Slowbalisation: Globalisation in Transition

1
Slowbalisation: Globalisation in Transition
Term Paper for International Economics
Group Members:
Karan Kaushal (170002025)
Varun Patil (170002058)
Aneesh Nema (170003008)
Pradyumna Somani (170005023)
Abstract
For years, the USA and the other western countries have advocated for freer trade and lesser
non-trade barriers. But the recent trends suggest the general sentiment around the world to be of
lesser interdependence. It has been argued that globalisation is already behind us. We should say
goodbye to it and set our minds on the emerging multipolar world. Today’s global economic
trend, suggests that the world may be entering a period of “de-globalisation”, signified by slower
growth of trade, foreign direct investment and capital flows. Growing environmental concerns
also raise questions over the viability of repeating the pattern of massive export growth enjoyed
by some developing countries in the past several decades. Shifting patterns of economic growth
call for a new focus on political discontent, economic growth, growing debt and geopolitics.
This term paper discusses - the rise of service trade over the goods trade and argues the existence
of slowbalization. Then the paper using the empirical evidence assumes the era of globalization
to be over and we are living in an era of prolonged deglobalization. Then the paper discusses two
theories to explain what lead to this situation, how the global mechanism would work and the
outcomes of such slow down across the world.

Slowbalisation: Globalisation in Transition 2
Introduction
Since the late 20th century, globalisation the
interweaving of world economies through
cross-border flows of ideas, goods, services
and capital has been the prevailing trend.
Rapid improvements in technology,
transportation and communication would
suggest that this trend would always move
in one direction, that is, more
interconnected. And yet, several trends are
making global trade less advantageous and,
in some cases, less feasible. Enter
“slow-balisation.” also referred to as
deglobalisation.
In this paper, we explain the current state of
globalisation and how it is changing. Later
we will discuss some of the theories
proposed by researchers explaining the play
of deglobalisation, and finally, we draw
conclusions regarding the future of
deglobalisation.
The State of Deglobalisation
Globalisation is commonly dened as the
process of increasing interdependence
among nations. Accordingly, deglobalisation
represents the process of weakening
interdependence among nations. As the
definition suggests, we should see countries
becoming less reliant on goods and services
or on investment from other countries. In
other terms, trade and investment flow as a
percentage of GDP should be declining.
Substantial evidence in the form of data
suggests that indeed we may live in a period
of de-globalisation that began with the 2008
mortgage crisis. From the data, we can infer,
trade globalisation peaked between 2007
and 2010, and then later started going
downhill. Figure 1 shows the world average
levels of imports of goods and services as a
percentage of GDP, weighted by GDP
(World Bank, 2019). It suggests that the
period of rapid growth from around 1985
onwards peaked in 2007 at 30.2% before
dropping as a result of the 2007 nancial
crisis. It rebounded in 2009 and 2010,
reaching 30.1%, but has since been on a
slight downward trend. A similar but more
pronounced downward trend is visible in
FDI. Figure 2 shows the world average net
FDI inflow of the world as a percentage of
GDP (World Bank, 2019). After a rapid
increase in the 1990s, this measure rst
peaked at 4.4% with the burst of the dotcom
bubble; it recovered from 2004 onwards and
peaked again in 2007 at 5.3% before falling
as a result of the 2007 nancial crisis. It has
since stabilised between 2 and 3%. We are
observing the reversal of the trends with
greater restrictions on trade and investments
by all major countries of the world catalysed
by the USA under Trump.
Globalisation in Transition
McKinsey argues that instead of
deglobalisation, globalisation is reshaping to
the current economic needs. Transitioning
into a more service-oriented form. Even
with trade tensions and tariffs dominating
the headlines, important structural changes
in the nature of globalisation have gone
largely unnoticed.
Although output and trade continue to
increase in absolute terms, trade intensity
(that is, the share of output that is traded) is
declining within almost every
goods-producing value chain. Trade of
services and data now play a much bigger
role in tying the global economy together.
Not only trades in services growing faster
than trade in goods, but the services are
creating value far beyond what national
accounts measure. In addition, all global
value chains are becoming more
knowledge-intensive. Low-skill labour is
becoming less important as a factor of
production. Contrary to popular perception,

only about 18% of global goods trade is now
driven by labour-cost arbitrage.
Trade is still growing in absolute terms, but
the share of the output moving across the
world’s borders have fallen from 28.1% in
2007 to 22.5% in 2017.
Figure 1. Imports of goods and services (% of GDP) Source: World Bank

