Social Europe

  • EU Forward Project
  • YouTube
  • Podcast
  • Books
  • Newsletter
  • Membership

Rethinking globalisation in an age of crises

Piergiuseppe Fortunato 1st November 2023

We need to find a path to peaceful coexistence and co-operation, fixing the social and economic damage of the last three decades.

globalisation,crises
The rise of illberal regimes in west Africa, including the coup in Niger in July, is one side-effect of the economic insecurity and political instability unleashed by market fundamentalism (MattiaATH/shutterstock.com)

Hyper-globalisation is exhausted. The smoke of (commercial) war between China and the United States, followed by (real) war in Ukraine and more recently in the middle east, is compounded by the flames of ever-growing inequalities and wage stagnation, which have propelled a populist backlash in advanced economies and fully-fledged illiberal regimes in many developing countries. Even globalisation’s biggest boosters now concede that it has produced lopsided benefits and that the threats which became evident during the pandemic, and the supply-chain catastrophe, provide no justification for weak regulation and low labour costs.

The outlook for the world economy is uncertain. In the US, Joe Biden’s administration is pursuing a course correction, looking inwards for economic security while in quest of global supremacy. Many other countries are taking this approach and now look at bilateral relationships essentially as zero-sum games. The supremacy of geopolitics means trade wars and economic sanctions might become a permanent feature of international trade and finance.

Avoiding a scenario that would make it impossible to reap the mutual gains from co-operation and provide global public goods of critical importance—such as a world within planetary boundaries and global public health—relies on acknowledging multipolarity and abandoning the goal of pre-eminence. It also requires fixing the social and economic damage done by decades of market centrality under hyper-globalisation, recovering the spirit of the postwar Bretton Woods consensus while leaving more space to domestic objectives.

Seemingly irreversible

Today’s woes have their roots in the 1990s. After the collapse of the Berlin wall, taking advantage of their dominant position on the global scene western economies extended their  model, grounded in market fundamentalism, to regulate relations between countries through ‘liberalising’ trade and capital flows. To convince ‘the markets’—that is to say, the major financial institutions—about their commitment not to intervene, they set in motion a seemingly irreversible process of delegating power to external rules and autonomous, ‘technocratic’ agencies.

Nowhere was this more evident than in the decision to replace the General Agreement on Tariffs and Trade, regulating international trade, with the World Trade Organisation in 1995. The countries joining the WTO also signed up to ‘trade-related intellectual-property rights’ (TRIPS), incorporating stringent patent and copyright rules which severely limited space for anti-trust initiatives against monopolies. They accepted the institution of international investor tribunals in trade agreements, which notably reduced their margin to adopt policies that could affect the profits of multinational corporations. More generally, they abdicated to external rules a significant share of domestic responsibilities related to trade, technology and investments.

Important issues have been excluded from the domestic political agenda in many democracies, with policy-makers increasingly more accountable to corporations than voters. Thirty years of hyper-globalisation have led to sharp increases in global market concentration and a proliferation of rentierism, whereby the world’s largest corporations attempt to protect their market power through rent-seeking activities, such as lobbying or systematic abuse of intellectual-property laws. As with the rise of the Medicis in renaissance Florence, market power accrues political power, in turn enhancing market power and so on.

Rising inequality

The other side of the coin has been inequality reaching unprecedented heights in industrial and developing countries alike, leading some scholars to talk of a new Gilded Age. Indeed, paradoxically, while globalisation has been about integration among countries it has also entailed disintegration within individual economies.

A further paradox is that the countries that benefited most from globalisation are the ones that did not play by its rules. Over the last three decades over 800 million Chinese have lifted themselves out of poverty—70 per cent of the world’s poverty reduction took place in China. This would certainly not have been possible had China not turned itself towards world markets, becoming an exporting superpower. But China ignored the globalisation playbook, certainly in spirit, before and after its accession to the WTO in 2001. Its industrial policy has been key to transforming the country into a factory for the world and eventually a competitor with the US in technologically intensive sectors.

Finally, over the almost 30 years separating us from the Uruguay trade round, a system sanctifying egoistic utilitarianism has proved utterly unable to provide essential global public goods in timely and equitable fashion. Just look at the stalled negotiations to reduce greenhouse-gas emissions and the shaming debate over a TRIPS waiver to increase developing countries’ access to Covid-19 vaccines.

Polycrisis

The pandemic has fused with what has recently been labelled the ‘polycrisis’. This cluster of interdependent and mutually compounding global threats—high indebtedness and rising interest rates, inflation and a cost-of-living crisis feeding social unrest, geopolitical confrontation associated with food and energy crises and an onrushing catastrophe of climate change and biodiversity loss—is fostering a ‘lowbalisation’ or ‘slowbalisation’, partly reversing the trends of the hyper-globalisation era.

