For whom does the death knell of globalization ring?
Xize Research Institute
Xize Research Institute
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This article analyzes the evolution of globalization from 1.0 to 3.0: the US led globalization 1.0 (General Agreement on Tariffs and Trade) after World War II and the US China driven globalization 2.0 (WTO) after the Cold War promoted economic and trade prosperity, but the wealth gap within the US triggered MAGA ideology, leading to a wave of anti globalization. The current collapse of Globalization 2.0 and the rise of trade protectionism, but digital technology and emerging economies are driving the formation of a more inclusive Globalization 3.0. The rising cost of global trade during the transition period will make life more difficult for ordinary people. The key questions raised are as follows:
What are the main differences between Globalization 1.0 and Globalization 2.0? How does MAGA affect the global trading system? What are the manifestations of the trend of "re globalization"?
This article is from the WeChat official account: Xijing Research Institute, written by Zhao Jian, and the title is from AI Generation
Article Summary
The article outlines the evolution of globalization in three stages: post World War II US led Globalization 1.0 (General Agreement on Tariffs and Trade), post Cold War US driven Globalization 2.0 (WTO), and current anti globalization and digital technology driven Globalization 3.0 transformation. Analyze how MAGA ideology exacerbates trade protectionism, leading to an increase in global trade costs, and explore the role of emerging economies and technology in the context of re globalization, warning of the risks of war and economic challenges during the transition period.
• The evolution of globalization stage: from the fragmented 1.0 between the US and Soviet camps to the complementary 2.0 between China and the US, shifting towards the digital driven fragmented 3.0.
• MAGA Impact: The wealth gap in the United States triggers protectionism, shakes the WTO system, and accelerates anti globalization.
• The Sprout of Globalization: Emerging economies and digital technology drive regional cooperation, while cross-border e-commerce dark web maintains trade.
• The pains of transformation are intensifying: global trade costs are rising, and ordinary people are facing rising prices, job instability, and resource shortages.
• ⚔️ Hidden risks of war: Trade conflicts may escalate into military confrontation, and great power games may reshape the international order.
• The double-edged sword of technology: digital payments and remote collaboration support new globalization, but dark web transactions weaken the inclusiveness of rules.
The 'rural lament' of a great country has brought about the 'globalization dusk' of the world. When the contradictions of wealth inequality and political polarization in China become irreconcilable to a certain extent, the prevalence of MAGA ideology in the United States leads to deglobalization and withdrawal from international affairs, resulting in the absence of a dominant player in the world order, and the inclusive global economic and trade system is heading towards dusk. The rust belt in the United States is spreading worldwide. The cycle of birth, aging, sickness, and death is all cyclical and cyclical. Globalization has been flourishing for nearly a century, and today it is finally falling apart under the turmoil of Trump, even in danger of dying a natural death.
Of course, this does not mean that all of Trump's violent tariffs can be truly implemented, nor does it mean that there will be no trade exchanges between countries from now on. Rather, it means that the era of globalization, which was established in the past with international rules, universal freedom, global inclusiveness, and efficiency orientation, has come to an end. A crude era of globalization, mixed with geopolitical conflicts, historical grievances, great power games, ideology, nationalism, isolationism, hegemonism, small courtyard walls, renegotiation, and deception, has begun.
In this anti globalization environment, primitive and backward jungle rules have replaced civilized and inclusive WTO rules, and high-risk, high cost, uncertain, regionalized, bilateral, transit, ideological, dark web, and smuggling transactions have replaced transparent international trade.
For whom does the death knell of globalization ring? Speak for every person, every enterprise, every country and region in this era. When speculative politicians like Trump provoke tariff wars for their own benefit, disregarding the interests of all humanity, they are also destined to face the backlash of deglobalization.
It should be noted that today's international trade order is the result of nearly a century of civilization accumulated by human beings around the world, and can even be said to be a civilization order created at the cost of war. It has gone through globalization 1.0 (General Agreement on Tariffs and Trade) after World War II and globalization 2.0 (WTO) after the Cold War. Today, we are experiencing a new era of overlapping de globalization and re globalization, a new globalization process filled with great power games, geopolitical conflicts, and war risks, until the formation of the new globalization 3.0.
