Late last year, Taiwan Semiconductor Manufacturing Co’s legendary founder Morris Chang (張忠謀) proclaimed that “globalization is almost dead.”
In a world where supply chains have been disrupted by COVID-19 and the deepening Sino-US rivalry, other commentators have echoed this view, and many companies have begun on-shoring and near-shoring their procurement of goods.
However, it is a mistake to conclude that globalization is over. A lot of human history reveals why.
Illustration: Louise Ting
Globalization is simply the growth of interdependence at intercontinental, rather than national or regional, distances. Neither good nor bad in itself, it has many dimensions, and it certainly is not new.
Climate change and migration have been driving humanity’s spread across the planet ever since humans began to leave Africa more than 1 million years ago, and many other species have done the same.
These processes have always given rise to biological interactions and interdependencies. The plague originated in Asia, but killed one-third of the European population from 1346 to 1352. When Europeans journeyed to the Western Hemisphere in the 15th and 16th centuries, they carried pathogens that decimated indigenous populations.
Military globalization goes back at least to the days of Xerxes and Alexander the Great, whose empire stretched across three continents. The sun never set on the 19th-century British Empire. Through it all, great religions spread across multiple continents — a form of sociocultural globalization.
More recently, the focus has been on economic globalization: the intercontinental flows of goods, services, capital, technology and information.
The process is not new, but technological changes greatly reduced the costs associated with distance, rendering today’s economic globalization “thicker and quicker.”
The Silk Road connected Asia and Europe in the Middle Ages, but it was nothing like the vast flows of modern container ships, let alone Internet communications that connect continents instantaneously.
While globalization came to be seen primarily as an economic phenomenon in the 20th century, it became a political buzzword — for proponents and critics — in the 2000s.
When rioters in Davos broke the windows of a McDonald’s to protest labor conditions in Asia, that was political globalization.
The current globalization differs from that of the 19th century, when European imperialism provided much of its institutional structure, and when higher costs meant that fewer people were involved directly. Western firms began spreading around the world in the 1600s, and by the end of the 19th century, the global stock of foreign direct investment was equivalent to about 10 percent of global output.
By 2010, the worldwide stock of foreign direct investment included non-Western companies and was equivalent to about 30 percent of world GDP.
On the eve of World War I in 1914, there was a high degree of global interdependence, including movements of people, goods and services. There was also inequality, because the benefits of economic globalization were unevenly shared.
However, economic interdependence did not prevent the major trading partners from fighting each other — which is why people at the time called it the Great War. After those four years of devastating violence and destruction, global economic interdependence was sharply reduced. World trade and investment did not return to 1914 levels until the 1960s.
Could the same thing happen again? Yes, if the US and Russia or China blunder into a major war.
However, barring that contingency, it is unlikely. For all the talk of economic decoupling, the breaks have been selective and incomplete. Global trade in goods and services made a strong comeback after the COVID-19 downturn in 2020, but not all areas recovered equally.
With the US having established barriers to hamper the flow of sensitive goods to and from China, its imports from China have risen by only 6 percent from pre-COVID-19 levels, while its imports from Canada and Mexico have risen by more than 30 percent.
In the US case, regionalization seems to have recovered more robustly than globalization.
However, a closer look shows that while China’s share of US imports dropped from 21 percent to 17 percent from 2018 to last year, US imports from Bangladesh, Thailand and Vietnam rose by more than 80 percent. Those figures do not suggest that globalization is dead.
It bears mentioning that this new Asian trade with the US is intermediated Chinese trade. The US and its allies are still more deeply intertwined with the Chinese economy than was ever the case with the Soviet Union during the Cold War.
Western countries can reduce their security risks by excluding Chinese companies such as Huawei from Western 5G telecommunications networks without incurring the inordinately high costs of dismantling all global supply chains.
Even if geopolitical competition were to substantially curtail economic globalization, the world would remain highly interdependent through ecological globalization.
Pandemics and climate change obey the laws of biology and physics, not politics. No country can solve these problems alone. Greenhouse gases emitted in China can lead to costly sea-level rises or weather disruptions in the US or Europe, and vice versa.
These costs could be enormous. Scientists estimate that China and the US each suffered more than 1 million deaths as a result of the COVID-19 pandemic that began in the Chinese city of Wuhan, partly owing to the countries’ failure to cooperate on policy responses. Success in addressing climate change or future pandemics would require recognition of global interdependencies, even if people do not like it.
Globalization is largely driven by technological changes that reduce the importance of distance. That is unlikely to change. Globalization is not over. It could just no longer be the kind we want.
Joseph S. Nye is a professor at Harvard University.
Copyright: Project Syndicate
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