This scenario is sinisterly reminiscent of the end of the Bronze Age between the 13th and 12th centuries BC: amid interconnected crises, communicable diseases—smallpox, bubonic plague and tularemia—paved the way to widespread societal collapse. At that time, the Mediterranean was characterised by intense trade flows and important episodes of mass migration, which historians later defined as pre-modern globalisation.

The first reactions to this intricate situation and to the recent geopolitical tensions are not encouraging. In many capitals, decisions in this difficult conjuncture seem predominantly to be inspired by the ‘realist’ school of international relations, rather than universalism.

‘Great-power competition’

The mainly US-based realists contend that the absence of a supranational authority to impose order inevitably produces anarchy in the international system, which requires rational states to rely on themselves to achieve security. States, then, pursue their interests through the accumulation of relative, often material, power. Under such zero-sum conditions, competition and conflict are natural and inevitable. As John Mearsheimer put it, ‘the world is condemned to perpetual great-power competition’.

The US Treasury secretary, Janet Yellen, recently drummed up support from America’s allies to carve up more resilient supply chains among trusted partners through ‘friend-shoring’. The administration is reviewing gaps in domestic manufacturing and supply chains, including those for semiconductors, high-capacity batteries and rare-earth metals, dominated by (or running through) foreign countries. These initiatives have prompted fears of a global economic decoupling, particularly as the US and other advanced economies seek to avoid their emerging counterparts.

This worry is reinforced by the long list of measures, adopted or under discussion, reflecting the advanced economies’ determination to decide alone on the regulation of trade between themselves and the rest of the world. This ever-growing list includes the competition over subsidies, the ban on trade in deforestation products, the due-diligence obligation imposed on European companies, the anti-coercion regulation, the reciprocity instrument in public procurement and the exceptional trade measures implemented in the context of the pandemic and the geopolitical tensions. The defence of domestic interests through trade policy and regulation on the part of rich countries risks undermining the industrial sovereignty of developing countries.

Rebalancing prerogatives

Ensuring national security in the absence of a global enforcer does not however have to imply a world of conflict and minimal economic interdependence. During the hyper-globalisation era, most states have been unable to manage the tension between national democracy and global markets—most ended up erroneously restricting democracy in the interest of minimising international transaction costs. We now need to rebalance the prerogatives of nation-states and the requirements of an open economy.

The path ahead is narrow, as we need to expand the scope of national democratic politics and repair social contracts, while reviving multilateral governance to tackle global emergencies. The starting point should be prioritising the domestic agenda and stability. This is not inimical to an open economy—it is in fact essential to it. To overcome distrust and sustain multilateral co-operation we must ensure a fairer distribution of benefits from production and trade, and provide citizens with greater security and confidence in the face of change.

National democratic authorities should therefore be granted more space to regulate markets and influence their outcomes, in a way not dissimilar to what was possible under the Bretton Woods regime. This would entail more permissive rules on intellectual property, subsidies and standards and leave national governments free to tailor their regulations and tax regimes. Countries are different and at different levels of development. A pluralist approach, building in acceptance and respect for different political and economic systems—and for different approaches to governance and industrial policies among diverse nations—is essential to sustain social and economic progress.

Multipolar world

Restoring national social contracts is not enough, however. We need to reform global governance and build capacity to provide global public goods. As the pandemic has shown, in our interdependent world no one is safe unless everyone is safe.

In this multipolar world, where many countries are capable of shaping reality, gaining legitimacy and fostering consensus, we need to expand the global community, giving more voice within the United Nations system and the Bretton Woods financial institutions—the International Monetary Fund and the World Bank—to countries long under-represented. Global public institutions must be accountable to their full membership, open to diverse viewpoints, cognisant of new voices and with balanced dispute-resolution systems. The calls from countries of the global south for a greater role in global governance, which echoed during the UN General Assembly in September, should be attended to carefully.

Finally, the principle of common but differentiated responsibilities, in light of varying circumstance among states in a multilateral system seeking to produce global public goods and protect the global commons, should not be forgotten when it comes to climate and trade negotiations. If we are to make any advance on these delicate topics, a positive agenda is needed: developing economies cannot be burdened beyond their capacities and should preserve space to sustain social and economic development priorities while reducing green-house gas emissions.

Piergiuseppe Fortunato
Piergiuseppe Fortunato

Piergiuseppe Fortunato is an economist at the United Nations Conference on Trade and Development, where he leads projects on global value chains and economic integration, and an external professor of political economics at the Université de Neuchâtel.

Harvard University Press Advertisement

Social Europe Ad - Promoting European social policies

We need your help.

Support Social Europe for less than €5 per month and help keep our content freely accessible to everyone. Your support empowers independent publishing and drives the conversations that matter. Thank you very much!

