Globalization
The era we're leaving and don't know what replaces it
Description
In 1990, the ratio of world merchandise trade to global GDP was roughly thirty-eight percent. By 2008, it had risen to sixty-one percent. That eighteen-year surge in cross-border exchange was accompanied by surges in foreign direct investment, international travel, migration, and the integration of supply chains that connected Chinese coastal factories to American suburbs through shipping infrastructure of unprecedented scale. This was globalization — the period from the end of the Cold War to the 2008 financial crisis, during which the world economy became more integrated than at any point since the First World War, and possibly than at any point in history.
The era had defenders who thought it was lifting hundreds of millions out of poverty, which was true, and critics who thought it was hollowing out Western industrial regions and concentrating wealth at the top, which was also true. Both sides assumed it would continue indefinitely. Neither was quite right. Globalization peaked around 2008 and has been running in reverse for roughly ten years. The trade-to-GDP ratio has fallen. Cross-border capital flows have slowed. Multinationals are repatriating supply chains. Immigration has become politically toxic across most wealthy democracies. The world of 2026 is visibly less integrated than 2008 was, and the trajectory is continuing.
What is replacing globalization is not yet clear. Commentators who describe the current moment as deglobalization overstate the case — the world economy is still more integrated than in 1990. Those who insist globalization is only temporarily paused underweight the political, demographic, and geopolitical shifts pushing against further integration. What seems to be happening is a reconfiguration — some exchanges growing, others slowing, the geography of production rearranging around new political realities. The label is still unsettled. The reality is increasingly undeniable.
● The question we're asking: what was globalization, why is it ending, and what comes next?
● What we'll see: the conditions that produced the surge, the winners and losers it created, the reasons the consensus has broken, and the shape of what is replacing it.
Table of contents
01The conditions that produced the surge
The globalization of the 1990s and 2000s was the result of several trends converging. The end of the Cold War removed political barriers to integrating the former communist economies — China had begun market reforms in 1978 and the Soviet bloc joined the global economy in the 1990s — adding roughly two billion workers to the global labor market within a decade. Container shipping, fiber optic cable, and eventually the internet reduced the cost of moving goods, information, and capital across borders by orders of magnitude. The WTO, founded in 1995, provided a rule-based framework for progressive trade liberalization. The Washington consensus — IMF, World Bank, Treasury under both parties — pushed for market liberalization almost everywhere it had influence.
The results were substantial. Extreme poverty, defined as living on less than $2.15 a day at 2017 prices, fell from roughly thirty-six percent of the world's population in 1990 to roughly nine percent by 2019. Most of the reduction happened in China and India, but the pattern held across much of the developing world. Child mortality fell. Life expectancy rose. Access to education, electricity, and basic infrastructure expanded. The period from 1990 to 2010 was probably the best twenty years in history for the poorest half of humanity. Whatever else globalization did, it was substantially responsible for these gains, and the costs of the alternative would have been measured in hundreds of millions of lives not improved.
02The winners and losers
The primary beneficiaries were workers in developing countries that successfully integrated into global supply chains. Chinese coastal cities absorbed hundreds of millions of rural migrants into manufacturing employment paying multiples of agricultural wages. Southeast Asian economies followed similar trajectories. The emergence of a new middle class — roughly two billion people across China, India, Southeast Asia, Eastern Europe, and Latin America — is the largest upward mobility event in human history. The material consequences for these populations are not yet fully appreciated in the Western discourse about globalization's costs.
The secondary beneficiaries were consumers in the wealthy countries. The decline in manufactured goods prices — electronics, clothing, furniture, appliances — from the late 1990s through the 2010s was a direct consequence of production shifting to lower-wage locations. American and European consumers gained purchasing power in these categories, disproportionately for lower-income households. This benefit was real but diffuse and easy to take for granted. It also came packaged with harder-to-track losses in other dimensions.
03Why the consensus has broken
The political consensus was strong from 1990 to 2005 and then progressively weakened. The 2008 financial crisis was a turning point, demonstrating that the tightly integrated global financial system could propagate shocks from American housing markets to European banks to Asian exports in weeks. The scale of the crisis and the fiscal cost of rescues damaged political faith in the integration project. The eurozone crisis from 2010, which showed that monetary integration without fiscal integration produced unsustainable imbalances, weakened the consensus further.
The rise of China as a strategic competitor rather than merely a trade partner was the second major shift. American policy in the 1990s and 2000s had assumed economic integration would produce political liberalization in China — that a Chinese middle class would demand democratic reforms, that a Chinese economy linked to the West would become dependent on Western institutions. None of these assumptions has held up. China has remained authoritarian, developed its own institutional infrastructure, pursued technology policies the West views as strategic threats, and become by some measures the largest economy in the world. Economic integration with China is no longer separable from competition with China, and the political consensus in Washington has shifted accordingly.
04What is replacing it
The most visible pattern is the emergence of regional production blocs. North American manufacturing is reintegrating across the US, Mexico, and Canada. European manufacturing is consolidating within the EU. East Asian manufacturing is being reorganized to reduce dependence on China, with Vietnam, India, and other countries absorbing capacity that is leaving. The pattern is not autarky — cross-border exchange continues at high levels — but a reconfiguration toward shorter, politically-aligned supply chains. Economists sometimes call this slowbalization or friendshoring. The labels vary; the phenomenon is real.
The financial reorganization is running in parallel. The dollar's weight in global reserves has been declining, from roughly seventy-one percent in 1999 to around fifty-eight percent recently. Alternative settlement systems — the Chinese CIPS, digital currencies, settlement in non-dollar currencies — are expanding. The dollar remains dominant, but universal dollar hegemony is fading. Whether this produces a multipolar financial system or two competing blocs is unclear. What is clear is that the single-pole architecture of the globalization era is evolving into something else.
05Conclusion
Globalization matters because arguments about its successes and failures are shaping the political economy of the next several decades. The industrial policies the US and EU are pursuing, the tariff regimes being reestablished, the immigration restrictions being enacted, the technology export controls expanding — all are direct responses to the lessons policymakers have drawn from the period. Whether the lessons are the right ones is contested. That they are driving contemporary policy is not.