In light of the Covid-19 pandemic, there has been considerable focus on the fragility of global supply chains and the possibility of ‘slowbalisation,’ a term coined by Dutch writer Adjiedj Bakas referring to a “slowdown in global trade.” Through the use of economic theory and empirical data, I will be assessing why the events of the last three years have not only disproven the ostensible inevitability of globalisation but have entailed a drastic reversal of globalisation, from an economic perspective.
Due to the relentless process of globalisation since the Industrial Revolution, the economic and cultural integration of markets has seemed inevitable: globalisation rides the back of technological innovations. To evaluate why recent events can mark the end of this era of internationalism, it is important to understand that globalisation’s inevitability hinges not only on technology but crucially on policy decisions made by governments. It is for this reason that Turkish economist Dani Rodrik criticised the vision of deep economic integration. For him, the direction of globalisation was subject to a ‘political trilemma,’ whereby voters desire market integration, democracy and a sovereign nation-state but all three are not compatible with each other. Since World War Two, markets have merged as much as possible through intergovernmental organisations such as the International Monetary Fund. For deep market integration to occur, however, the removal of institutional variations is required except a single global institutional framework, where nation-states still existed, would mean ignoring the preferences of electorates in some countries; in contrast, obtaining this global framework with democracy intact, would require the dissolution of nation-states. Recent events, can attest to Rodrik’s trilemma. The rising tide of nationalism, as evident from Brexit, Trump and the launch Identity and Democracy in 2019 (a far-right political group within the European Parliament), as well as the Sino-American trade war (which saw America’s tariff rate jump back to its highest level since 1993), it can be argued are all symptomatic of the desire to sacrifice deep integration over the apparent preservation of democracy and identity.
With reference to the trade war in particular, it might be argued instead that we are not seeing a decline in trade but merely a restructuring of the global dynamics. Although America has risen to dominate global trade, its role in the international economy is not as important as it used to be; in 1992 Europe became a single economic bloc and now makes up 15.2% of world exports, while China makes up 13.1% of world imports. While America is reducing its burden as the leading powerhouse under it’s ‘America First’ policy, global competitors have become more determined in liberalising trade. In 2018, for example, the EU and Japan signed the biggest trade deal in history, covering one third of the world economy. A pattern could emerge to counter the threat of US protectionism whereby further globalisation between other countries becomes a safeguard against dependence on US trade; such trade agreements also hurt US producers, potentially inducing the future administration to reduce tariffs.
More recently, the Covid-19 pandemic in conjunction with a growing focus on environmental sustainability have spearheaded the contraction in globalisation: world merchandise trade is set fall by between 13% and 32% in 2020. The long-term consequences of this include the push to relocate supply chains domestically, pledges to ‘economic self-reliance,’ favouritism of national firms through stimulus packages and the failure of the current global governance to provide leadership. Just as Covid-19 has shocked the world economy, so too will the realisation that global capitalism cannot be sustained under the threat of the global climate crisis and depletion of natural resources. The fact that 71% of the world’s top 500 companies now opt to externally audit their environmental impact numbers, demonstrates the growing influence of environmentally sustainable ways of operating. The severity of these developments will not only slow down globalisation, as the trade war did, but push the world towards deglobalisation.
Globalisation, however, is not a zero-sum game as populist politicians would have the electorate believe. It follows that globalisation has facilitated phenomenal gains from economies of scale and comparative advantages, originally theorised by David Ricard, which are too great for it to cease; as stated by DHL chief executive John Pearson, globalisation is “too big to fail.” To illustrate these gains, in 2018, development economist Michael Clemes claimed that easing border restrictions, one aspect of globalisation, could double world GDP. Some argue that the slowdown of globalisation, like the era of isolationism during the Great Depression, will not last and that supply chains will not be regionalised but will be diversified to build resilience. If factories are localised, the jobs that politicians in western democracies tout simply won’t exist due to automation and high capital-labour ratios. Therefore, the vast remunerative incentives of globalisation in line with risk mitigation will spur firms to spread their operations to even more countries. In this way the supply shock of Covid-19 will not reverse globalisation but change how firms approach it.
It is clear that the shifting trends in global trade and politics of the last three years have both drastically marked the advent of slowbalisation and nudged the world perilously close to deglobalisation. Unfettered integration of markets under a hyper capitalist system has brought the world to the limits of Rodrik’s Trilemma, while unsustainable consumption of resources under the same system has questioned the permanence of globalisation. Notwithstanding the acclimatisation of trading blocs and incentives for firms to adapt, it has taken a world health pandemic to galvanize the world into an era of de-globalisation. Consequently, governments will experience economic growth at a modest pace, albeit with elements of globalisation continuing, with western consumers experiencing higher prices and less choice, while emerging markets struggle to develop as rapidly.
 (Slowbalisation, 2019)
 (Kishtainy, 2012) (Rodrik, 2012)
 (Has covid-19 killed globalisation?, 2020)
 (Data Browser, 2020)
 (Youtube, 2019)
 (Trade set to plunge as COVID-19 pandemic upends global economy, 2020)
 (Why Environmental Sustainability is Becoming Big for Business, n.d.)
 (Ricardo, 1817)
 (Opening Borders Would Double World GDP, Economist Says, 2018)
 (News / Globalisation 'too big to fail', and Brexit and Trump haven't dented trade either, 2019)
 (Slowbalisation, 2019)