First, it was the financial crisis. Then Brexit and the election of former US President Donald Trump. Next came a trade war and a pandemic. The war in Ukraine is only the latest event to trigger a wave of claims that globalization is dead.
Since the Russian invasion began, everyone from newspaper columnists to Wall Street luminaries such as BlackRock Inc. Chairman Laurence Fink and Oaktree Capital Group co-founder Howard Marks have decided that the era of expanding global trade and financial ties has ended. Yet such claims don't match the empirical reality many of us see, especially in Asia.
On the contrary, it seems that our world is only becoming more interconnected. Last year, global trade hit a record $28.5 trillion, up 25% year-on-year and 13% higher than in 2019, before the pandemic struck. For all the talk of decoupling, US-China trade swelled more than 20% last year, to $687.2 billion. Even with war in Ukraine, global trade is forecast to grow in 2022, albeit at a slower pace.
Cross-border investment also surpassed pre-pandemic levels last year, swelling to $1.65 trillion. China, in particular, is more integrated into the global economy than ever. In 2021, its foreign direct investment inflows rose by a third to an all-time high of $334 billion. In the first quarter of this year, they grew by more than 25% year-on-year.
Travel has been slower to recover and international trade as a proportion of global GDP has fallen since its peak in 2008. At the same time, globalization is evolving and surging in other, non-physical dimensions as well.
Monthly global data traffic soared during the pandemic and is forecast to reach 780 exabytes by 2026, up more than three-fold compared to 2020. Half a million new people connect to the Internet each day.
We are more immersed in a global sphere of images and ideas than ever. Billions are watching what the New Yorker has dubbed "the first TikTok war" unfold via satellite images and livestreams from civilians and soldiers. Ukrainian President Volodymyr Zelenskiy has harnessed the technologies of digital globalization, captivating the world with selfie videos and addressing multiple national parliaments by Zoom, something that would have been difficult to imagine before the pandemic.
Why then do so many pundits still think globalization is dying? In part, they appear to be fixated on a particular set of US-centric neoliberal ideas about globalization that prevailed after the Cold War.
One central belief is what New York Times columnist David Brooks calls "convergence globalization" — the idea that as countries became more globalized and developed, they would become "more like us in the West."
In reality, as scholars Heather Berry, Mauro F. Guillén, and Arun S. Hendi report in a study cited by Brooks, "Over the last half century, nation-states in the global system have not evolved significantly closer (or more similar) to one another along a number of dimensions." Globalization has not led to Americanization.
To the contrary, globalization is becoming less American and more, well, global.
While the US was at the helm of global trade before 2000, today two-thirds of countries trade more with China. Since Trump turned his back on the Trans-Pacific Partnership free-trade pact and the World Trade Organization, the locus of multilateral trade liberalization has shifted to Asia.
In global finance, while the dollar still reigns supreme, its share in global currency reserves fell from 70% in 2000 to 59% in 2020. Sanctions are accelerating efforts by Russia and other countries to develop alternatives to the US dollar and the SWIFT interbank messaging system.
In the cultural sphere, American pop culture faces increasing competition from alternatives such as Bollywood, K-pop, and Turkish soap operas. Last year, the top-selling musical act (BTS) and most popular show on Netflix (Squid Game) were South Korean, while the world's most downloaded app (TikTok) and biggest fashion retailer (Shein) were Chinese. Thus, while global flows continue to grow, they are relatively less mediated by Washington, Wall Street and Hollywood.
The second neoliberal assumption about globalization shattered by the war in Ukraine is the belief that market liberalization would launch a virtuous circle of peace, prosperity and openness, entwining the economic interests of states until conflict between them became unthinkable.
This idea is not completely wrong. But it fails to recognize that connectivity is a double-edged sword and that people care about things other than money.
As Mark Leonard writes in "The Age of Unpeace," it is increasingly clear that connections that have knit the world together — from trade to migration, global finance and the internet — can also be weaponized and become a source of conflict.
Around the world, governments are paying more attention to how globalization can threaten national security, citizens' interests and the environment. To mitigate these risks and make globalization more palatable, many are shifting away from Washington-style laissez-faire policies to a more hands-on approach of "managed globalization."
The European Union is a pioneer in this regard, adopting new rules on cross-border flows such as its General Data Protection Regulation and the forthcoming carbon border adjustment tax. China's "dual circulation" model can be seen as a form of managed globalization that seeks to harness its benefits while reducing exposure to external uncertainty. Even the US is pushing for more proactive measures to manage transnational flows, such as a global minimum tax on multinationals.
This heralds a more measured approach to globalization that takes long-term resilience and political realities into account, not a wholesale retreat to autarky. We have entered a phase of global integration driven by new forces, one that will be more diverse and more managed than the one that came before. And that needn't be a bad thing.
Wang Huiyao is founder and president of the Center for China and Globalization in Beijing and vice chairman of the China Association for International Economic Cooperation.
Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.