De-globalization—Myth or reality?

No one can deny the significance of the today’s globalized economy. From our homes and offices, we can order an unimaginable array of goods and services from nearly every country in the world, delivered to our doorstep and enjoyed at our leisure.

However, this was not always the case. In the millennia prior to the US Civil War, incessant human strife—as well physical limits on transportation and communication—kept nations, civilizations and economies apart. However, the half century between the end of the US Civil War and the start of the first World War saw the rise of a globalized economy. Moving forward, the period from 1914 to 1945 experienced two world wars separated by the Great Depression, which shattered humanity’s first try at globalization. It was only in 1945 under American hegemony that the second great era of globalization rebooted. This wave of globalization accelerated for almost four decades and gained powerful momentum with China’s emergence into the world economy in the early 1980s. The fall of the Berlin Wall in Germany reinforced this trend with the opening of communist countries after 1989.

Today, the buzzword is de-globalization. It is defined as the movement toward a less- interconnected world—one with groups of nation states replete with fresh barriers to the free movement of goods, services, capital and labor dominating once again. There are a variety of reasons that this narrative has taken hold, but to best explore whether this is truly the path we are on, an understanding of how we got here is needed.

What drives globalization?

We see three forces that drive globalization. The first is the ability to shorten distances in both transport and communication. The second is the commitment of nation states to establish and adhere to rules, standards and safeguards that ensure that goods, services, capital and labor can move relatively freely across borders. The third is the incentive of firms and consumers to push the boundaries of what is possible in the ever-present quest for profits and pleasure.

First, consider the role of technology in connecting the world. Globalization could not emerge until modern sailing vessels, roads, railroads and air travel made worldwide transportation both feasible and affordable. In similar fashion, the telegraph, undersea cables, phones, radio—and more recently the internet and satellites—made instantaneous communication over great distances possible. Globalization required the emergent technologies of the 19th century and their refinements thereafter to shorten transportation and communication distance.