As increasing Western sanctions aim to sever Russia from the international economic community, some industry leaders and pundits alike have speculated that the current conflict in Ukraine may mark the end of the “global economic order” as we know it.
However, this shift is not a new phenomenon. After the election of Donald Trump in 2016, the international economic web began to slowly unravel. His administration embraced the deeply isolationist “America First'' policy, which claimed to protect the interests of working-class Americans and bring back blue-collar jobs. Through this policy, Trump antagonized China for what he deemed “unfair trade practices”, leading to his initiation of a trade war. The Biden Administration has upheld this aggressive rhetoric in regard to the US relationship with China. As a result, the two largest economies in the world continue to seek less interdependence with one another.
Adding on to this shift away from economic interdependence, the pandemic has led many governments to question whether a globalized economy is as valuable as many previously thought it to be. COVID has encouraged leaders to turn inward toward economic self-sufficiency, as issues in global supply chains create fears of shortages in PPE, vaccine supply, and more recently, rising inflation. This, coupled with increased xenophobia and general public distrust of foreigners resulting from the pandemic, has been the dominant argument for lessening governments’ dependence on other countries.
Clearly, populist promises to “bring back jobs” and fears brought about by supply chain hiccups during the pandemic have created the perfect framework to argue that Putin’s war is causing the global economy to disintegrate even further. Recently, there has been increased international concern over the war’s effects on agricultural production and the potential for a surge in food prices and shortages. According to a World Food Program report, Russia and Ukraine supply 30% of the wheat and 20% of the maize in global food markets. As a result, halted grain shipments out of Ukraine and the international isolation of Russia are directly contributing to a weakened global food supply that is raising prices. Moreover, the rising energy prices brought by the war are exacerbating this problem. The WFP report suggests that high energy prices are “pushing up local inflation”, which in turn will “reduce purchasing power and reduce poor households’ access to food”.
There is no better example of globalization’s weakness in times of crisis than European dependence on Russian energy. As many of us know, European countries rely heavily on imported Russian oil and natural gas to run their industries, heat their homes, and to maintain a functioning economy. This dependence has discouraged European leaders from cutting off significant portions of the Russian energy that they import; many feel this would lead to an economic catastrophe. However, accepting the costs of this action would allow the West to strike directly at the heart of the Russian economy, where nearly 60% of all of its exports are energy-related. Clearly, globalization has created a world where an autocrat like Putin can leverage a key resource to avoid facing the crushing punishments warranted by such a brutal attack on another nation.
Although the COVID-19 and Ukrainian crises appear to be uncovering the weaknesses of a globalized economy, it’s important to remind ourselves of the incredible benefits brought by globalization over past decades. It brought us the gift of quick and seamless lines of communication, lowered prices for consumers, exposed us to new cultures and ideas, and most importantly, raised the standard of living in countries across the globe. These successes should discourage us from marking this as the “end of globalization.” However, that doesn’t mean that we shouldn’t scrutinize it and acknowledge where it is deeply failing us. It is reasonable for world leaders and the public to want to increase economic self-sufficiency to avoid shortages of key resources in a time of crisis. It is vital that we protect vulnerable populations from the unsafe labor conditions and starvation wages brought by corporate outsourcing. It is understandable that blue-collar workers are disillusioned by the destruction of their jobs.
Yet, that does not mean that we must unravel the entire system and move towards protectionism and autarky. While our globalized economy is far from perfect, it certainly can be improved through new policies. Negotiating new trade agreements, shifting to green energy, and investing in our workers at home are just a few strategies that could strengthen global resilience in times of crisis and protect vulnerable communities from the dark side of the global economy.
Despite all of its shortcomings, I believe one thing is clear: globalization is here to stay.