In such an era, we will not only witness, but also bear the heavy yoke of this era. We will no longer be able to plan our company's international business as conveniently and efficiently as in the past, nor will we be able to easily plan our family's international travel and children's future education. Many ordinary people's jobs will also be greatly impacted, and problems such as deflation, overcapacity, and debt burden will become even more severe. It is difficult for ordinary people to enjoy high-quality imported goods and services in their daily lives. Especially when sick, unable to obtain imported medical equipment and drugs for saving lives normally.
Americans on the other side of the ocean are also facing various difficulties. The market for daily necessities is short, prices are high, agricultural products and oil cannot be sold, patents and other services can no longer obtain rich and stable returns, high-end research and development of cutting-edge machines and materials have no market, and the economy is likely to fall into a stagflation. If a new trade agreement cannot be reached as soon as possible, its disaster level can be compared to the Great Stagnation in the United States in 1970, or even the Great Depression in 1930.
Ultimately, without the globalization that was not highly valued or even widely criticized in the past, ordinary people's lives are likely to become even more difficult. Supply chain, sales channels, customer relationships, job positions, and so on, all require a huge rebalancing until a new globalization system - Globalization 3.0- emerges to supplement the internal rebalancing caused by the collapse of the old globalization system. Obviously, this new global economic and trade network is difficult to compare with the globalization of the past. Before the establishment of the new international order, it mostly existed in the form of trade dark web such as transshipment and smuggling, but it could still barely maintain international economic and trade exchanges, so as not to make countries and economies truly isolated islands.
But the high cost of global trade has added to the economic and political burden on the world. Once the economic and political costs of global trade exceed the costs of military action, resorting to extreme methods of war to solve the problem will be included in the country's optional strategy set - in fact, politicians of major powers have never given up on this choice. This situation may seem too unlikely to people who have been at peace for too long, but in today's situation, it is time for each of us to take it seriously and think seriously.
Globalization 1.0 Built after World War II
Order is a product of war, and Globalization 1.0 was created during World War II. After World War II, the global economy was in a state of disrepair and entered the stage of post-war reconstruction. Countries around the world, which were in ruins, needed close cooperation in order to be reborn from the ruins. Due to the close ties and alliances formed by various countries during the war, the embryonic form of international organizations and order was already in place, such as the Yalta Agreement, as well as the post-war United Nations Charter and Potsdam Agreement. In order to facilitate cooperation between countries in handling post-war affairs, it is also necessary to establish a series of international organizations. Therefore, the global governance system is gradually taking shape.
In terms of economic cooperation, the Bretton Woods system led by the United States was established. The establishment of the International Monetary Fund (IMF) and the World Bank (WB) in 1945 established an international monetary system centered around the US dollar, providing a relatively stable monetary environment for international trade and investment. For example, European countries can conduct foreign trade relatively stably under this system, which has promoted economic recovery.
The General Agreement on Tariffs and Trade was signed in 1947, committed to reducing tariffs and trade barriers. Under its impetus, the global tariff level gradually decreased from a high level after World War II to single digits, and the global trade volume continued to grow. According to statistics, from 1950 to 1973, the average annual growth rate of world trade was as high as 7.8%, laying the foundation for the development of globalization.
As the country that determined the outcome of World War II and the biggest beneficiary, the United States held an absolute dominant position in Globalization 1.0. The United States, with its strong economic power, provided economic assistance to Europe through the Marshall Plan. From 1948 to 1952, the United States provided approximately $13.15 billion in aid to Europe, helping to rebuild infrastructure, restore industrial production, and strengthen economic ties between Europe and America.
At the same time, American companies began investing globally and expanding into overseas markets. Multinational corporations in industries such as automobiles and oil in the United States have established factories and branches in Europe, Latin America, and other regions. By the end of the 1960s, the cumulative amount of US outward investment had significantly increased, reaching $66.2 billion by the end of 1960 and $148.6 billion by the end of 1970, driving the flow of production factors globally.