Figure 2. Foreign direct investment, net inflows (% of GDP) Source: World Bank
Trade volume growth has also slowed.
Between 1990 and 2007, global trade
volumes grew 2.1 times faster than real GDP
on average, but they have grown only 1.1
times faster than GDP since 2011. [1]
The decline in trade intensity is especially
pronounced in the most complex and highly
traded value chains (Figure 3). However,
this trend does not signal that globalization
is over. Rather, it reflects the development
of China and other emerging economies,
which
Figure 3. Source: McKinsey Global Institute
are now consuming more of what they
produce.
Services play a growing and undervalued
role in global value chains. In 2017, gross
trade in services totaled $5.1 trillion, a
figure dwarfed by the $17.3 trillion global
goods trade. But trade in services has grown
more than 60% faster than goods trade over
the past decade (Figure 4). Some subsectors,
including telecom and IT services, business
services, and intellectual property charges,
are growing two to three times faster.
Moreover, cross-border trade in services
generates far more economic value than
what’s been captured in traditional trade
statistics, including the contributions of
value-added services to physical goods.
These value adds include R&D and
engineering as well as the
intangible--software, intellectual property--
companies send to foreign affiliates.
McKinsey estimates that such uncounted
services collectively produce up to $8.3
trillion in value annually.[2][3]
Growing regional trade
The map of global demand, once heavily
tilted toward advanced economies, is being
redrawn. Value chains are reconfiguring as
companies decide how to compete in the
many major consumer markets that are now
dotted worldwide. McKinsey estimates that
emerging markets will consume almost
two-thirds of the world’s manufactured
goods by 2025, with products such as cars,
building products, and machinery leading
the way. By 2030, developing countries are
projected to account for more than half of all
global consumption. These nations continue

to deepen their participation in global flows
of goods, services, finance, people, and data.
Figure 4. Source: McKinsey Global Institute
As consumption grows, more of what gets
made in China is now sold in China. This
trend is contributing to the decline in trade
intensity. Within the industry value chains
we studied, China exported 17% of what it
produced in 2007. By 2017, the share of
exports was down to 9%. This is on a par
with the share in the United States but is far
lower than the shares in Germany (34%),
South Korea (28%), and Japan (14%). This
shift has been largely obscured because the
country’s output, imports, and exports have
all been rising so dramatically in absolute
terms. But overall, China is gradually
rebalancing toward more domestic
consumption.
The rising middle class in other developing
countries is also flexing new spending
power. By 2030, the developing world
outside of China is projected to account for
35% of global consumption, with countries
including India, Indonesia, Thailand,
Malaysia, and the Philippines leading the
way. In 2002, India, for example, exported
35% of its final output in apparel, but by
2017, that share had fallen by half, to 17%,
as Indian consumers stepped up purchases.
Growing demand in developing countries
also offers an opportunity for exporters in
advanced countries. Only 3% of exports
from advanced economies went to China in
1995, but that share was up to 12% by 2017.
The corresponding share going to other
developing countries grew from 20 to 29%.
In total, advanced economies’ exports to
developing countries grew from $1 trillion
in 1995 to $4.2 trillion in 2017. In the
automotive industry, Japan, Germany, and
the United States send 42% of their car
exports to China and the rest of the
developing world. In knowledge-intensive

services, 45% of all exports from advanced
economies go to the developing world. The
Asia–Pacific region is already a top strategic
priority for many Western brands.

