Deglobalization? Or just an end to globalization?
The GFC marked the end of the globalization era. A fully globalized but no longer globalizing economic order is now taking shape.
Most people think globalization started in the 1990s. But if you look at the data, global trade and investment started to rise rapidly right after the 1972 collapse of the Bretton Woods system of managed exchange rates. Both merchandise trade and foreign investment peaked in 2007-2008. Growth has continued in currency exchange markets but at a slower pace than in the early 2000s. It took 25 years for the world’s major markets in raw materials (oil, etc.) and manufactured goods to stabilize at a market equilibrium. Bracket the “globalization era” with the dates 1973-2008, RIP: Al Jazeera | China: The Most Visible Victim of Deglobalization
Some of the first major beneficiaries of currency and trade liberalization were the Gulf oil exporters. Opec may be a cartel but it has never been a successful monopolist. The massive redistribution of the world’s income towards oil (and other commodities) exporters in the 1970s was the result of prices rising to a market equilibrium level. A second move to market equilibrium was China’s reindustrialization of the 1980s through the 2000s. The reorientation of the world’s manufacturing base to China was inevitable, though that hasn’t made it any more popular than high oil prices: Al Jazeera | Hillary Clinton, Donald Trump, and China
The crisis of 2008 can be understood as the end of a period of massive redistribution caused by the breaking of the dams that held back global markets in the post-war period. The sub-prime mortgage bubble and the Euro fiasco were directly caused by gross economic mismanagement, and good (bad) policies could have made them much smaller (bigger), but the dramatic break in global economic time series is on a different scale entirely. The global integration of the world’s economy is now complete. The next few centuries (yes, centuries) will clarify its direction. Personally I expect that the United States will be its biggest beneficiary.
From: p.13 of World Economics Association Newsletter 6(5), October 2016