for the price advantages as in response to geopolitical fracturing. But it is far from complete: evidence the real impact in the West whenever there is any disruption of trade with China.

As we move to, perhaps not deglobalisation but the next phase of globalisation, can we learn from the past?

The move from global to regional is a realist reaction to geopolitical strains, and – like globalisation itself – is influenced by the interplay of multiple interests. Just as those who do best out of globalisation are its greatest proponents, so regionalisation on geopolitical/security grounds is often influenced by protectionist interests.  Even if it were desirable, it would be pretty well impossible to eliminate trade dependence on China. And, the Great Firewall of China notwithstanding, the position of technology in the modern economy means that a retreat from globalisation isn’t going to be a return to the 1980s.

Regionalisation and friendshoring can only go so far. If we only trade with those with closely similar values, we’ll too quickly run out of trading partners. Moreover, we shall still need to trade with many states (eg in the Gulf or South-East Asia, for example) who are closer than we would like to China or even Russia. We should look in the mirror too: over the last 50 years, Western values (and red lines) have shifted at a historically unprecedented pace. As Peter Frankopan has pointed out, much of the world sees the West as short-termist and fickle. For all our rhetoric about values, we will continue to be forced to compromise.

It’s worth remembering that globalisation, as we have come to know it, was not centrally planned, but rather the result of individuals, businesses and countries exploiting a series of opportunities, each with a multiplier effect. Those who benefited became advocates; losers were often ignored. Might this happen again? The political and commercial advocates of climate change initiatives are perhaps today’s globalisers and similarly in danger of making similar mistakes. Will efforts towards a “just transition” address these concerns or in practice reinforce them? The answer perhaps depends less on the grand principles than on how the new economic order is implemented.

Sceptics will wonder whether there’s a markedly better Gen Z-driven globalisation around the corner. To be markedly different from their predecessors the next generation of globalisers will need to be able to look beyond the perspective of the ambitious and talented pioneers to the left behind, geographically, demographically and socially. I recall a distinguished business school professor arguing that today’s young people regardless of where they live are more like each other than they are like their parents. That may be true of business school students around the world – and the danger is that the next generation of leaders, as much as its predecessors, pays too little attention to those they aspire to lead.

The next round of globalisation can surely be better than the last, but only if we tread carefully and focus as much on the human dimension as on the power of technology and our own intellectual and professional success. Understanding the history of the last globalisation is essential, and for that alone Braw’s book is a must-read. Then there really will be a good story to tell.

David Landsman

David Landsman is a Senior Advisor at BFPG