As a group, emerging Asia has become less
reliant on imported intermediate inputs for
the production of goods than the rest of the
developing world (8.3% versus 15.1% in
2017). By contrast, in developing Europe,
where economic growth has been slower,
companies have continued to integrate into
the supply chains of companies in Western
Europe. The decline in trade intensity
reflects growing industrial maturity in
emerging economies. Over time, their
production capabilities and consumption are
gradually converging with those of
advanced economies. Declining trade
intensity in goods does not mean
globalization is over; rather, digital
technologies and data flows are becoming
the connective tissue of the global economy.
De-globalisation: Theories and
Analysis
As discussed above, politics is one of the
most important factors in both globalization
and recently de-globalization. Researchers
in the field have developed two major
theories that give possible reasons for the
shrinkage of the share of trade in the global
economy.
Liberalism
The term “Liberalism” has a lot of different
meanings to different people from different
backgrounds. For the course of this paper,
“liberalism” will mean the theory which will
be introduced and discussed below. It will
not mean economic liberalism such as an
open economy, philosophical liberalism or
the political ideology liberalism concerning
social welfare etc.
For the course of this paper, we will follow
the definition of liberalism as given by
Andrew Moravcsik in (Taking Preferences
Seriously: A Liberal Theory of International
Politics) [9]
Liberalism is consistent with the public
debate on deglobalization in the media. It
hypothesizes domestic political pressures
leads to the growing unpopularity of
globalization. Liberalism allows for a wide
spectrum of players influencing the politics
and hence the economic policies of the
country. Possible players determining the
final outcome may include individuals,
NGO’s (non-governmental organizations),
firms, and other international organizations.
Liberalism considers these players to be
rational on average.
The boycott China movement is an example of
liberalism - Domestic players affecting national
foreign policy
These actors have self-interests which they
attempt to fulfill by engaging in political
discourse. It involves issues regarding
economic welfare and other preferences
determined by personal and cultural values.
The players may complete their objective
through positive-sum cooperation (eg:-
trading with other states) or zero-sum
initiatives (national security using military
strength). To fulfill these self-interests,
players have access to different forms of
power which include hard power, which
usually depends on military capabilities or
the ability to inflict large scale economic
damage (eg:- blocking energy imports and
thus crippling the economy of a hostile
state). Sharp power which relies on
distraction and manipulation and soft power
which depends on a persuasive approach to

international relations, typically involving
the use of economic or cultural influence.
Thus the resulting dynamics means that
domestic issues are as important as what
happens internationally between countries.
In Liberalism, a state's interests are the
projections of their domestic interests with
powerful players having greater say in the
overall foreign policy of the country. As
players and their interests change over time,
so does the focus of the foreign policy.
Liberalism thus depicts a complex and
accurate depiction of reality which is also a
major drawback as this makes it very
difficult to arrive at a conclusive analysis
and predict the future.
Table: Key attributes of Liberalism and Realism
Liberalism Realism
Players Individuals, NGO’s
(Non-governmental
organizations), firms, other
international organizations
Sovereign states especially powerful
ones
Goals/Interest Self interests which involve
issues regarding economic
welfare and other preferences
determined by personal and
cultural values.
The ultimate goal of realism is
survival of the state
Nature of Power Hard power, Sharp power and
Soft power
Hard power
Domestic politics role One of the most important
factors as the foreign policy
reflects domestic political
discourse
Irrelevant
Bedrock of globalization Cooperation between states for
positive-sum results thus
increase in interdependence
Pressure from a global hegemonic
state
Factors contributing to
the rise in de-globalization
Shift in public interest leading
to de-globalization becoming a
more feasible option and hence
opting out of states from
previous agreements
Decrease in the relative power of the
reigning hegemon hence pressure to
maintain and promote globalization
no longer present
Prediction for the future Survival of only those
international agreement which
remains feasible in the long
term
Development of new global power
centres hence leading to multiple
regional hegemons and development
of regionalized globalization

