From glorious globalization to a world in crises – and back?

For several decades, globalization was driven based on the promise that it would make everyone better off and that the growing interdependence of the world’s economies would guarantee global stability and peace.

While globalization has brought significant benefits, the uneven distribution of these benefits has in recent years led to increasing dissatisfaction with an ever-deeper trade and financial integration among disadvantaged groups and regions. In the US and Europe, governments have started to reconsider economic priorities, setting in motion a trend towards a more balanced form of of globalization, one that reconciles the benefits of free trade with tackling important national issues.

Since Donald Trump’s first term in office at the latest, governments are increasingly resorting to geo-economic means to achieve economic and foreign policy objectives, which ultimately led to an escalation of geopolitical tensions. National-security-driven de-risking is on the agenda, marking a clear break in the history of globalization.

At the Berlin Summit in May, we hosted a high-level panel with Moritz Schularick, Adam Tooze, Daniela Schwarzer and Rob Johnson to discuss what this means for the endeavour to shape a new economic policy agenda that helps to regain people’s trust and repair the damage caused by excessive market liberalism.

Moritz Schularick and Adam Tooze trace the beginning of the recent geopolitical confrontation back to the collapse of our economic and financial system in the 2008 financial crisis and its aftermath, in particular austerity policies, that set in motion the decline of the West and the rise of China and other emerging markets.

The subsequent shift from a rules-based to a power-based order represents a major challenge for Europe. As Daniela Schwarzer pointed out, Europe depends on a rules-based order globally and its leverage in negotiations is now in relative decline. For her, the rebuilding of a European security order is a condition for having a vision for our economic and democratic model. And governments will have to invest far more in their own security. However, in the face of an enormous securitization, which can be used to take extraordinary measures bypassing democratic rules and procedures, she appealed not to neglect the socio-economic divides and people’s sense of being decoupled. Meeting these different challenges ultimately represents an important trade-off in financial terms.

“Costs to protect the achievements we have in Europe and other parts of the Western world will be higher. And here is the big trade-off, and the difficult trade-off to be made. Because if security costs us more, where do we cut?” Daniela Schwarzer

Moritz Schularick reaffirmed that we will have to focus our attention on the interaction between the security agenda and progressive economic projects. Both should be considered together instead of in opposition. Being vulnerable to blackmail in defence would jeopardize our ambitions to be an economically successful, secure and influential Europe, to create global public goods and to fight climate change.

“In this new order, (…) we will have to think very hard about how the security agenda will enable us to push ahead more progressive economic projects.” Moritz Schularick

Adam Tooze sees securitization first and foremost as a major conceptual change, that in his view does not represent a fundamental shift in macro-social or macro-economic trade-offs.