During this period, the international division of labor also underwent adjustments. Developed countries focused on developing capital and technology intensive industries, while developing countries mainly engaged in labor-intensive industries and primary product production. For example, some Southeast Asian countries have begun to develop industries such as textiles and clothing to provide consumer goods for developed countries, increasing the interdependence of their economies.
An important feature of the era of Globalization 1.0 is that although World War II ended, the Cold War between the United States and the Soviet Union lasted for nearly half a century, which led to Globalization 1.0 not being truly globalized, but divided into two camps, and global trade also showed regional characteristics. Typical examples are Europe and America. In 1951, the European Coal and Steel Community was established, initiating the process of European integration. In 1967, the European Community was officially established, and member states gradually eliminated tariff barriers, achieving the free flow of goods, personnel, services, and capital, and promoting regional trade and economic development.
In other regions, there have also been some regional economic cooperation organizations, such as the Central American Common Market established in 1960 and the Andean Community established in 1964. Although their influence is relatively small, they have to some extent promoted economic cooperation and development within the region.
The existence of the Cold War had a huge impact on the development of Globalization 1.0, resulting in a structural globalization rather than a universal globalization. The world is divided into two major camps: capitalism and socialism. The political opposition and economic blockade between the two camps have to some extent restricted the free flow of production factors such as capital, technology, and personnel on a global scale. But overall, from the end of World War II to the end of the Cold War, globalization still achieved certain development under the promotion of economic system reconstruction, trade growth, international investment, and regional cooperation, laying the foundation for the accelerated development of globalization after the end of the Cold War.
Globalization 2.0 created after the Cold War
At the end of the 20th century, two major events occurred that are worthy of being recorded in the annals of globalization history. One is the complete westernization following the "Washington Consensus" after the dissolution of the Soviet Union and the end of the Cold War in 1991. The other is the convening of the 14th National Congress of China in 1993, which established the path of socialist market economy and can be said to combine the Western economic development model with Chinese characteristics. These two major events signify that a resource rich country and a populous country have jointly joined the historical tide of globalization, and the true globalization that has benefited the vast majority of the population in human history has officially begun, marked by the establishment of the World Trade Organization (WTO) in 1995.
In fact, the core engine of Globalization 2.0 is the China US economic and trade cycle: the United States is the largest consumer and party A, while China is the largest producer and party B. The United States is responsible for consumption, research and development, innovation, standard setting, and financialization, while China is responsible for production, OEM, imitation, standardization, and industrialization. From the perspective of global division of labor and cooperation, China and the United States are a perfect match and a natural pair, jointly forming the global economic cycle. On this cyclical structure, the financial industry in the United States is becoming increasingly powerful, and the dominant position of the US dollar in the world is becoming stronger; China's manufacturing industry is becoming increasingly powerful, with industrial capacity sweeping the world and playing a crucial role in the global industrial and supply chains.
The globalization after the Cold War can be divided into two stages. The first stage is the rapid development stage, which lasted from the end of the Cold War to the 2008 financial crisis. At this stage, trade liberalization is rapidly advancing, WTO member countries are constantly increasing, and the multilateral trading system is further consolidated and developed. Global trade barriers are gradually decreasing, and trade volume has increased significantly. From 1991 to 2006, the global weighted average applicable country tariff rate decreased from 6.2% to 3.2%. The increasing frequency of trade between countries and the freer flow of goods and services globally have driven the growth of the global economy.
At the same time, international investment is becoming increasingly active. Multinational corporations developed rapidly during this period, utilizing the resources and market advantages of various countries to carry out industrial layout and investment on a global scale. For example, many companies in developed countries are transferring labor-intensive industries to developing countries to reduce production costs. From 1991 to 1997, the average annual growth rate of global mineral exploration investment was 14.6%, with a relatively fast growth rate, reflecting the activity of international investment. The growth of international investment has promoted the cross-border flow of production factors such as technology and management experience, and improved the efficiency of global resource allocation.
Under the inclusive framework of the WTO, regional economic cooperation has also been continuously strengthened, such as the North American Free Trade Area (NAFTA) and the European Union (EU). These organizations strengthen economic ties and cooperation among member countries by further reducing internal trade barriers. During this period, the European Union continuously expanded its membership, deepened economic integration, and implemented important measures such as currency unification, which promoted economic development and market integration in the European region.