Realism
For the course of this paper, we will follow
Structural Realism as given by Waltz in
(Theory of International Politics ) [10]
Realism sees the rise of China as a
geostrategic competitor and the end of US
hegemony as the trigger for
de-globalization. The realist theory narrows
down the spectrum of players as compared
to liberalism. Players include sovereign
countries, especially powerful ones.
Countries are rational with domestic politics
being irrelevant for their behaviour in the
international system. Realism assumes
anarchy in the international system. This
means that there is ultimately no entity to
supervise state behaviour and enforce
compliance and hence there are no rules
constraining state behaviour. In this system,
ultimately securing survival becomes the
primary goal of any state. Thus the main
objective of the foreign policy is thus forced
on the state by the international system and
states which get distracted from the core
goal of survival by domestic political
discourse risk survival in the long term.
In this anarchic world of realism, survival is
overall just a function of hard power. That is
countries should prioritize military power to
defend themselves against hostile foreign
forces. Since building and maintaining this
hard power requires an investment of large
scale resources into the military, this means
an important need for economic strength.
Thus economic development is ultimately a
tool for survival against other countries.
Ironically given the name “Realism”,
realism offers a less realistic view of
international politics compared to liberalism.
Thus one of the important criticisms of
realism is the fact that it offers a less
complete picture of reality.
Relationship with De-Globalisation
Liberalism
Globalization consists of two components:
the agreement of states to cooperate in
building interdependence, and a supporting
infrastructure that enables such cooperation
to occur.
The first component, agreement, requires
that there be enough political support for
building economic interdependence within
each country. While such an agreement is an
expression of the will to cooperate, putting
cooperation into practice often faces
challenges because of a risk that other
countries will renege on their agreements to
gain even more significant benefits for
themselves. This can be explained with
reference to the prisoners’ dilemma: while
the overall benefits of cooperation may be
maximized if everyone cooperates,
individual players may maximize their
benefits by defecting while the others
continue to cooperate. Since this incentive
structure is known, the risk is that no actor
agrees to cooperate.
Liberalists claim that countries can
overcome the restrictions of anarchy and
build cooperation in at least three ways.
First, because actors, especially states,
interact with one another repeatedly, the
gains from a one-time defection pale in
comparison with the possible gains from
long-term cooperation. Second, cooperation
can be helped along through the use of
strategies that reward cooperation and
punish defection. For instance, adopting a
simple ‘‘tit-for-tat’’ approach – doing
whatever the partner did last – tends to lead
to stable cooperation over time (Axelrod,
1984). Third, and most important for the
understanding of de-globalization, is the
argument that just as institutions facilitate

cooperation within countries(North, 1990;
Williamson, 1985), international institutions
may enable international cooperation
(Keohane, 1984, 1989). They provide a
forum for discussion, for identifying mutual
interests, and for finding joint solutions.
Once institutions are agreed on, the
organizations attached to them can help
monitor compliance. Some of these
organizations also provide for the
adjudication of conflicts around
international institutions and set penalties
for violations.
In a liberalist world, there are accordingly
two pathways to de-globalization. The first
is for the institutional infrastructure,
supporting globalization to lose its ability to
support openness. We have seen such a
divergence of interests in the context of the
Doha Round of WTO negotiations, in which
advanced industrialized countries essentially
pushed for more free trade, while the
emerging markets pushed for what they saw
as fair trade. It also contributes to
institutional drift(Mahoney & Thelen, 2009),
which implies that institutions move out of
synch with the issues they should address.
An example is non-tariff barriers to trade,
which many states have thrown up and
which the WTO remains ill-equipped to
address. Such circumvention of international
institutions both reduces interdependence
directly – by making the trade with and
investment in other countries harder – and
indirectly – by inducing other countries to
reciprocate by limiting openness. This
reneging is linked to the second pathway: a
change in national political interests leads
countries to opt-out of economic
interdependence. Consistent with the notion
that shifting interests may be connected with
the current de-globalization, public support
for globalization has dropped in many
economies since the early 2000s (OECD,
2017).
A wide range of causes is conceivable for
this shift. For example, values underlying
policy preferences may undergo ideological
shifts away from open to protected markets.
Arguably, the financial crisis of 2008 and
the European refugee crisis of 2015
represented such watersheds against
pro-openness ideology in the Western world.
The former empowered left-wing critics of
globalization, who object to openness in its
present shape, which they see as unjust
(Fisher &Ponniah, 2003; Santos, 2013;
Verbeke et al., 2018). This led to support for
right-wing nationalist groups linking
globalization to unwelcome
immigration(Rodrik, 2018), which seems to
have played a role in the Brexit vote of
2016.
Second, opening up trade or finance
internationally has distributional
consequences within countries, with some
sectors gaining and others losing. For
instance, international trade or financial
liberalization will generally hurt previously
protected sectors and their workers(Buckley
& Ghauri, 2004;Frieden, 1991; Stolper &
Samuelson, 1941). Low skilled workers
suffer in terms of wage depression and job
losses – and resultant increases in inequality
– when exposed to competition from
emerging markets, as has been shown for
US workers facing competition from China.
Unless compensated, the losers from
globalization may mobilize and seek to
reverse economic openness. Arguably, this
accounts at least partially for the election of
Donald Trump as US President and the
global rise of populism more generally.
A third example is that the payoffs from
cooperation may change over time, and
interests supporting globalization may
weaken as a consequence. For instance,
while importing goods or offshoring
production may be economically efficient in
the short term, the attendant shrinkage of

