The Retreat from Globalization
The COVID-19 pandemic has hastened a process that began with the collapse of Lehman Brothers in 2008 and has gained further momentum during the era of Donald Trump. The second great wave of globalization is over, and everything from trade and technology to finance and economic governance has become vulnerable to radical change.
CAMBRIDGE – The world economy has experienced two great waves of globalization since the onset of the first Industrial Revolution in the late eighteenth century. The retreat from the second wave is now plainly underway. Will it be an orderly withdrawal to defensible positions or a rout, like Napoleon’s retreat from Moscow?
Globalization’s first great wave peaked in 1914 with the outbreak of World War I. It was propelled by transformative technologies: railroads and steamships, telegraphy and telephony, all of which vastly reduced the friction with which people, capital, and information moved across national borders (although protectionism on the part of the United States, Germany, and other countries constrained the movement of goods).
The second wave of globalization, beginning in the 1980s and accelerated by the opening of China and the collapse of the Soviet bloc, was driven by information and communication technology, which again facilitated the transnational movement of capital, goods, and even services like never before. Although the ICT revolution did not have a direct bearing on the movement of people, it inaugurated a new era of outsourcing and remote work.