The current political era is best understood as a “great recoil” of economic globalization. It is a moment when the coordinates of historical development seem to be inverting, upsetting many of the assumptions that dominated politics and economics over the last decades. This moment corresponds to the “second movement” socialist economic historian Karl Polanyi described in his book The Great Transformation, when phases of capitalist expansion recede and are met by “societal responses.”

According to Polanyi, in phases of profound crisis like that opened by the 1929 Wall Street Crash, society tends to act defensively, erecting forms of social protection against a capitalist logic that has manifestly failed to deliver prosperity, yet becomes even more aggressive in its attempts to extract profit. During this moment, societies are involved in a process of “re-internalization” that aims to “re-embed” the economy in society.

On certain occasions, this second movement produces a reactionary drive, pacifying the conflict between capital and labor under the aegis of an authoritarian corporatist state, typified by the fascist movements of the 1920s and 1930s. But this is not the only possible conclusion. Roosevelt’s New Deal in the United States and the French and Spanish popular-front governments represented the left’s attempts to resolve the same quandaries in a progressive direction. To capture contemporary political developments, it is essential to understand how this moment of recoil has come to be, and why globalization has proven so fragile.

​Redrawing the economic map of the world

Economic globalization — the growing interconnectedness of the economy at a planetary level — has been the most vaunted product of the neoliberal order. During the 1990s and early 2000s, it looked like an unstoppable phenomenon, bound to integrate even the most remote recesses of the planet into a global market. Nonetheless, in a world traversed by multiple shocks from the COVID-19 pandemic, to the disruption to the global supply chain that it caused and the ever-more visible threat of climate change, it is precisely this monument to neoliberalism’s ingenuity and ambition that stands in peril.

Already in the aftermath of the 2008 financial crisis, and during the austere 2010s, economists had noticed a tendency towards “slowbalization” — the slowing of globalization. Global growth slackened, foreign direct investments dipped and even global trade – a key indicator of global interconnectedness — receded. The coronavirus crisis has only intensified this tendency, producing a dip in global trade, the upsetting of global supply chains and growing economic protectionism, amid growing signs of “uncoupling” between the Chinese and Western economies.

Globalization has been marked by a drive towards externalization seen in the emphasis on exports, outsourcing, out-contracting and off-shoring which carry a joint emphasis on the “outside” of the global market. Different forms of externalization had a common objective: privatizing profits and collectivizing losses, while making at the same time the economy a space away from the control of political institutions. Neoliberal externalization has redrawn the economic map of the world according to the principle of cost-minimization of production inputs, especially labor. In order to sell on world markets and insulate their profits from taxation, companies have relocated their factories, outsourced their labor and taken advantage of the special export zones and tax havens that were created all over the world under neoliberalism.

The net result has been a spectacular rise in inequality. A very few individuals have been able to amass huge wealth, while workers’ wages have been pushed to the bottom; and the gulf has grown massively between rich, globalized cities and a diffuse global periphery ravaged by impoverishment and decline. Neoliberal globalization has been proven to be not only economically far less convenient than its evangelists made it to be, but it has also proven to be socially and politically unsustainable, as its economic effects have fueled populist insurgencies across different countries. In fact, much of contemporary politics can be understood as a reaction against globalization’s effects, one which while trying to extricate society from globalization, is still very much caught in its long term consequences.

​United under One World Market

First popularized by Harvard business professor Theodore Levitt in the mid 1980s, the term globalization soon served to capture the progressive inclusion of ever more nations into a global market under the aegis of the United States as the uncontested global superpower after the collapse of the Soviet bloc by the end of the decade. For the first time in human history, almost the entire planetary economy had been subsumed into a unitary world market.

Neoliberal globalization emerged from the ruins of the system created by the Bretton Woods Agreement — signed in 1944 as World War II was still raging in Europe, China and the Pacific — which until the 1970s had enforced strict control over currency and capital movements. Starting in the 1960s, the rise of multinational corporations and the increase in transnational capital mobility began to reshape the international economy. The most disparate industries — from car manufacturing to food and beverages, retailing and social media — were progressively colonized by multinationals such as McDonald’s, Nike, Coca-Cola and Nestlé, and more recently digital companies such as Apple, Facebook and Amazon; these became the public faces of globalization, whose goods, services and brands were available virtually anywhere on the planet.

The growth of multinationals was facilitated by free trade agreements that have done away with many barriers to international commerce. While the original General Agreement on Tariffs and Trade, signed in 1947 by 23 nations including the United Kingdom, the US and France, already aimed at the liberalization of trade through the reduction of tariff s, quotas and subsidies; important areas — such as agriculture, textiles and, most importantly, services — were not covered by it.

The World Trade Organization (WTO), created in 1995, went on to supervise 95 percent of the world’s global trade, the exchange of goods and services across national borders. Its effect — combined with that of the creation of regional free trade agreements such as the Mercosur in South America (1991), the ASEAN Free Trade Agreement (AFTA, incorporating Southeast Asian nations, 1992), the North American Free Trade Agreement (NAFTA, 1994) and the growing integration of the common market in the European Union — was the progressive elimination of ever more trade barriers. As a consequence, global trade has grown spectacularly. Between 1985 and 2011, it more than doubled, growing by an average of 5.6 percent per year, in excess of global GDP growth.

Free trade and the rise of multinational corporations have in turn been key factors fueling the pervasive fictionalization of the economy. Informed by the recommendations of English theorist and “economic diplomat” John Maynard Keynes, the Bretton Woods Agreement was designed to limit international capital flows, which Keynes considered a cause of macroeconomic destabilization. However, starting in the 1970s neoliberal policies of deregulation progressively demolished all such Keynesian rigidities that stood in the way of international market arbitrage and speculation. Global capital flows more than quadrupled between 2000 and 2007 and continued to grow even after the 2008 crisis. In 2019, gross cross-border capital flows accounted for over 20 percent of global GDP: a colossal river of money that can wreak havoc in countries experiencing sudden inflows and outflows.

