- By: Sumera Shah (MS Economics)
- IMSciences Peshawar
Globalization, which was once the unstoppable force behind technological advancement, cross-cultural exchange, and economic growth worldwide, is now facing a difficult decision. There is a growing questioning of the process that has shaped a large portion of the 20th and early 21st centuries. Concerns about the future of globalization are raised by the growing economic nationalism, escalating geopolitical tensions, and changing digital landscape that seem to be leading the world towards fragmentation.
- The Rise of Economic Nationalism
The rise of economic nationalism is currently one of the biggest obstacles to globalization. Global trade and collaboration are becoming less and less important to countries than their own industries and labor forces. This change is especially noticeable in developed economies such as the US and the UK.
Due to former President Donald Trump’s “America First” policy, tariffs on $360 billion worth of Chinese goods were imposed in the United States between 2018 and 2019, starting a trade war that caused disruptions to international markets. A shift towards a more protectionist approach was indicated by the renegotiation of NAFTA, which led to the United States-Mexico-Canada Agreement (USMCA), and the withdrawal from multilateral agreements such as the Trans-Pacific Partnership (TPP). Despite the Biden administration’s renewed efforts to engage with international allies, worries about how globalization will affect domestic businesses and workers are still very real. 70% of Americans, according to a Pew Research Centre survey from 2021, think that economic globalization has resulted in job losses domestically. This belief continues to influence American economic policy.
Brexit was a turning point in British history that signaling a dramatic retreat from regional integration. The desire to restore control over trade, immigration, and national borders—important facets of globalization that many voters believed had undermined their sovereignty—fueled the 2016 vote to exit the European Union. The difficulties the UK has had renegotiating trade agreements and forging new economic ties since Brexit serve as a stark reminder of the difficulties involved in retreating from global integration.
Economic nationalism is not just a Western phenomenon. The “Make in India” campaign in India aims to increase homegrown manufacturing and lessen reliance on imported goods. In a similar vein, nations like Brazil and Russia are enacting protectionist policies to insulate their economies from international rivalry.
Recent reports state that 43% of chief economists worldwide expect the United States to have weak economic growth in 2024. Many of them worry that the trend towards growing economic nationalism may further erode international cooperation (Euronews). The global economy may experience long-term effects from this move towards protectionism, including a possible drop in foreign investment and trade.
- Geopolitical Tensions and Fragmentation
Another factor contributing to the fragmentation of globalization is geopolitical tensions. The two biggest economies in the world have started to significantly decouple as a result of the U.S.-China trade war, which started in 2018. Due to the disruption of global supply chains caused by this decoupling, businesses everywhere now face uncertainty and increased costs. Beyond trade, these superpowers have developed a rivalry in technology and finance as they aim to build independent systems and form rival economic blocs in the world economy.
For example, in an effort to become less dependent on American technology, China has accelerated the growth of its semiconductor industry. The world economy could split into rival blocs as a result of this decoupling, each with its own set of regulations, norms, and trade routes. China’s Belt and Road Initiative (BRI), which seeks to establish a different international trade network centered on Chinese influence, exacerbates the fragmentation.
The 2022 Russian invasion of Ukraine has made the world’s division even worse. Wide-ranging economic sanctions against Russia resulted from the conflict, upsetting the energy market and forcing nations to reconsider their reliance on international supply chains, especially for vital resources like food and energy. Global energy dependencies have to be reevaluated as a result of Europe, which had to quickly look for alternative energy sources after importing 40% of its gas from Russia.
NATO and the European Union, two regional alliances that are now more centered on security and self-sufficiency, have also been strengthened by the war. Global trade may suffer as a result of this shift towards regionalism, as nations value stable and dependable alliances over free markets (Atlantic Council).
- Technological Changes and Digital Fragmentation
Globalization was once supported primarily by technology, but it is now at risk of fragmenting. The emergence of digital technologies has brought about unprecedented global connectivity, but it has also resulted in a novel form of fragmentation known as digital fragmentation. A growing number of nations are pursuing digital sovereignty policies in an effort to regulate online content, technology standards, and data flows inside their boundaries.
China’s “Great Firewall” is a prime example of this, as the government has imposed strict controls on the internet, preventing access to numerous international websites and services. China’s tech regulations tightened even further in 2022, affecting multinational behemoths like Tennent and Alibaba and pointing to a shift towards more state-run tech sectors.
Another example of digital sovereignty being asserted is the General Data Protection Regulation (GDPR) of the European Union, which went into effect in 2018. Although the GDPR aims to protect consumer privacy, it has complicated global business operations by creating barriers for companies that operate across different regions.
Debates concerning digital regulation are still going strong in the US, especially in regards to social media control and data privacy. The fragmented digital landscape being created by these disparate approaches to technology regulation may make it more difficult for multinational tech companies to operate in the seamless exchange of technology and information that once drove globalization.
The digital landscape may become more fragmented as more nations enact comparable policies, creating new obstacles to international collaboration and innovation.
- Conclusion
Even though globalization has greatly benefited the world, the way things are going now points to a future in which the globe may become even more divided. This change is being driven by the emergence of economic nationalism, geopolitical tensions, and digital sovereignty. How these forces are handled and whether or not international cooperation can continue will probably determine how globalization develops in the future. If not, the interconnectedness that has characterized the past few decades may be eclipsed by regionalism and protectionism as the world enters a new era. The decisions taken by world leaders in the upcoming years will determine whether globalization reasserts itself or continues to slip into fragmentation. The stakes are high.