The World Economic Forum reports that the world has experienced four waves of globalization.
The idea, background, current situation, different aspects and benefits of globalization have all been extensively studied and discussed over the past 25 years.
The argument advanced by the World Economic Forum is that there have been four waves of globalization.
The following is a summary from a 2019 publication.
The first wave is considered to start at the end of the 19th century and continue until 1914.
It was fueled by the Industrial Revolution and concomitant advances in transportation and communications.
After World War II, the second wave began in 1945 and lasted until 1989.
The third began in 1989 with the fall of the Berlin Wall and the dissolution of the Soviet Union, and ended in 2008 with the global financial crisis.
The fourth wave began in 2010, when the effects of the global financial crisis began to fade, the digital economy grew, artificial intelligence became more widespread, and China’s influence as a global power grew. .
Recent discussions on the topic have focused on whether the world is currently in fourth wave retreat and ready for fifth wave liftoff.
Surprising parallels exist between the retraction phase of the first wave and the current global dynamics a century later.
But do these parallels imply that there has been a retreat from globalization?
Is there enough evidence of “slowdown” or “de-globalization”?
Parallels
The geopolitical and economic effects of World War I and World War II characterized the prolonged retreat from globalization throughout the 30-year period from 1914 to 1945.
The Spanish flu pandemic of 1918-1920, the stock market crash of 1929 and subsequent Great Depression, and the development of Stalin’s communist bloc in the 1940s were other contributing factors.
Protectionist views, higher tariffs and other trade barriers, and a general slowdown in world trade, were other features of this period.
The similarities are amazing when seen in the context of today’s world.
The COVID pandemic, which has had a catastrophic impact on the international economy, global supply networks, and people’s livelihoods and well-being, is still being battled by the world today.
On the other hand, the Russian-Ukrainian conflict has led to major unrest and food shortages in the world.
In addition, it has caused significant disruptions in global value chains, increased gas and fuel prices, and political polarization.
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The general price level has been under pressure due to the rising cost of electricity and other consumer products.
For the first time in forty years, global inflation is accelerating. The world’s monetary authorities are fighting inflation.
The World Trade Organization and the UN, which functioned successfully after World War II, now have less influence, and the Russian-Ukrainian war has divided the world into three political factions.
Supporters of the Russian invasion, neutral nations and opponents make up this group dominated by the US, EU and UK.
This division is a factor in the complicated geopolitical issues that are gradually modifying regionalisms and trade alliances.
The first signs of a possible expansion of Chinese influence in Asia are evident, and Europe is already looking for new sources of oil and gas.
World with fewer connections
De-globalization is considered
A trend towards a less interconnected world that is characterized by strong nation states, regional regulations and local solutions rather than international organizations, agreements and freedom of movement.
Nowadays, slowbization is a hot topic.
Trend watcher and futurist Adjiedji Bakas coined the term to refer to the phenomenon in 2015.
continued global economic integration through trade, financial and other flows, albeit at a much slower pace.
News about economic globalization presents a compelling picture.
They demonstrate that even before the COVID outbreak hit the globe in 2020, a slowing in the pace of globalization was visible.
The following data shows general measures of globalization:
exports of goods and services around the world. These peaked at a record high of 31% of global GDP in 2008, marking the end of the third phase of globalization.
Exports declined as a share of global GDP and only reached this level at the start of the fourth wave in 2011. T
Then, exports began to gradually decline, reaching 28% of global GDP in 2019 and a low of 26% in 2020, the first year of the Covid-19 era.
the amount of foreign direct investment that is brought in.
These peaked at US$2 trillion in 2016 and then began to decline to US$1.480 billion in 2019.
Although 20% below the level seen before the 2009 financial crisis, foreign direct investment inflows of $963 billion in 2020 have recovered to $1.58 billion in 2021.
From a low of 1% in 1989 to a high of 5.3% in 2007, foreign direct investment as a share of GDP has started to rise.
It declined after the global financial crisis and peaked at around 3.5% in 2015 and 2016.
After that, it fell to 1.7% in 2019 and 1.4% in 2020.
Over time, multinational corporations have been the main driver of economic globalization.
Their quantity reflects how eager companies are to make investments outside their own country.
According to the United Nations Conference on Trade and Development, 82,000 people were affected in 2008. By 2017, that figure had fallen to 60,000.
Data on global private capital flows, such as remittances, portfolio movements, foreign direct investment and private sector borrowing, are not readily available.
According to data from the Organization for Economic Co-operation and Development, however, private capital flows to reporting countries reached a record high of US$414 billion in 2014 before dropping to US$229 billion in 2019 and 8 billion US dollars in 2020.
Evidence of increased fragmentation in economic relations brought about by Brexit and the difficult US-China relationship, particularly under the Trump administration, supports these downward trends.
Then what?
If the most recent information is:
a slowdown in expectations of a global economic recovery from the effects of the Covid-19 epidemic and the war in Ukraine, or an indication of a setback in globalization similar to that which occurred after the first wave a century ago?
The first wave of globalization and current world events share many parallels, even though they are part of a very different world order.
The rate at which technology and knowledge are diffused, the digital age and other current global dynamics will undoubtedly impact the intensity with which the already deep-rooted dependence on globalization is retracted.
Nation states understand that it is necessary to choose trade and investment partners carefully and that naively entering into contracts and agreements with companies from other countries can be inconvenient.
The events of the past three years have undoubtedly demonstrated just how interconnected global economies are, and it will be impossible to completely reverse this trend despite instances of protectionism and threats from more inward-looking policies.
Supply networks may become more regionalised, leading to fragmentation.
Nobel Prize-winning economist Joseph Stiglitz used the term “ami shoring,” which was coined by US Treasury Secretary Janet Yellen, to describe the shift in manufacturing.
It is becoming clear that the process of globalization has both elements of de-globalization and deceleration.
It is also evident that the effects of global external shocks necessitate a complete rethinking, reorientation and reform of the globalization process.
Most likely, this will usher in the fifth phase of globalization.
Elsabe Loots, Professor of Economics at the University of Pretoria and former Dean of the Faculty of Economics and Management
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