Raphael Thys
Description
World economic integration has been in decline since the 2008–10 global financial crisis, ushering in an era of "slowbalization" or even deglobalization.
Tracing global trade openness—the ratio of world imports and exports to world GDP—reveals five distinct eras of globalization since 1870. Advancements in transportation deepened international economic integration prior to the outbreak of World War I. The economic dislocation of war and protectionism during the Great Depression led to a reversal of globalization from 1914 to 1945.
Economic integration rebounded after the Second World War and continued to increase for the latter half of the 20th century. An embrace of economic liberalization saw the removal of trade barriers in large emerging markets and led to unprecedented levels of international economic cooperation, peaking in 2008 at 60.1 percent.
Since this era of peak globalization, economic integration has been in retreat, falling to 57.2 percent on the openness index in 2021. Since 2008, China and the United States have turned toward erecting mutual trade barriers that have disrupted supply chains and prompted the spread of trade barriers elsewhere. Under President Xi Jinping and President Joseph R. Biden Jr., China and the United States are seeking greater self-sufficiency in technologically-advanced sectors.
The global pandemic and Russia’s invasion of Ukraine have added further momentum to the retreat of globalization. Product shortages caused by measures to contain COVID-19 and decisions from governments and companies to reduce or sever business ties with Moscow have prompted firms to reconsider their supply chain organization. For example, the United States has proposed “friendshoring”—the relocation of supply chains to allied countries—as a possible solution to recent instability.
The world is at an inflection point over growing fears about globalization and economic interdependence. Even if the “slowbalization” trend abates, reversing the damage that has already been done will likely prove difficult.
This PIIE Chart was adapted from Doug Irwin’s blog post, The pandemic adds momentum to the deglobalization trend.
Data Disclosure
The data underlying this analysis are available here.