The second stage is the adjustment and slowdown phase, from after the 2008 financial crisis to before Trump's trade war. The growth of trade and investment has slowed down. The 2008 global financial crisis had a serious impact on the global economy, causing a slowdown in economic growth in various countries and a rise in trade protectionism. The ratio of global exports to global GDP has decreased from 25.9% in 2008 to 22.9% in 2018; The ratio of global outward direct investment to global GDP has decreased from 3.8% in 2007 to 1.2% in 2018. The growth rate of trade and investment has significantly slowed down, and the process of global economic integration has been hindered to some extent.
The slowdown in global trade has also led to reforms in global economic governance. The financial crisis exposed some flaws in the global economic governance system, prompting countries to pay attention to the reform of the global economic governance structure. The role of the G20 in global economic governance is increasingly prominent, replacing some of the functions of the previous G8 and becoming an important platform for international economic cooperation. Countries strengthen macroeconomic policy coordination through platforms such as the G20 to jointly address global economic challenges.
While the real estate crisis in developed countries such as Japan and the United States is heading towards decline, emerging economies are rising. The status of emerging economies represented by China, India, etc. in the global economy is constantly rising. China's share of high value-added exports in the world has significantly increased, ranking first among all countries with a share of over 14% in 2016. The rise of emerging economies has changed the global economic landscape, playing an increasingly important role in global trade, investment, and economic growth, promoting the development of multipolarity in the global economy.
Overall, between the Cold War and Trump's trade war, globalization developed rapidly amidst twists and turns, driven by the super dynamic of the China US cycle. Significant achievements have been made in trade liberalization, international investment, and economic cooperation in the early stages, which have promoted rapid global economic growth and optimized resource allocation. Due to factors such as the financial crisis in the later stage, the process of globalization faced some challenges and adjustments, but the rise of emerging economies also injected new impetus into globalization.
The mournful songs of rural people and the prevalence of MAGA ideology
The globalization that flourished after the end of the Cold War was not smooth sailing, but rather a continuous accumulation of crises behind the prosperity. The biggest crisis among them is that the United States, as the sole leader of Globalization 2.0 and the largest consumer country, continues to accumulate deficits in trade with China, represented by the largest producer and producer countries. One of the reasons for the deficit is that capital enjoys the dividends of globalization and seeks profits in high profit countries and regions, leaving a rust belt for ordinary labor in the United States.
All of this is reflected in the famous work of the current Vice President of the United States, Vance, 'The Lament of the Countryside People'. The book depicts the living difficulties of the white lower class people in the Appalachian region, who lack high-quality educational resources and good employment opportunities. Compared to the affluent class, the poor find it difficult to access upward mobility channels and have been trapped in poverty for generations. The huge gap in economic opportunities has made the barriers between classes increasingly strong and difficult to break down.
Along with the emergence of economic differentiation, the distribution of educational resources in the knowledge economy era has become increasingly uneven. The community school where the author comes from has low quality, low teacher quality, and outdated teaching facilities. Schools in affluent areas have sufficient funding, excellent teachers, and advanced teaching equipment. The huge gap in educational resources leads to unfairness among children from different social classes at the starting point, making it difficult for lower class children to change their fate through education, further exacerbating class stratification.
In this situation, the contradiction between elite culture and bottom culture is becoming increasingly acute. There is a clear distinction between elite culture and bottom culture in American society. The elite class emphasizes personal struggle, professional achievement, and globalist values, while the lower class white people have their own unique cultural traditions, such as valuing family, community, and religion, but there are also some conservative and exclusionary ideas. There is a lack of understanding and communication between the two cultures, and the elite often hold a contemptuous attitude towards the lower culture, while the lower classes feel dissatisfied and alienated from the values and policies of the elite.
At the same time, there has been a fierce collision between the diverse and indigenous cultures of the United States. With the diversified development of American society, minority cultures continue to pour in, colliding with local white culture. On the one hand, white people at the bottom feel marginalized by their own culture, and on the other hand, they have misunderstandings and biases towards the culture and way of life of ethnic minorities, leading to increasing cultural conflicts. This cultural contradiction manifests politically as opposition and divergence between different groups, affecting social harmony and stability.