production in the home market may be
undesirable in the long term for reasons such
as a reduction in expertise and production
capacity in industries necessary for national
defence.
Realism
Hegemonic stability theory argues that
periods of globalization occur when an
overwhelmingly powerful country, a
‘‘hegemon,’’ creates and maintains, for its
benefit, sets of international institutions
(‘‘regimes’’) that govern aspects such as
trade and investments. The hegemon will
keep this system in place as long as it
remains strong enough to do so, and the
benefits of keeping the system exceed the
costs. Other states may or may not benefit
from the system. Once the hegemon declines
– i.e., it loses power relative to other
countries to the point that it is no longer
overwhelmingly powerful – the system
becomes unstable.
US GDP at purchasing power parity and in constant 2011 international dollars relative to the next largest economy
and the world. Source: World Bank
US military spending relative to the next largest spender and the world. Source: Stockholm International Peace
Research Institute

Realism makes it much more
straightforward to illustrate how the current
period of de-globalization coincides with
hegemonic decline. Hegemonic stability
theory links the openness of the international
economic system to the preponderance of
the most powerful country, which in recent
history has been the United States of
America. To assess this possibility, we
evaluate the relative power of the United
States as compared with the rest of the world
and its closest rivals. We focus on two main
dimensions that are central to the realist
concept of power: military strength and
economic power. The latter is easy to
operationalize as GDP. We rely on the
extent of military spending. Any decline in
the US budget is thus likely to be a
conservative depiction of actual dynamics.
Both metrics paint a clear picture of the
relative decline of US power.
Outcomes
In both the approaches we have taken, i.e.,
Liberalism and Realism, we expect
de-globalization to happen. However, the
predicted implication of both the theories in
the context of de-globalization w.r.t
international political economy varies
considerably.
Liberalism
As this theory argues, the failing of the
multinational corporations and international
institutions such as IMF, World Bank, and
the general sentiment around the world
shifting against the economic openness is
the primary outcome of de-globalization. It
would not be uniform across the globe and
would exist in the globalization patchwork
with countries forming localized groups
with varying levels of interdependence on
each other.
Geographically confined agreements would
gain prominence due to this, and we have
already seen the rise of such agreements
over the last ten years in the form of RCEP,
ASEAN, SAARC (Aggarwal and Urata,
2006; Shadlen, 2008). One can argue that
the agreements are attempts to increase
interdependence. Still, instead, these
agreements would serve as adding an extra
layer of complexity, which some countries
would begin to opt-out of to decrease their
interdependence. These departures would, in
turn, question the very existence of such
agreements, and the countries which are
willing to maintain such a high level of
interdependence may need top form suitable
regional and bilateral agreements. These
agreements would be localized and
favouring the countries negotiating them.
And since there is a varying amount of
interests across the globe, there would be
varying economic openness across the
world.
An extreme of this situation can be seen in
the past in the form of formation of
economic blocs in 1930 due to the currency
and trade restrictions were in place. These
restrictions curtailed the FDI, and the
general sentiment in favour of
interdependence decreased (Jones, 2005,
2014). The overall investments by foreign
entities in some countries had a positive
effect initially as the investments couldn’t be
moved out due to trade restrictions and
instead remained in the local markets.
Hence, it was observed that the FDI for
some countries increased due to the
formation of geopolitical, economic blocs.
Realism
Realism predicts globalization in the
presence of global power blocks. It argues
that there is a presence of a multi-polar
world with at least two superpowers
representing two power blocks, which are
regional much like the cold war era, and
neither is strong enough to dominate the

