Globalization as we know it is over. A period that witnessed the lowering of international trade and investment barriers, higher rates of migration, the rise of global commodity markets, and the proliferation of the internet has reached its natural political limits. Domestically, across the world, inequality has led to new demands concerning employment, migration, and opportunity. The election of Donald Trump and Brexit, both in 2016, were some manifestations of this dissatisfaction. Internationally, imbalances such as between Northern and Southern Europe or between China and the rest of the world have reached a breaking point. The Russian invasion of Ukraine and the COVID-19 pandemic have only further highlighted vulnerabilities caused by economic interdependence.
Consequently, the next period for the global economy — a rebalanced globalization — will be marked by greater national and economic security considerations and competing industrial policies. Avoiding such a future is only possible if China embarks upon a complete structural overhaul of its economy with a shift to greater consumption and net imports. Beijing is highly unlikely to pursue this course as it would risk short-term slowdowns, domestic political instability, and greater dependency on the United States and its allies. A grand bargain to revive globalization therefore appears nearly impossible.
The more likely possibility is managed economic competition, particularly over manufacturing and critical and emerging technologies. The United States, China, Europe, India, Japan, Latin America, the Persian Gulf, Southeast Asia, and other major economies will each compete to provide incentives, employment opportunities, and technological benefits at home. Internationally, areas where there should be cooperation — such as clean energy and climate change, trade facilitation, technology standards, or arms control — will increasingly become realms of competition.
All this should not be interpreted as a reversal of globalization. Overall, international volumes of goods, trade, data and energy flows, investment, and migration are likely to remain stable and possibly even grow. But those flows will be more carefully governed, regulated, and calibrated. While remaining mindful of political relationships, comparative advantages, domestic employment, and national security, many governments will continue to cooperate with friendly partner countries in an increasingly structured way on supply chains and technology.
The management of the new globalization is not conducive to multilateralism. Inclusive bodies such as the United Nations and World Trade Organization will confront difficulties. But minilateral, regional, and issue-based institutions are likely to proliferate, grow, and flourish. Additionally, a major challenge will involve bridging the public and private sectors. Private players — whether investors, corporations, educational institutions, or non-profit organizations — will need to better understand the new dynamics at play.
Under these circumstances, the most promising form of international cooperation might involve achieving development objectives articulated under the Sustainable Development Goals (SDGs). These goals have witnessed setbacks, in part due to the Covid-19 pandemic. But the outline of a common agenda was reflected at the Group of Twenty Summit last year, including reforming and empowering multilateral development institutions; leveraging new technologies for welfare delivery, clean energy, and public health improvements; curtailing tax havens and money laundering; and remedying gender imbalances in the workforce. It will be in these areas, rather than on conventional trade and technology issues, where multilateral cooperation will be most forthcoming in an otherwise fractured world.
Dhruva Jaishankar is Executive Director at ORF America.
This was adapted from a commentary originally published by the Council on Foreign Relations for the Council of Councils Thirteenth Annual Conference in May 2024.