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Globalisation process is a complicated issue: there are those who benefit from globalization and those who face its direct costs. Fraying social safety nets in wealthy countries, not to mention technological advances that allowed manufacturing firms to reduce their labor forces, added to workers’ woes. If managed effectively, the “new globalization” can still live up to its once vaunted potential as a counterweight to global fragmentation and conflict.
Background
Some initial trends in the globalization processes promised to “bridge divides” between advanced and developing economies, binding them together in a mesh of shared interests. It seemed reasonable to assume that this would even foster geopolitical stability, as collective prosperity would incentivize countries to tamp down conflicts that could disrupt their economic relationships.
Today, this grand hope of globalization has been dashed: globalization’s devastating effects on jobs in advanced economies have played a role in pushing many democracies, including the United States, to the precipice of anarchy. More politicians are looking to take advantage of the backlash against globalization, and “portrayed” it as a malignant force exposing their countries’ firms and workers to destructive foreign competition.
The dream of integration has given way to a reality of fragmentation in which patterns of trade and capital flows mirror geopolitical alliances rather than transcend rifts between them. Far from the antidote to geopolitical rivalry it was originally imagined to be, globalization has itself become a source of dissension.
Source: https://www.foreignaffairs.com/united-states/how-geopolitics-overran-globalization#
China-US controversies
The two superpowers are explicitly engaged in competition for economic and geopolitical supremacy. Without the countervailing force of mutually beneficial economic and financial linkages to prevent the competition from spiraling out of control, the relationship between the two countries has become injurious not just to Beijing and Washington but also to the rest of the world, left to suffer from the collateral damage. This fracturing relationship is emblematic of the new instability of a world order less restrained by economic integration.
The shifting nature of globalization should not lead to despair: instead, economists and policymakers must reflect on how globalization went astray, transforming from a force that promotes cooperation to one that fuels conflict, so that they might once again productively channel its positive effects.
Harnessing globalization’s potential to improve economic outcomes and lives while allaying its destructive effects is more necessary than ever to counteract the fragmentation that continues to increase the risk of dangerous interstate conflict.
In what became known as the “China shock,” higher-wage American manufacturing jobs collapsed and the manufacturing sector hollowed out.
Foreign demand for goods helped many emerging-market countries build up their manufacturing sectors, which swelled their middle classes. As trade expanded, many of these countries ran trade surpluses as they exported more than they imported. Meanwhile, some rich countries, including Australia, Spain, the United Kingdom, and, most notably, the United States, began borrowing money from the rest of the world to finance their trade deficits.
Lessons to learn
Globalization came to serve as a convenient bogeyman for rising inequality, shrinking job opportunities, and government policies that failed to ameliorate the accompanying sense of economic despair. The domestic fallout from the backlash to globalization in the United States eventually resulted in the election of Donald Trump as president.
Despite their historical embrace of free trade, advanced economies are embracing industrial policy in which the government, rather than the market, picks winners and losers. Industrial policy was once anathema to countries with market-oriented economies but has now come to be seen by many as a legitimate tool to boost domestic firms’ competitiveness in domestic and international markets.
The new forms of globalization might intensify economic and geopolitical volatility.
In response to these new risks, multinational businesses are pursuing strategies of “resilience”. Many have attempted to concentrate production facilities in locations that promise relative safety from geopolitical risks: reshoring production in home countries, “friend shoring” production in countries seen as geopolitical allies, establishing production facilities in multiple countries to supply each of those countries’ home markets, or some combination of the three. Others are attempting to diversify the locations of production facilities, sources of raw materials, or markets for final products.
Apple, for example, has begun to invest in India, shifting some of its phone production away from China. Chinese manufacturers attempting to skirt U.S. tariffs have increased their investments in Mexico, Vietnam and other countries with more access to U.S. markets. Minimizing costs—including labor, land, and energy—is no longer the main factor driving decisions about where to set up physical plants or other business operations.
Globalization sought to reduce geopolitical conflict by intertwining economies together with the idea that an integrated world would have less reason to fight. But as companies retreat from markets in countries seen as geopolitical rivals to their home countries, businesses no longer serve as bridges to help maintain good relations. Without the mutually beneficial commercial networks of globalization’s earlier years, this new form of globalization might ultimately intensify, rather than lessen, economic and geopolitical volatility.
If global trade and financial flows continue to fragment, however, this path to development could be shut off, leaving a large share of the world’s population that will have missed out on the benefits of globalization’s prosperous early decades. The downstream political effects of such an economic retrenchment could make the backlash of the early twenty-first century appear quaint by comparison.
The challenges’ effects around the world
In some emerging-market countries, where governments still maintain tight control over the economy and banks, this will require refashioning intrusive government regulation and fixing dysfunctional financial systems so that domestic firms can more effectively compete on the international stage. International institutions that oversee global trade and finance must also find ways to rejuvenate themselves.
To maintain their legitimacy, trade institutions such as the World Trade Organization should strive harder to enforce the rules of the game in a consistent and transparent manner, calling out the unfair trade practices of all countries, including powerful ones such as China and the United States. Financial institutions such as the International Monetary Fund and the World Bank can win back the support of emerging-market countries by restructuring their governance systems to give those countries fair voting shares commensurate with their economic power.
Source and citations from: Prasad E. “How Geopolitics Overran Globalization. The End of the Dream of Economic Integration”. – Foreign Affairs. March 31, 2026. In:
https://www.foreignaffairs.com/united-states/how-geopolitics-overran-globalization#