The division and fragmentation of American society mapped onto the political level is political polarization. There are serious differences between the Democratic and Republican parties in many policies in the United States, with both parties focusing more on their own political interests and ideological struggles, while paying insufficient attention to the practical issues of the lower classes. On issues related to the vital interests of the lower class, such as medical insurance, employment, and education, the two parties often find themselves deadlocked and unable to introduce effective policies to improve their living conditions, leading to disappointment and anger towards the political system among the lower class.
The political participation of the lower class has also encountered unprecedented difficulties. On the one hand, the lower class people have weaker political participation abilities due to low education levels and limited access to information; On the other hand, they feel that their voices are not valued in the political system, leading to apathy and resistance towards political participation. The dilemma of political participation makes it difficult for the interests and demands of the lower class to be effectively expressed and satisfied, further exacerbating social instability and political polarization.
The triple dilemma of American society, economy, and politics revealed in "The Lament of the Countryside People" created a breeding ground for the emergence of MAGA. Although MAGA ideology claims to "make America great again," in practice, some of its policies tend to protect the interests of traditional white people, which may exacerbate the opposition and division between different races and classes. For example, a tough stance on immigration policy can deepen the conflict between native white people and minority groups, posing greater challenges to the diversity and integration of American society.
At the economic level, MAGA emphasizes prioritizing the United States and implements trade protectionism policies, such as imposing tariffs on imported goods. This may have a short-term protective effect on some traditional industries in the United States to a certain extent, but in the long run, it will disrupt the stability of global industrial and supply chains, affect the global layout and international market share of American companies, and also lead to an increase in consumer purchasing costs, harming the overall interests of the American people.
The economic difficulties of the lower classes reflected in "The Lament of the Countryside" also indicate that the problem of imbalanced economic development in the United States is still serious, and contradictions such as regional and wealth disparities have not been effectively resolved. Some policies of MAGA have failed to fundamentally improve the economic situation of the lower classes.
At the political level, the prevalence of MAGA ideology has exacerbated political polarization in the United States. The huge differences between the camps supporting and opposing MAGA have intensified political confrontation, leading to low efficiency in government decision-making and affecting the stability and coherence of policies. The disappointment and anger of the lower class people towards the political system portrayed in "The Lament of the Countryside People" also reflects the inadequacy of the American political system in representing the interests of all people, which has undermined the political participation and trust of the people, further weakening the legitimacy and effectiveness of the American political system.
As the world's largest country and the leader of the world order, MAGA ideology means that the United States fully withdraws from international affairs and only wants to enjoy the monopoly position of the US dollar, technology, product standards, high technology, and scarce resources. As the world's largest economy, the trade protectionism policies promoted by MAGA have triggered global trade frictions and disrupted the layout of global industrial and supply chains.
Many countries' export industries have been impacted, and global economic growth is facing uncertainty. For example, the trade war between China and the United States has caused global trade tensions and slowed down economic growth in some countries and regions that rely on the Chinese and American markets. At the same time, the policy adjustments of the United States have also prompted other countries to re-examine their economic development strategies, strengthen regional economic cooperation, and promote the diversified development of the global economic landscape.
MAGA ideology has changed the image and role of the United States on the international political stage, and its unilateral actions have undermined the international order and multilateral cooperation mechanisms. The United States' leadership in international organizations and affairs has declined, forcing other countries to readjust their relationships with the United States and seek new modes of cooperation and partners. This may lead to a more multipolar global political landscape, changes in the balance of international power, and a gradual increase in the voice and influence of some emerging countries in international affairs.
The conflict between American lower culture and elite culture reflected in 'The Lament of the Countryside People', as well as the conservative cultural tendency inherent in MAGA ideology, have to some extent influenced the global dissemination and image of American culture. The diversity and openness of American culture are being questioned, and some countries' acceptance and sense of identity towards American culture may change. At the same time, this cultural internal contradiction will also affect the role and function of the United States in global cultural exchange, prompting other countries to pay more attention to the protection and development of their own culture.
