The authors are economists from Shinhan Investment Corp. They can be contacted at [email protected] — Ed.
The COVID-19 pandemic and the Russian-Ukrainian war are fueling de-globalization
Globalization, after driving the world’s economies, politics and cultural developments during the 20th century, has begun to falter since the financial crisis of 2008. The movement towards de-globalization has begun to gather pace after Trump took office and to advance “America First” policies. The additional impact of COVID-19 related disruptions from 2020 has accelerated the pace of global supply chain restructuring efforts led by developed countries. The decline in globalization, first seen in the economic realm, spread to politics and national security with the start of the Russian-Ukrainian war. Different countries’ responses to US sanctions against Russia marked the end of the US-led world order.
Anti-globalization movement and the energy crisis of the 1980s
Today’s world shares many similarities with the 1980s, when anti-globalization was at its height, including: 1) tensions between nations caused by the Cold War; 2) the rise in commodity prices induced by the oil shocks; 3) monetary tightening to fight inflation; and 4) protectionism in the United States to help its failing manufacturing industry. Amid the retreat from globalization, the global rush to secure energy, seen as the essential necessity at that time, prompted the United States to reorient its foreign policy towards the Middle East and energy companies to make advancing aggressive investments to increase supply.
New focus on securing 2020s necessities, high-tech products
Energy is a strategic resource for most countries, with the exception of the United States, which is now a net exporter of energy. Instead of energy, the United States is currently focused on the supply of high-tech products such as semiconductors and rechargeable batteries, which are essential for the fourth industrial revolution but which depend heavily on Asian regions for their supply. While US-led Western countries are expected to step up their diplomatic efforts in Asia to purchase strategic resources, US-China tensions are expected to surface more frequently in the future, but to a lesser extent than in the past. . At the same time, we expect countries to increase local investment in high-tech areas such as semiconductors and rechargeable batteries.