Download the Indosuez 2023 Global Outlook here
Has the idea of de-globalisation become mainstream? Like all fashionable narratives, it runs the risk of being used in a somewhat dogmatic way, causing us to leave rational thought behind and enter the realm of political slogans.
For this is where this programmatic idea was born: a project that originated in the anti-globalisation movements, advocating the dismantling or reconstruction of a globalisation that is contested for its effects on inequalities, the environment or the fiscal and monetary sovereignty of a country.
This concept, initially synonymous with radicalism, has become central to the economic and political debate since 2016 and this phenomenon has been amplified since the COVID-19 pandemic. Brexit and the victory of Donald Trump both reflected a revolution of the middle class against the traditional elites, authors and actors of this globalisation that had previously accepted a rampant deindustrialisation. These political upheavals were probably a turning point in the growing acceptance of the idea of de-globalisation among the elite.
This is also quite logical: the globalisation of the 1990s, desired and initiated by the United States, is no longer to the advantage of the latter, which changes the situation. In short, to talk about de-globalisation in Washington or Davos is to ask the question of the loss of American leadership and the rise of China.
And if the social implications of globalisation were to undermine our political systems and challenge the powers that be, it would be urgent to rethink the terms of the equation. What is now at stake is both the continuation of an industrial model in Western countries and the survival of moderate liberal democracy, which has been based primarily on the emergence of a middle class for more than a century, and especially since 1945. The observation of political polarisation, the loss of influence of the traditional moderate parties and their disruption by candidates easily labelled as ‘populist’ leads us to question the links between globalisation, wealth distribution and the political model.
The COVID-19 pandemic was, according to Carmen Reinhart, «like the last nail in the coffin of globalisation» (21 May 2020). From now on, it is time for strategic autonomy, in the face of a pandemic that revealed our dependencies and vulnerabilities. The globalisation of production and supply chains, previously advocated by the major international groups, has been transformed into a form of trap; de-globalisation has therefore invaded the board rooms, prompting slogans and formulas in response (nearshoring, friendshoring1), at the risk of substituting one dependency for another.
But the real nail in the coffin was the outbreak of war in Ukraine, which definitively put an end to the idea of a happy globalisation or post-Cold War world peace. The confl ct precipitated geopolitical tectonic rifts and heightened Europe’s sense of urgency to be less dependent on Russia for energy, but also to increase military autonomy. The paradox is that in the short-term, Europe will have to buy its gas even further away while accelerating its domestic energy transition. Environmental considerations (partly at the origin of the first anti-WTO (World Trade Organization) movements in Seattle in 1999) are at the heart of the debate: producing renewable energy rather than importing gas, recycling rather than continuing to import disposable products. Even if everyone is aware that one dependency often leads to another and that the electrification of our energy-mix relies on other imported raw materials.
This conflict and the accompanying sanctions seem to have almost reversed the order of priorities between politics and economics. For three decades, the West lived in a world where diplomatic relations (especially with China) were determined by economic considerations (signing contracts, exporting, taking advantage of the Chinese boom).
Now, the ability to produce and exchange is determined by the political and geopolitical framework. This is where the question becomes very concrete: where should we produce tomorrow? With whom can we trade? How can we integrate the long-term geopolitical framework into decisions on where to locate a factory or choose a partner? Can we still invest in emerging markets on a global scale as we did in the past? Are trade, industrial and technological interdependencies too strong now to turn back?
Are Western countries just as dependant on the savings accumulated in Asia and the Middle East?
Over the years, the slogan seems to have become a statement that is sometimes a little too quick and simple to be true: we are already in a phase of de-globalisation. The decline in the weight of trade in world GDP and the relocation of production are evidence of this. But as with any easily accepted narrative, there is a risk of falsifying reality. Behind this slogan or this growing concern of the elites, what is really going on?
This is the purpose of this Global Outlook: to attempt to decipher, from several angles, the degree of reality of the globalisation movement that is certainly not as irreversible as we thought, but whose reconfiguration would not necessarily constitute a complete turnaround. In our view, the economic, industrial and financial stakes seem to be sufficiently important for us to devote the following pages to them.
Editorial of the Indosuez Global Outlook release of 31/10/2022
December 17, 2022