There may be signposts on the road of de-globalization which is reshaping our world.
Certainly, you’ve heard of globalization. But what about de-globalization?
Supply chain disruptions, surging costs, shortages these daily realities could all be connected to a process known as de-globalization.
Some experts even see the war in Ukraine, combined with the pandemic, as marking a turning point toward a deglobalized era.
But what shape would this new world take? A brief intro to globalization.
Experts typically describe three types of globalization: economic, social and political globalization.
Economic globalization is the integration of the world economy in terms of trade.
This process certainly has its share of advocates and critics. Globalization lifts people out of poverty and increases their standard of living, proponents proclaim.
Yet the rewards of economic globalization are not shared equally.
Internationally as well as in industrialized societies, inequality has increased, confirms Andreas Wirsching, a history professor at LMU in Munich.
Economic globalization has resulted in “many winners, but also many losers that is undeniable.”
Downsides of globalization also include social and ecological consequences, points out Cora Jungbluth.
An economist and senior expert at Bertelsmann Stiftung, an institute in Germany.
Workers in high-income countries have seen jobs moving to lower-cost countries.
While multinational corporations have outsourced more dirty production steps to developing.
And emerging countries, thus contributing to environmental issues there.
Globalization in retreat since the Great Recession
Just as globalization reflects a process of increasing economic interdependency, de-globalization then marks a retreat from global economic integration.
And there are indications this has been happening for some time already.
A key measure of globalization trade’s share of global GDP peaked in 2008 at the start of the Great Recession.
The ratio of exports to GDP around the world rose pretty significantly in the 1990s and 2000s.
But since the 2008 and 2009 financial crisis, those measures have been flat or down, explains Douglas Irwin, an economics professor at Dartmouth College in the US.
Irwin and other experts also note that this has been linked to populism and protectionist economic policies.
But there are other major factors putting the brakes on globalization.
Economically, the coronavirus crisis was infamous for supply chain disruptions.
Who could forget the resulting shortages, price increases, hoarding that moment when you got down to your last roll of toilet paper?
Such disruption spurred a fundamental change to the design of those supply chains.
Explains Megan Greene, an economist and senior fellow at Harvard Kennedy School.
The pandemic shifted a trend away from just-in-time manufacturing more toward holding inventories, Greene says.
She describes this newer contingency system as global supply chain plus backup plans.
Do firms are not left in the lurch when there are global supply chain disruptions.