other to become the global superpower.
Realism theory predicts the emergence of
economic power blocks around each region
but not military power blocks like in the
cold war. The most likely outcome under
this theory is the existence of tensions in the
Cold War-like configuration of the global
economy.
Here, let us assume there exist Two
Superpowers i.e., the United States and
China. Then there would be a bipolar world
in which both superpowers form two
different systems tailored to their spheres of
interest. So, here, the United States of
America is no longer the global superpower
but strong enough to deny China the title of
becoming the global superpower. It could be
the transitional phase for world politics.
Now, we could proceed with two
possibilities after this.
1. China stays as a regional superpower
and is unable to break the
middle-income barrier and thus
doesn’t grow much stronger.
2. China emerges stronger and emerges
as the global superpower piping
United States from its mantel. It
would lead to the creation of a new
world order.
In case 2, there would be the creation of a
new world order suiting Chinese
preferences. The smoothest transition would
be the United States ceded the territory to
China. It would be highly unlikely. Hence,
we could observe friction between China
and the USA, and this would be in the form
of economic and digital warfare as
conventional war is unlikely given the
potency and threat of nuclear annihilation.
How this takes place is difficult, but we are
starting to observe it in the form of the
US-China trade war under the Trump
administration. China’s go-to strategy to
obtain global dominance is by replacing the
dollar by yuan as the global currency. Yuan
is already included in the reserve currency
of the IMF and the World Bank. China has
also been planning to replace the USA
dominated agreements with its own, recent
example of NAFTA being replaced with
RCEP.
Now, there is an alternate outcome where
we might see the emergence of a multi-polar
world with the rise of more than two
superpowers vying for global dominance.
With a large population and available GDP
size equivalent to that of China and the
USA, one of the most likely candidates for a
superpower is India. It is based on continued
economic development and the ability to
have a high growth rate.
An unlikely candidate for a superpower is
the European Union. The early 2000s saw a
series of
aspirational work that suggested that the EU
might indeed be a coming superpower. But
the euro crisis put an end to hopes, at least
for now. It lacks the power conversion
capability requisite despite the broad
economy and population. The major
problem of the EU is becoming a
superpower is the constant disagreements of
the member nations due to the varied
interest of the member nations; it
significantly decreases the ability of the EU
to act.
Other countries are generally too small to
become the poles of a multi-polar world.
They either have a low population or ageing
population, which cannot take it to become a
robust economy to become a superpower.
Some countries in this category are Russia
and Japan.
Both theories have a large scale implication
on three areas in the global context:
1. MNE (Multi-national entities)
2. Global Value Chains (GVC)

3. National Context
Multi-national Entities (MNE)
MNE activities have the potential to affect
the power distribution among the nations
across the world. MNE can slow the
development of potential rivals by using
their international presence to block the
emergence of competitors in the country. It
can result in countries trying to stop the
money coming into their markets, leading to
lesser interdependence. But, MNE’s can also
help another country gain economic strength
through technology transfer, increase the
GDP of the host country. In both cases, it
would lead to less interdependence as the
countries would not want the rival nations to
gain economic strength.
Under liberalism, MNEs, especially large
ones, may decide to dedicate more resources
to sustaining and expanding economic
interdependence. It may, for instance,
involve an increase in direct political
activities, such as lobbying policymakers to
counteract the pressure from
anti-globalization forces. It could also
include attempts to prevent parts of the
population from turning negative on
globalization. For instance, MNEs may use
CSR activities such as retraining programs
to help buffer against the adverse effects of
globalization, possibly tailoring these
programs to the specific institutional context
of home and host countries (Ioannou &
Serafeim, 2012; Jackson & Apostolakou,
2010; Matten & Moon, 2008; Miska, Witt,
& Stahl, 2016; Rathert, 2016). Many
significant firms already pursue both
political strategies and CSR, and it would be
surprising if they did not put them to use to
counteract de-globalization, individually or
in coalition with other national or
international actors.
Under Realism, the survival of
globalization depends on the strength of the
hegemon, and to the extent firms consider
the present form of globalization under the
current international regime to be desirable,
the question of how policies affect the
power of the hegemon would become part of
the equation. Especially if the alternative
were de-globalization or a less favourable
globalized environment under a new
hegemon, weaker states and their firms
might conclude that it is in their self-interest
to permit a hegemon to accrue
disproportionate benefits.
For example, in the current international
context, European MNE’s may weigh in the
implications of their association with China
in the USA-led international order. In this
theory, it could be argued that anything that
strengthens China would be in a direction
undermining the USA. And MNE,
especially the European MNE, might
reconsider to accept the recent USA
demands in trade. While European MNE
might consider it unfair, but it would be
more advantageous to give in to US
demands than see the world moving towards
more de-globalized or a China-led form of
globalization.
Global Value Chains
It is the second area where de-globalization
would be most hit. Both theories argue on
the range of implications for the Global
Value Chains.
In liberalism, a breakdown of international
institutions would imply more uncertainty in
international business, which translates into
higher transaction costs of doing business
internationally. Transaction costs would
presumably also increase with a
fragmentation of the international economic
order, which would imply an even greater
variety of rules and conditions under which
MNEs operate.

