Since the birth of modern capitalism, we have preached economic efficiency through trade and interconnectivity. However, for almost two decades, this narrative has been unravelled. Is this merely a phase? Or a sign of change in how the world views a fundamental concept of economic growth?
[Sidd is a fourth-year Commerce and Law student and a Publications Officer at ESSA. With a keen interest in behavioural economics, macroeconomic trends, and the history of economic thought, Sidd enjoys unpacking the complexities behind how individuals, institutions, and ideologies shape economic outcomes. He brings a curious and analytical mindset to his work, aiming to make economic ideas more engaging and accessible for students. Through his writing, Sidd hopes to spark deeper conversations about how economic theory has evolved—and continues to influence—modern policymaking and everyday decision-making.]
Deglobalisation is a trend which has waded in and out of commercial and political focus throughout modern society. Buzzwords like ‘protectionism’ and ‘Tariffs’ have been freely thrown around in association with deglobalisation. However, to understand what deglobalisation truly is, we must first understand the process it is undoing – Globalisation. At its core, globalisation is unification. It is the process of increasing interconnection and positive trading relationships between countries, through instruments such as free trade agreements and cultural exchanges. Deglobalisation is, as the name suggests, the very unravelling of this process. Nations lean more towards self-reliance by shortening supply chains and reducing trade, opting for policies of isolationism.
Since the fallout of the Global Financial Crisis (GFC) in 2008, deglobalisation has steadily been on a rise and shows no signs of slowing. The obvious question which arises is, why? What benefit could there be of reversing a mechanism which supposedly brings the world together?
Historical Background
Globalisation can be found as early as 50 BCE in Central Asia. Spanning the length of the Silk Road, open trade connected the Mediterranean to the South China Sea, with goods being exchanged, cultures being shared, and an age of inter-continental connection beginning. The history of Deglobalisation does not stretch back as far though. The first modern instance of this process is during the Great Depression, with the Smoot – Hawley Tariff Act of 1930 spreading the economic crisis in the United States globally. The effects were catastrophic, causing the capitulation of the global financial and economic systems of the time, and driving the rise of extremist politics across Europe.
However, the world slowly recovered and global trade was at its highest during the late 20th and early 21st century. This was until the Global Financial Crisis, which triggered another global economic collapse, and impacted the world in a manner that still lingers to this day.
In more recent history, the COVID-19 pandemic was yet another blow to globalisation, with supply chains being almost completely halted, plunging numerous countries into critical levels of debt, and decreasing reliance on imports. In even more recent history, conflicts between trade pillars China and USA, as well as the ongoing war in Russia and Ukraine have all contributed towards the growing disintegration of global trade.
The hypothesis that rises from modern history is that deglobalisation functions as a reaction, in which the catalysts are rising political tension, conflict and growing uncertainty.
How does it occur?
While minimising costs to maximise profits is traditionally the most efficient way to run any business, the world is now viewing control as a more valuable resource. Supply chains are a large component of globalisation, through which companies will manufacture their goods overseas to greatly reduce labour costs, but as a result, cannot react to unmanageable factors like natural disasters or policy changes.
As a result, nations who desire control will undergo either reshoring, nearshoring or friendshoring. This occurs by nations relocating their overseas production back to their own country, a much closer country or in the case of friendshoring, an allied country where they possess better relations or aligning interests. There are numerous examples of this trend, such as North America establishing automobile manufacturing in Mexico, and the proposed “European Chips Act” which aims to restructure the microchip manufacturing industry in Europe.
Another mechanism of deglobalisation is government policy shifting towards protectionism, through stricter immigration laws, higher tariffs and providing subsidies to local companies.
What does the future hold?
Although we are taught that economic trends work in a cyclical nature, in the case of deglobalisation that may not be true. Political tensions are on the rise, with the current rivalry between China and the US growing more turbulent than ever. In addition to the ongoing conflicts in Russia and Taiwan, it does not seem likely that we will once again see the rapid rise in globalisation which occurred from the 1990s-2000s. In fact, some may view the worldwide tariffs Trump recently imposed as the final nail in the coffin.
However, although it may not be for some time, the previous examples given show a rise in regional unification, pointing towards a trend of allyship within continents rather than globally. Thus, while it may look like the end of globalisation for now, this demise may pave the way for a new era of economic efficiency, one with greater security and sectionalism.
References
Kim, H. M., Li, P., & Lee, Y. R. (2020). Observations of deglobalization against globalization and impacts on global business. International Trade, Politics and Development, 4(2), 83-103.
CICC Research, CICC Global Institute xinran. liu@ cicc. com. cn. (2024). Scale Matters: Industry Chain Restructuring Amid Deglobalization. In The Reshaping of China’s Industry Chains (pp. 1-14). Singapore: Springer Nature Singapore.
Halmai, P. (2023). Globalisation versus deglobalisation. Financial and Economic Review, 22(2), 5-24.
Keller, C., & Marold, R. (2023, January 17). Deglobalisation: what you need to know. Weforum.org. https://www.weforum.org/stories/2023/01/deglobalisation-what-you-need-to-know-wef23/
National Geographic Society. (2024, October 2). Globalization. National Geographic. https://education.nationalgeographic.org/resource/globalization/
