When the Cold War ended, governments and companies believed that stronger global economic ties would lead to greater stability. But a perfect storm of circumstances is helping dismantle the global economic system built over the past few decades, pushing the world in the opposite direction.
The coronavirus pandemic and supply chain disruptions triggered governments to wonder why more essential needs were not produced at home.
Russia’s invasion of Ukraine has further induced governments and companies to examine their reliance on other nations, reevaluating their dependencies and reanalyzing their manufacturing and assembly footprints. For decades, executives have pushed for globalization to expand their markets and to exploit cheap labor and lax environmental standards. China especially has benefited from this, while Russia profits from its exports of minerals and energy. They tap into enormous economies: the Group of 7 industrialized nations make up more than 50% of the global economy, while China and Russia together account for about 20%.
Russia’s invasion of Ukraine is a much smaller conflict than World War I (or II), but the clash is nonetheless a giant step away from globalization, and it comes at a time when the world has already been moving away from economic integration: trade’s share of global GDP peaked in 2008 and has been falling for the past decade. So, the war in Ukraine doesn’t necessarily mark a sharp break in history. But it underlines and will perhaps cement the decline of globalization.
China, for example, is on a drive to make critical industries selfsufficient. President Xi Jinping’s “Made in China 2025” initiative, isn’t about creating jobs, it’s about securing economic space for China to operate with political autonomy. Similarly, when Vladimir Putin’s Russia got hit with sanctions in 2014 after taking over Crimea, it responded not by withdrawing from Crimea but by launching a crash effort to sanction-proof the economy by emphasizing domestic production. China has been in talks with Saudi Arabia to pay for some....READ MORE
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When the Cold War ended, governments and companies believed that stronger global economic ties would lead to greater stability. But a perfect storm of circumstances is he...
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