Under liberalism, the MNE of the future
may still be global in the sense of being
active across the globe; it is likely to have
smaller international reach if some countries
opt out of economic openness. The ability of
firms to ‘‘fine slice’’ would presumably be
curtailed because of a lack of access and
scale. Some benefits of specialization may
be lost, and some specialized clusters
dependent on supplying the Global Factory
may decline.
Realism likewise expects smaller reach of
MNEs. Unlike under liberalism, however,
the Global Factory would probably give way
to the Regional Factory (where ‘‘region’’
denotes the economic sphere of interest of
the respective regional hegemon). For the
probable near-future outcome of two areas
of influence, one led by the United States
and one by China, it seems likely that at
least the US sphere will continue to operate
under rules similar to those today. Under
these conditions, the strategy of ‘‘fine
slicing’’ remains in principle viable, though
on a smaller scale, with reduced levels of
specialization and probably not across
spheres of influence.
Interaction with National Contexts
The third set of implications from this paper
discusses the context of the national
narrative.
Liberalism suggests a concern with the
ability of national contexts to sustain
globalization, while
Realism asks how national contexts tie into
economic and military power. As discussed
earlier, liberalism predicts a patchwork of
openness in a de-globalizing world. For
MNEs, this implies uncertainty over MNEs
adopts strategies that undermine political
support of globalization. Globalization
seems to affect workers more adversely in
liberal market economies such as the United
States, where low protection makes
wholesale factory closures possible and thus
facilitates large-scale offshoring. While such
offshoring may result in lower consumer
prices at the level of the economy as a whole
(Feenstra et al., 2010), at the individual level
of the affected worker, the overall impact
seems to be adverse (Acemoglu et al., 2016;
Autor et al., 2013).
Conversely, in coordinated market
economies (CMEs) such as Germany,
employment protection is much stronger,
which makes factory closures and
large-scale offshoring harder (Lewin &
Volberda, 2011; Milberg & Winkler, 2010).
CMEs may forgo macroeconomic gains
from offshoring, such as lower prices and
resultant
consumption. Still, higher levels of job
security and a higher labour share of income
in the economy (Milberg & Winkler, 2010)
may dampen anti-globalization sentiment.
Realism raises the issue of how institutions
and other factors, both at home and abroad,
can be leveraged to maximize economic and
military power. At the same time, much
remains to be explored about the linkages
between context and hard power. It seems
likely that these connections exist. For
instance, in the US, Cold War defence
spending funded the rise of Silicon Valley
and other high-tech clusters in the United
States (Le´cuyer, 2006; O’Mara, 2015).
Among the fruits of these efforts is the
Internet, which grew out of a defence
initiative for distributed computing
(Castells, 2002), as well as the US
microelectronics and aviation industries
(Hooks, 1990). In all of these areas, US
MNEs continue to be major global players.
In effect, US defence spending assumed the
role of industrial policy in other countries.