Social Europe Membership

Click here to become a member

Most Recent Articles

u42198346fb0de2b847 0 How the Billionaire Boom Is Fueling Inequality—and Threatening DemocracyFernanda Balata and Sebastian Mang
u421983441e313714135 0 Why Europe Needs Its Own AI InfrastructureDiane Coyle
u42198346ecb10de1ac 2 Europe Day with New DimensionsLászló Andor and Udo Bullmann
u421983467a362 1feb7ac124db 2 How Europe’s Political Parties Abandoned Openness—and Left Populism to Fill the VoidColin Crouch
u4219834678 41e5 9f3e dc025a33b22c 1 Funding the Future: Why the EU Needs a Bold New BudgetCarla Tavares

Most Popular Articles

startupsgovernment e1744799195663 Governments Are Not StartupsMariana Mazzucato
u421986cbef 2549 4e0c b6c4 b5bb01362b52 0 American SuicideJoschka Fischer
u42198346769d6584 1580 41fe 8c7d 3b9398aa5ec5 1 Why Trump Keeps Winning: The Truth No One AdmitsBo Rothstein
u421983467 a350a084 b098 4970 9834 739dc11b73a5 1 America Is About to Become the Next BrexitJ Bradford DeLong
u4219834676ba1b3a2 b4e1 4c79 960b 6770c60533fa 1 The End of the ‘West’ and Europe’s FutureGuillaume Duval
u421983462e c2ec 4dd2 90a4 b9cfb6856465 1 The Transatlantic Alliance Is Dying—What Comes Next for Europe?Frank Hoffer
u421983467 2a24 4c75 9482 03c99ea44770 3 Trump’s Trade War Tears North America Apart – Could Canada and Mexico Turn to Europe?Malcolm Fairbrother
u4219834676e2a479 85e9 435a bf3f 59c90bfe6225 3 Why Good Business Leaders Tune Out the Trump Noise and Stay FocusedStefan Stern
u42198346 4ba7 b898 27a9d72779f7 1 Confronting the Pandemic’s Toxic Political LegacyJan-Werner Müller
u4219834676574c9 df78 4d38 939b 929d7aea0c20 2 The End of Progess? The Dire Consequences of Trump’s ReturnJoseph Stiglitz

KU Leuven advertisement

The Politics of Unpaid Work

This new book published by Oxford University Press presents the findings of the multiannual ERC research project “Researching Precariousness Across the Paid/Unpaid Work Continuum”,
led by Valeria Pulignano (KU Leuven), which are very important for the prospects of a more equal Europe.

Unpaid labour is no longer limited to the home or volunteer work. It infiltrates paid jobs, eroding rights and deepening inequality. From freelancers’ extra hours to care workers’ unpaid duties, it sustains precarity and fuels inequity. This book exposes the hidden forces behind unpaid labour and calls for systemic change to confront this pressing issue.

DOWNLOAD HERE FOR FREE

ETUI advertisement

HESA Magazine Cover

What kind of impact is artificial intelligence (AI) having, or likely to have, on the way we work and the conditions we work under? Discover the latest issue of HesaMag, the ETUI’s health and safety magazine, which considers this question from many angles.

DOWNLOAD HERE

Eurofound advertisement

Ageing workforce
How are minimum wage levels changing in Europe?

In a new Eurofound Talks podcast episode, host Mary McCaughey speaks with Eurofound expert Carlos Vacas Soriano about recent changes to minimum wages in Europe and their implications.

Listeners can delve into the intricacies of Europe's minimum wage dynamics and the driving factors behind these shifts. The conversation also highlights the broader effects of minimum wage changes on income inequality and gender equality.

Listen to the episode for free. Also make sure to subscribe to Eurofound Talks so you don’t miss an episode!

LISTEN NOW

Foundation for European Progressive Studies Advertisement

Spring Issues

The Spring issue of The Progressive Post is out!


Since President Trump’s inauguration, the US – hitherto the cornerstone of Western security – is destabilising the world order it helped to build. The US security umbrella is apparently closing on Europe, Ukraine finds itself less and less protected, and the traditional defender of free trade is now shutting the door to foreign goods, sending stock markets on a rollercoaster. How will the European Union respond to this dramatic landscape change? .


Among this issue’s highlights, we discuss European defence strategies, assess how the US president's recent announcements will impact international trade and explore the risks  and opportunities that algorithms pose for workers.


READ THE MAGAZINE

Hans Böckler Stiftung Advertisement

WSI Report

WSI Minimum Wage Report 2025

The trend towards significant nominal minimum wage increases is continuing this year. In view of falling inflation rates, this translates into a sizeable increase in purchasing power for minimum wage earners in most European countries. The background to this is the implementation of the European Minimum Wage Directive, which has led to a reorientation of minimum wage policy in many countries and is thus boosting the dynamics of minimum wages. Most EU countries are now following the reference values for adequate minimum wages enshrined in the directive, which are 60% of the median wage or 50 % of the average wage. However, for Germany, a structural increase is still necessary to make progress towards an adequate minimum wage.

DOWNLOAD HERE

Social Europe

Our Mission

Team

Article Submission

Advertisements

Membership

Social Europe Archives

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Miscellaneous

RSS Feed

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641