Opinion – Martin Wolf: Geopolitics is the biggest threat to globalization

How could globalization end? Some can imagine a relatively peaceful “decoupling” between economies that until recently were closely integrated. But the fracture of economic ties is likely to be both a consequence and a cause of a deepening global discord. If that is the case, globalization is likely to end in a more destructive way.

Humanity has unfortunately done something similar. From the industrial revolution of the early 19th century onwards, we had two periods of deepening transnational economic integration and a period in which it went into reversal. The first period of globalization preceded 1914. The second began in the late 1940s, but accelerated and expanded from the late 1970s onwards, with increasing integration between economies. Among them, there was a long period of retreat from globalization, delimited by the two world wars and deepened by the Great Depression and the protectionism that accompanied it and at the same time worsened it. Finally, since the 2007-2009 financial crisis, globalization seems to have neither advanced nor retreated.

This history in no way indicates that a period of retreat from globalization could be a happy time. On the contrary. The years between 1914 and 1945 were marked by the collapse of the political and economic order, both within countries and internationally. The Bolshevik Revolution of 1917, itself a consequence of the First World War, inflicted communism on the world. According to some estimates, communism killed around 100 million people, a greater number of victims than that of the two world wars.

That period of chaos and calamity had some beneficial results: it made European empires unsustainable; resulted in modern welfare states; and made human beings a little more aware of their common destiny. However, on balance, it was a catastrophic time.

A controversial question is how and to what extent peace is linked to globalization. As John Plender recently argued, trade does not necessarily guarantee peace. The beginning of the First World War at a time of relatively prosperous trade certainly demonstrates this fact. The causal nexus points more in the opposite direction, from peace to trade. In an era of cooperation between great powers, trade tends to grow. In an age of mutual suspicion, especially if there is open conflict, trade collapses, as we now see between Russia and the West.

People sometimes call the English liberal thinker Norman Angell a naive guy, because he believed in the view that commerce would bring peace. However, in “The Great Illusion,” written just before World War I, he argued that countries would gain nothing of value from the war. Subsequent experience confirmed this view: all the major players in the war lost. Likewise, ordinary Russians will not benefit from conquering Ukraine, or ordinary Chinese from conquering Taiwan. But this truth does not preclude conflict. Under the leadership of psychopaths and the influence of nationalism and other dangerous ideologies, we are capable of grotesque follies and horrendous crimes.

One possible answer is that this time there’s no way anything like the “great retreat from globalization” that we had in the 20th century is going to happen. At worst, the outcome might turn out to be a bit like the Cold War. However, this is an unjustifiably optimistic position. The consequences of a breakdown in great-power relations are likely to be even worse in our era than they were in the past.

One obvious reason for this is that our capacity for mutual annihilation has grown tremendously. A disturbing recent study by Rutgers University argues that a full-scale nuclear war between the United States and Russia, especially given the likelihood of a “nuclear winter”, could kill more than 5 billion people. Is it something that we can consider unimaginable? Unfortunately not.

Another reason the outcome could be even worse this time around is that we depend on a high level of informed cooperation to sustain a habitable planet. This is particularly true of China and the United States, which together account for more than 40% of the world’s carbon dioxide emissions. The climate is a quintessential example of a collective action challenge. A breakdown in cooperative relationships is likely to end any chance of avoiding a runaway climate change process.

It is therefore necessary to return to the hope that the deepening world divisions we see today can be contained, as they were generally held in the Cold War era. One caveat to this hope is that there were some high-stakes moments during the Cold War. Furthermore, the Soviet economy was not integrated into the world economy, while China and the West are integrated and at the same time compete against each other and against the rest of the planet. There is no painless way to decouple these economic ties. It’s crazy to imagine it exists. And any effort in that direction will certainly create conflict.

Indeed, the recently announced controls by the United States on exports to China of semiconductors and associated technologies appear to be a decisive step. It is certainly a far more threatening move for Beijing than anything Donald Trump has done. The objective is clearly to slow down China’s economic development. It is an act of economic warfare. There will be those who agree with the measure. But it will have huge geopolitical consequences.

Globalization is very unlikely to be dismantled through carefully calibrated and intelligent decoupling. This is not how we humans work. People can pretend that the dismantling of globalization has something to do with reducing inequality. But this is also nonsense: the most open economies are often the ones where equality is greatest.

It is the power conflicts that most threaten globalization. By seeking to increase their security, great powers generate more insecurity in their rivals, creating a vicious spiral of mutual mistrust. We are already living this spiral. This reality will shape the fate of the world economy. We are not moving towards a benign localism, but towards a rivalry in which the complete victory of one will require the complete defeat of the other. Our world may not survive a virulent outbreak of this disease.

Translation by Paulo Migliacci