Commenting on Martin Wolf: as is almost always the case, the odds are strongly in favor of Martin being right, once again; but I guess I should say more than that, shouldn't I?...
As Martin Wolf observes <https://www.ft.com/content/e167eca5-e1e7-4927-abb5-d87dfb699cf3>, the post-1990 landscape of global trade and finance hyperglobalization was indeed the result of the container, the jumbo jet, the submarine fiber-optic cable, and of the two preceding centuries of global economic divergence.
It was significantly shaped by the disparities in productivity between advanced economies and those lagging. This gap created vast opportunities, primarily fueled by the availability of cheap labor in less developed countries. Given this gap, the technological advancements in transportation and communications lit the fuse. The explosion was the integration of business organizations and the unbundling of supply chains. The accelerant was the shift in economic ideologies towards market liberalization and favoring cross-border openness. These significantly transformed global policies.
Now the age of increasing hyperglobalization is over. But, Martin Wolf says, that era is unlikely to be followed by an era of globalization retreat like that of the generation after 1913. Martin Wolf sees global trade and capital flow patterns more-or-less continuing as they are for the next decade or so—not much deepening of international economic integration, but not much shallowing either. Deepening is seen as risky for political, security, income-distribution, and social-stability reasons. As the BREXIT disaster has served as a horrible warning to all, shallowing is very expensive indeed.
What do I think of this?
I think that, as is almost always the case, Martin is right.
Martin:
Martin Wolf: “The World Economy’s Story Remains One of Integration”: ‘Underlying… most fundamental are… economic opportunities… costs of transport and communications… comparative advantage… exploiting economies of scale and learning by doing. No less crucial… are changes in economic ideas and geopolitical realities. Finally… wars, crises and pandemics… shift… perceptions of… the risks, costs and benefits of integration….
The ratio of trade in goods to world output tripled between 1840 and 1913, then fell by roughly two-thirds between 1913 and 1945, and tripled again between 1945 and 1990, to surpass pre-1914 levels…. After 1990… Gaps in productivity between the most advanced economies and those that had fallen behind… created enormous opportunities… cheap labour…. The container ship, jumbo jet and advances in information and communication technology… integration of business organisations and unbundling of supply chains…. Belief in market liberalisation and cross-border opening transformed policy….
What ended this?… The main drivers weakened or went into reverse…. The global financial crisis, pandemic and today’s great power tensions have transformed trust into suspicion and risk-taking into “de-risking”. No substantial global trade liberalisation has occurred in more than two decades.
What could come next? Continuation of a messy status quo seems the most plausible answer…
The primary drivers of hyperglobalization did indeed begin to lose momentum and even reverse direction after 2007. The global financial crisis, the COVID-19 plague, and escalating geopolitical tensions have fundamentally altered the landscape. The rust, which had once underpinned the global economic order ebbed away and was replaced by a fear of supply-chain disruptions and "weaponized interdependence". Optimism has given way to suspicion. Boldness has given way to caution. The watchwords today are "de-risking" and "de-coupling".
And yet, when I look around, I agree with Martin Wolf that a generation of full-fledged de-globalization is very unlikely. There is enormous inertia inherent in the global economic system. The forces making for globalization retreat are fragile, and while the world economy is indeed a delicate mechanism, the costs of disrupting it are so great that not-insane governments will move cautiously and incrementally.
And relatively few governments are insane.
From my point-of-view, the case of BREXIT in the United Kingdom is the pertinent example of how "shallowing" will work in practice. And it is indeed a horrible warning. The predictable and indeed predicted consequences of BREXIT now serve as a cautionary tale discouraging other nations contemplating an escalation from de-globalization rhetoric to de-globalization reality. Thus the heightened awareness of the risks associated not just with increasing extensive international interdependence but with moving away from it has led governments and other entities to approach international relations with increased caution: all recognize that, in the words of King Felipe II Habsburg of Spain in the 1580s, on matters as weighty as these "it is desirable to move with feet of lead".
We see this most notably, I think, in the United States. There is a vast and easily observe gulf between anti-trade and anti-immigration political rhetoric and practical implemented policy reality. The fraction of American residents who are immigrants holds steady at 14%. The proportion of people living in the United States without authorized documents has been slowly drifting down, from 4.2% in 2006 to 3.1% today. Yet as the heat of the rhetoric surrounding the immigrant threat and the import threat grows year by year, policy does not follow. Not even Donald Trump claims anymore that trade wars are "easy to win". And the Republican moneyed base may be the group most strongly opposed to actually doing anything to increase decrease the flow of immigrants into America.
De-globalization is thus stepped down to "de-risking". And "de-risking" is indeed a thing. But it is more likely to take the form of increasing the density of potential economic links in order to provide robustness against point failures than the form of any movement toward autarky: "friend-shoring", not "home-shoring" is the watchword.
So what does this mean for the future of neoliberalism, if the integrated global economy that it created and that is its powerful support remains? It looks like it will remain, albeit accompanied by increased distress, anxiety, and worry.
References:
Wolf, Martin. 2024. "The World Economy’s Story Remains One of Integration." Financial Times. Jan. 19. <https://www.ft.com/content/e167eca5-e1e7-4927-abb5-d87dfb699cf3>.
You may post the U.K.'s long-term GDP chart from the FT that shows a clear inflection in trend since Brexit. That tragic chart alone should drive home the point, at least to those who want to see -- and none so blind as those who do not want to.
I think the falling impact of labor costs on overall productivity [no longer a "cheap factory workers" royal road to manufacturing exports-led development, but also perhaps no longer a "cheap customer service workers" royal road to service exports-led development] might contribute to a lessening of productivity gaps as a driver: it still makes sense to diversify supplier networks, but fewer developing countries will be able to insert themselves into those networks.