Conclusion
The conclusion of this paper is to study the
two probable theories that predict that the
global economic environment would be
significantly different from the one which
we are experiencing today. Just as the
instance of deglobalization that occurred in
the first half of the twentieth century, we
have technology that could lead to a more
globalized world with increasing services
trade and improved data sharing taking place
than before. But, the significant lag for this
to occur is the lack of political configuration
that would support this.
In this paper, we reviewed the two theories
that could define and predict the outcomes
of deglobalization – liberalization, and
realism. Both theories have different
mechanisms and differ considerably in the
general mechanisms of the deglobalization
process. Based on these differences, we have
discussed the different outcomes under both
the theories on three different fronts –
MNEs (Multi-National Entity), Global
Value Chains (GVC), and National Context.
References
1. World trade statistical review 2018,
World Trade Organization, 2018.
2. Globalization in transition: The
future of trade and value chains
3. Globalization in Transition
4. Aggarwal, V. K., & Urata, S. (Eds).
2006. Bilateral trade agreements in
the Asia-Pacific: Origins, evolution,
and implications. London: Routledge
5. Shadlen, K. 2008. Globalisation,
power and integration: The political
economy of regional and bilateral
trade agreements in the Americas.
The Journal of Development Studies,
44(1): 1–20.
6. Jones, G. 2005. Multinationals and
global capitalism: From the
nineteenth to the twenty-first
century. Oxford: Oxford University
Press.
7. Jones, G. 2014. Firms and global
capitalism. In L. Neal & J. G.
Williamson (Eds), The Cambridge
history of capitalism: The spread of
capitalism: From 1848 to the present:
169–200. Cambridge: Cambridge
University Press.
8. Ioannou, I., & Serafeim, G. 2012.
What drives corporate social
performance? The role of
nation-level institutions. Journal of
International Business Studies,
43(9): 834–864.
9. Jackson, G., & Apostolakou, A.
2010. Corporate social responsibility
in Western Europe: An institutional
mirror or substitute? Journal of
Business Ethics, 94(3): 371–394.
10. Witt, MA J Int Bus Stud (2019) 50:
1053.
11. Taking Preferences Seriously: A
Liberal Theory of International
Politics
https://www.princeton.edu/~amoravc
s/library/preferences.pdf
12. https://www.britannica.com/topic/Th
eory-of-International-Politics
13. Axelrod, R. 1984. The evolution of
cooperation. New York: Basic
Books.
14. North, D. C. 1990. Institutions,
institutional change and economic
performance. Cambridge: Cambridge
University Press.
15. Rodrik, D. 2018. Populism and the
economics of globalization.Journal
of International Business Policy,
1(1): 12–33

16. Williamson, O. E. 1985. The
economic institutions of capitalism:
Firms, markets, relational
contracting. New York: The Free
Press.
17. Santos, B. S. 2013. The rise of the
global left: The world social forum
and beyond. London: Zed Books.
18. Verbeke, A., Coeurderoy, R., &
Matt, T. 2018. The future of
international business research on
corporate globalization that never
was…. Journal of International
Business Studies, 49(9):1101–1112
19. Fisher, W. F., & Ponniah, T. 2003.
Another world is possible:Popular
alternatives to globalization at the
World Social Forum.London: Zed
Books.
20. Keohane, R. O. 1984. After
hegemony: Cooperation and discord
in the world political economy.
Princeton, NJ: Princeton
UniversityPress.
21. Keohane, R. O. 1989. International
institutions and state power:Essays in
international relations theory.
Boulder, CO: Westview.
22. Mahoney, J., & Thelen, K. 2009.
Explaining institutional
change:Ambiguity, agency, and
power. Cambridge: Cambridge
University Press.
23. OECD. 2017. Towards a better
globalisation: How Germany can
respond to the critics. Paris: OECD
24. N. 2016. Strategies of legitimation:
MNEs and the adoption of CSR in
response to host-country institutions.
Journal of International Business
Studies, 47(7): 858–879.
25. Miska, C., Witt, M. A., & Stahl, G.
K. 2016. Drivers of global CSR
integration and local CSR
responsiveness: Evidence from
Chinese MNEs. Business Ethics
Quarterly, 26(3): 317–345.
26. Matten, D., & Moon, J. 2008.
‘‘Implicit’’ and ‘‘explicit’’ CSR: A
conceptual framework for a
comparative understanding of
corporate social responsibility.
Academy of Management Review,
33(2): 404–424.
27. Feenstra, R. C., Lipsey, R. E.,
Branstetter, L.G., Foley, C. F.,
Harrigan, J., Jensen, J. B., et al.
2010. Report on the state of available
data for the study of international
trade and foreign direct investment,
NBER working paper series.
Cambridge, MA: National Bureau of
Economic Research.
28. Acemoglu, D., Autor, D., Dorn, D.,
Hanson, G. H., & Price, B. 2016.
Import competition and the great US
employment sag of the 2000s.
Journal of Labor Economics, 34(S1):
S141–S198.
29. Autor, D. H., Dorn, D., & Hanson,
G. H. 2013. The China syndrome:
Local labor market effects of import
competition in the United States. The
American Economic Review, 103(6):
2121–2168.

Slowbalisation: Globalisation in Transition

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Slowbalisation: Globalisation in Transition

Similar to Slowbalisation: Globalisation in Transition (20)

Recently uploaded

Recently uploaded (20)

Slowbalisation: Globalisation in Transition