How either-or analysis is harmful

Globalization is not just "up" or "down" but is evolving in profound ways

Really solid article from Brad Setser in Foreign Affairs, which usually offers the height of conventional wisdom. The article is entitled, The Dangerous Myth of Deglobalization.

Here we get a decisive takedown of such wisdom, laid out as:

A consensus is emerging that the world is cleaving into blocs—not only geopolitically but economically, too.

This logic has been suitably “conventionalized”:

How to manage this purported deglobalization has been a consistent theme at World Economic Forum meetings.

This crowning of old thought presumes, says Setser, “that deglobalization is a long-term certainty.”

Which makes about as much sense as previously presuming globalization could extend itself ad infinitum or beyond all boundaries.

The problem is, real-world data undercuts this rush-to-judgment theory:

A closer look at economic data shows that even though governments have increasingly adopted policies aimed at strengthening their own resilience, the world economy is still evolving to become more, not less, globalized in key ways—and more dependent on Chinese supply in particular.

First key bit of data: “global trade surged during the pandemic,” in part reversing the wider shift from goods to services.” Trapped at home, people needed stuff delivered.

Setser doesn’t say but should note that this back flow surge, however coincidental with the pandemic, doesn’t negate the global economy’s wider shift to digital content trade, which has grown exponentially since the Great Financial Crash of 2008 (which has largely flatlined the global goods trade since or up to the pandemic’s countering surge) and now constitutes more than half of the value of global trade.

Another key data point cited here: The drop in foreign direct investment (FDI, or long term money invested in real things [not stocks and bonds]) really had more to do with national tax changes that dampened the role of tax havens. This I have not heard before. It is an interesting point that matches the natural re-regulation push following the Crash.

So, to sum up: