Time for Globalization 2.0?

From the fall of the Soviet Union to the 2016 election of President Donald Trump, America rode the globalization horse, leading the charge for the near-complete global integration of finance, investment, and trade. As Rob Atkinson writes in The International Economy, in this utopia, economic borders would be a thing of the past, capital would find its most efficient use anywhere around the world, and the globe would be awash with win-win outcomes. Sure, some workers might get hurt, but they could move frictionlessly to thriving communities and “learn to code.” It was America’s destined role to lead the world to this brighter place. Those who didn’t embrace that view were, well, beyond the pale and accused of being ignorant of basic economic principles.

It is easy to look back with incredulity and for some, even disdain, but this would forget the heady days after the long Cold War, and the belief in, as former U.S. State Department official Francis Fukuyama called it, “the end of history.” Or as former Intel CEO Craig Barrett stated, “Capitalism has won and economy trumps all going forward.” With the exception of a few malcontents, who didn’t agree? Indeed, it was, and for many still is, a simple, seductive, and sublime conception.

Needless to say, that vision didn’t work out quite the way its advocates believed or promised. The rise of an array of “behind the border” trade restrictions, many unchallengeable in the World Trade Organization system, was unexpected for many, as was the recalcitrance of many leading nations, especially in the “global South” and led by India, toward getting fully on board. But most important was the rise of China, a country that willfully skirted global trade rules in the 2000s and abandoned and
flouted them by the 2010s.

And so, the political economy of trade in the United States, but also in many OECD nations, shifted from one of utopian optimism to almost dystopian despair. Domestically we have gone from America the leader to America alone. It didn’t matter which party was in power. The first Trump
administration opposed market opening, signaled by its day-one abandonment of the Transpacific Partnership trade agreement. But so did the Biden administration, with its “pause” on new trade agreements (a euphemism for ban), its pulling the United States out of the WTO Joint Statement Initiative on e-commerce, and its embrace of Buy America and other protectionist measures. Now the second Trump administration promises to go all in on autarky, with across-the-board tariffs on friends and foes alike.

At one level, it could be expected that the response to the failures of Globalization 1.0 would be a Hegelian antithesis. If Globalization 1.0 was bad, domestic autarky, protectionism, and America alone was the unfortunate response.

But America can and should do better than reaction and rejection. Pundits, analysts, advocates, and policymakers can now acknowledge that we have spent enough time in a counterproductive globalization rejection phase, and it’s time to abandon the road to autarky. The problem, of course, is that even in Globalization 1.0 there were still significant contingents on the right and the left that fundamentally rejected and even despised globalization, at least corporate-led globalization. The stumbles and falls of Globalization 1.0 created an opening for their autarkic vision.

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