Globalization was a key driver of the world economy in the 1990s and 2000s. But global value chains—the spread of supply networks across countries—ceased expanding after the 2009 financial crisis. This year, the arrival of the pandemic has had a devastating impact on economic activity around the world, writes The Wall Street Journal (Dec. 17, 2020), and global trade has shrunk by 9.2%.
China remains an export powerhouse but has turned inward. Exports as a share of its GDP have fallen from 31% in 2008 to 17% in 2019. China is not alone. Nationalism has become a stronger force around the world, and with it economic nationalism. Indian Prime Minister Modi has a “Make in India” campaign. President Trump touts “Buy American” policies.
Other concerns about globalization relate to national security. The U.S.-China relationship has soured partly because of fears that the security of advanced technology products, from drones to microchips, might have been compromised by the Chinese authorities. The U.S. is not alone in worrying that Chinese technology is suspect, as the controversy over Huawei and the security of its telecom equipment shows. Japan has begun investigating how to break its supply-chain dependence on China and produce more at home.
And many countries have been asking whether they have become too dependent on others for essential medical supplies and medicines of which they might be deprived in an emergency. Some temporary export bans were imposed over fears about inadequate domestic supplies of medical equipment, PPEs, and drugs. Attitudes have changed. President Macron of France believes that the coronavirus “will change the nature of globalization, with which we have lived for the past 40 years,” adding that it was “clear that this kind of globalization was reaching the end of its cycle.”
Classroom discussion questions:
- In Ch. 2 (p. 33) of your Heizer/Render/Munson text, we identify 6 reasons why companies globalize. Which, if any of these, are changing if this WSJ article is on target?
- What are the main factors driving this “retreat?”