Last month, the head of UBS issued a stark warning: “For most of my nearly 50 years in finance, markets operated on the assumption that global capital would flow with increasing ease . . . fostering growth, innovation and improved standards of living. However, that dynamic is now being upended. Trade tensions between the US and China have led to declines in the flows of goods, services, investments, and labour.”
The electoral triumph of Donald Trump leaves America in the charge of a man who considers “tariff” to be a “beautiful word”. This week Luiz Inácio Lula da Silva, president of Brazil, declared that “neoliberal globalisation has failed”. Christine Lagarde, president of the European Central Bank, warns that “we are witnessing a fragmentation of the global economy into competing blocs”, while the latest World Economic Outlook from the IMF centres on the risks of protectionism.
But if you actually look at the data, rhetoric does not entirely match reality. Yes, America is threatening to become less globalist and US-China ties are weakening. But flows between other countries are rising. What we are seeing is a shift to a multipolar world — not necessarily towards deglobalisation.
Data from the World Trade Organization projects that trade growth will accelerate next year to 3 per cent, up from 2.7 per cent this year. Data from the NYU Stern School of Business and the DHL shipping group shows that overall global trade in goods and services remains strong. And while population flows collapsed during the pandemic, they have since rebounded. What is even more interesting is that information flows have exploded dramatically in the past two decades — although this is now flatlining due to spreading internet and patent controls. And the movement of money? Well, capital flows were at the same level in late 2023 as in 2008, the last peak.
Thus the overall global connectedness index, which measures international activity against domestic across all categories, was around 25 per cent in 2023. That is roughly the same level as in 2022, which was a record high.
The data shows that flows between America and China have declined since 2016 by around a quarter. But even so, these two countries were still more interconnected in late 2023 than almost any other pair of nations.
Second, worsening US-China relations and western sanctions on Russia appear to have raised — not reduced — overall global flows, since many companies have reoriented their supply chains through different countries and channels. Third, there is no evidence that regional trade is growing at the expense of global links, except in North America. Supply chains were on average 5,000km long in 2022, a record high, and appear to have hit a new peak during the start of 2024.
Fourth, a notable group of countries is trying to stay non-aligned, rather than rigidly locked into any geopolitical bloc, and they are trading with each other and a wide range of partners.
The global economy is increasingly multipolar. Today’s multipolarity could support globalisation.
https://www.ft.com/content/1cfa6b3e-16c2-41e9-a1f6-fc90afaa7a98
Posted by Naurgul
7 comments
As a Canadian, I really fear for my country’s inability to compete in a free market. Canadian companies are only propped up by the government setting barriers and tariffs, all the way to banning foreign competition. I have travelled for a bunch lately and it’s insane to see the economic vibrancy and the sheer amount of new innovation from China and South Korea, for example, but in my own country, we are stuck with technologies from 2 decades ago.
And the kicker? Most people in my own country don’t even acknowledge this. They still think Canada is doing fine and the best country in the world, accusing every country that’s doing better than us as some kind of imaginary authoritarian hellhole. Meanwhile China just invented flying cars lol
I think Canada and the US are about to end up on the wrong side of an isolationist Iron Curtain like the Soviet Union once did while the world around us moves on.
Yeah, globalization doesn’t work when a handful of investment banks can crash the global economy, when governments are all too happy to burden the taxpayer with an obscene amount of debt to cover the losses of these financial institutions.
I always wonder why these banks were not made to collect their own debts instead of being handed hundreds of billions for gambling on the economy and losing. In Ireland, everyone was bailed out down to individual contractors and developers, leaving entire housing estates and other projects unfinished. Surely it would have been a more efficient use of our money to fund the completion of these developments and sell at or near cost rather than just abandoning them to rot. We’ll be paying back our bailout debt until 2046 while people today are struggling to find housing. Absolute madness.
Globalization is by definition dead in a multi-polar world. If every continent has multiple factions producing the same stuff and selling them mostly locally the very point of globalization is dead. We’ll be better off without it. Globalization is liberal dogshit that forced us in Europe and the US to appease China in a vain attempt to grift progressivism in places like China and Russia. Once that obviously failed it pretty much became a system that vastly benefited Russia and China at Europe’s and the US’s expense. Trends like this must be reversed.
Silver lining here is that it also vastly undermined the progressive movement and its reach which is about the only good thing that globalism brought once it failed in its objective to influence China and Russia. In the future both globalism and progressivism can be flushed down the same toilet.
From the time Trump started the trade war, it was practically doomed to this outcome.
Globalization with the US/West at its core is over because the US itself is no longer playing the game (Biden actually inherited Trump’s reverse globalization).
Regional economic integration will be an increasingly obvious behavior.
Globalization isn’t just the free flow of capital. It’s pretty hard to do it without the flow of ordinary people.
In the past decades many countries imported cheap labour, but that also pissed many local citizens. In the end you can’t have it all
There’s no deglobalization, just de-CCPization. Most of the benefits of globalization went to China and, as the high price of cheap goods that could be sourced elsewhere are being realized, things are getting sourced elsewhere.
I think I’d need to see the charts and numbers before commenting.
I do not think the world is becoming multipolar rather different blocs are trying to be created.
Countries are experimenting more with tarries and also trying to create alternative financial systems in order to stay flexible amd sell to whoever at a premium price when things are…interesting.
I’m very interested what rules we are going to see made or defended as these different systems eventually get raised up. If you have a Brick currency do you have to trade that in for dollars or crypto to make salary for example?
I’m not sure the world is anymore multipolar today then it was say 30 years ago. But I do see different countries recently having more tense relations.
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