Anti globalization, De globalization, and Re globalization: Towards a New Globalization 3.0
When the contradictions of globalization accumulate to a certain extent in the two major trading powers of China and the United States, a process opposite to globalization - anti globalization and de globalization - emerges. Monthly gains lead to losses, extreme situations lead to reversals, and globalization is also a cycle.
Anti globalization refers to the ideological trends and practices that go against the process of globalization. It manifests as the rise of trade protectionism, with some countries building tariff barriers and restricting the free flow of goods. The UK's "Brexit" is a typical example, as its departure from the EU has caused setbacks in the already tight European integration process, reflecting some people's concerns about the free movement of people and economy under globalization. At the same time, some countries are vigorously promoting the return of manufacturing industries, providing huge subsidies to industries such as semiconductors and new energy, with the intention of reshaping their own industrial chains and reducing dependence on global supply chains. This is a manifestation of anti globalization in industrial policies.
'De globalization' goes further by attempting to proactively dismantle existing global economic networks. The United States unilaterally launched a trade war, imposed punitive tariffs on billions of dollars worth of Chinese goods exported to the United States, unreasonably cut off supply, restricted investment, included thousands of Chinese technology companies and research institutes in the control list, and even promoted "friendly shore outsourcing" and "nearshore outsourcing", creating exclusive "small circles" and "small groups", with the aim of excluding China from the world economy and global industrial system. This is an extreme act of deglobalization.
But we believe that the trend of world development will not be easily blocked, and the trend of "re globalization" is emerging. On the one hand, emerging countries represented by China actively promote the construction of a more open, inclusive, and inclusive global economic system. China has put forward the concept of a community with a shared future for mankind, promoted the "the Belt and Road" initiative, strengthened cooperation with countries along the Belt and Road in infrastructure construction, and promoted smooth trade and financial integration.
China has joined the Regional Comprehensive Economic Partnership (RCEP) and applied to join the Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP) and the Digital Economy Partnership (DEPA), continuously expanding its openness and providing a new platform for global economic cooperation.
On the other hand, the development of technology has also injected momentum into re globalization. The advancement of digital technology has led to the flourishing development of new formats such as cross-border e-commerce, remote work, and online education, breaking geographical limitations and strengthening global economic connections in new forms.
Therefore, we still embrace the progressive ideology towards the future of globalization. From the perspective of historical development, globalization is an irreversible trend. The early Age of Discovery opened the prelude to globalization, and the subsequent three industrial revolutions greatly promoted the development of globalization, allowing for deep integration of economies around the world.
Nowadays, although anti globalization and de globalization bring many challenges, they are also signals of the adjustment of the global economic pattern. Faced with various common problems, crises, and other "common enemies", countries should follow the trend of re globalization, abandon trade protectionism and unilateralism, strengthen cooperation, and jointly address global issues such as climate change, regional poverty, debt, war, resource scarcity, and public health crises.
We should also recognize that anti globalization and de globalization mainly reflect the political needs of major powers, while market economy and entrepreneurs still have great hope and confidence in globalization. After nearly a century, a massive, super sovereign, and super complex global ecosystem has formed. The linear storm of tariff wars among politicians, although seemingly fierce, is destined to be deconstructed by this vast forest and give birth to a new global system: a new form of globalization that is not dominated or interfered by major powers, with digital technology (currency, payments, credit, etc.) as the infrastructure, and self-organizing by various trade alliances, known as Globalization 3.0.
However, the current issue is not about imagining and longing for this Globalization 3.0, but rather that in the process of transitioning to Globalization 3.0, the death knell of Globalization 2.0 has already sounded, ringing for everyone. In this transformation process, relative to the increasingly high costs and risks of international trade, the relative benefits of war are becoming higher and higher, and the social mobilization of war is becoming more and more realistic and unattainable.
Just as Globalization 1.0 and 2.0 are both post-war orders, we also believe that Globalization 3.0 is a product of war. In fact, this war has already begun between China and the United States, with trade wars, technology wars, financial wars, and so on already underway. Our generation is destined to listen to the tragedy of the death knell of globalization and the repeated impact of the waves of the times in the struggle of great power games.
This article is from Xijing Research Institute, WeChat official account, and the author is Xijing Research Institute