These economic trends were accompanied by a progressive weakening of the system of social protection that was developed during the social-democratic era. In the post-war years, the capitalist West experienced a golden age of growth and rising productivity; demand was maintained by Keynesian-inspired government spending while wages continued to grow, driven up by strong unions. But this was not to last. Even in continental Europe, where social democracy remained dominant throughout the 1980s and 1990s, social-welfare provisions were reduced and made ever more conditional on job-seeking. The so-called “pact between labor and capital” of the post-war period, forged amid fear of the Soviet Union, which guaranteed rising living standards for workers was thus progressively dismantled.

The buzzword “globalization” served to give these different economic “reforms” the allure of a civilizational project. It was widely proclaimed in the Global North, and with not too dissimilar terms also in Global South countries with a far worse power relation vis-à-vis business actors, that globalization would not only render companies more efficient, and hence make consumers happier; it would also force governments to abandon unsustainable deficit-spending and tax-payer support for failing industries, providing an effective “external constraint” to deter irrational and wasteful economic practices. Resisting globalization would be framed as reactionary or nostalgic, given the momentum behind it. All politicians could do was to manage it, making national economies more export-friendly and globally competitive.

​Globalization in Shreds

Amid the dark atmosphere of the present, with societies caught in multiple systemic crises and globalization on the retreat, the wisdom of hindsight allows us to assess these shining promises with a cooler eye. It is true that globalization has had positive results in emerging economies. The inclusion of China and other developing countries in the world market has taken hundreds of millions of people out of rural poverty and created a sizeable middle class. However, the global growth record under neoliberalism (1979-2008) was considerably lower than that achieved under the Keynesianism that defined the Bretton Woods era (1946-71), with its fixed exchange rates and limited capital mobility.

Globalization has contributed to a spectacular increase in social inequality, magnified by the enormous scale on which the economy now operates. In 2020, it was documented that 2,153 billionaires had more wealth than the 4.6 billion people making up 60 percent of the world’s population. Between them, they controlled US$10 trillion, and Jeff Bezos, one of the world’s richest people, was projected to become the world’s first trillionaire in the 2030s. In fact, in America and Europe wages have long stagnated; the labor share in national income has been steadily decreasing since 1990, while the capital share has been growing and growing. In this context, globalization is no longer perceived as a force for prosperity, but as the prime source of many threats that have put society’s well-being in peril.

The 2008 financial deflagration caused a Great Recession that led to growing unemployment, stagnating wages and millions of people unable to pay their rent or mortgage. Public services were cut to the bone under the aegis of austerity, leading to infant poverty, and now to hundreds of thousands of unnecessary deaths due to unpreparedness in the face of the pandemic, amidst a landscape of devastated education and welfare services. From a macroeconomic perspective, the 2020 coronavirus crisis is far worse than the 2008 slump and more similar to the Great Depression of the 1930s. The fall in GDP in 2020 was just below 10 percent in OECD countries — something unseen since World War II. Neoliberal voices insist this is just a bump in the road, but it is clear that this crisis poses an existential challenge to globalization as we know it.

After the slowdown of global economic integration experienced in the 2010s, we are likely to see a phase of outright “deglobalization” — a global convulsion resulting in a lasting reduction in global economic interconnectedness: logistics chains are shortening, companies are reshoring and national economic interventions are multiplying. In the long run this trend could potentially lead to markets more closely focused on specific countries and their immediate geographical region, in order to ensure greater economic and environmental “resilience.”

The problems faced by globalization are paradoxically a product of its own success — a result of the fact that it has saturated the entire planet after pulling one country after another into its orbit. There are now no new markets left to open up. The garment factories of the Buriganga River in Bangladesh and the furniture factories around Ho Chi Minh City in Vietnam — some of the most recent sites of global integration — also mark the symbolic limit of neoliberal capitalism’s expansion. These Asian countries are among the last that have been integrated into the global market, and also those where the free market still continues to enjoy high popularity ratings. But they also stand in line to face some of the most devastating effects of capitalist globalization, including sea level rise, which is bound to hit these countries particularly hard in coming decades.

Furthermore, the growing geopolitical competition between China and the US, means that one fundamental condition of rampant economic globalization — the unrivaled power of the US — is now in question. Some investors hope that digital technologies will give a new lease of life to capitalism, opening an unexploited space in which it might thrive, an intensification of productivity and exploitation making up for the impossibility of further spatial extension.

Others look to the “lawless sea,” in which libertarian billionaires like Peter Thiel want to erect autonomous floating cities. Others still set their gaze towards the sky — focusing on the moon, Mars and other planets and asteroids that Tesla’s founder Elon Musk, among others, hopes to mine, and one day even colonize. In the meantime, though, global capital is in danger of asphyxiation in a world whose every recess it has colonized.

​Regression or internalization?

The present crisis of globalization has many echoes in Polanyi’s analysis and his discussion of the sense of “exposure” produced by capitalist rapacity. The push for externalization of neoliberal capitalism, with its geo-economic dislocations and the flattening of barriers and regulative institutions, has exposed workers and citizens to a number of economic flows against which they feel they have little control, which breeds a perception that might be described as “agoraphobia” — a fear of open spaces.

We live in an agoraphobic world because globalization is no longer perceived as a sea of opportunities that any sane citizen should tap into with enthusiasm, where the best will be prized for their efforts. Rather, it is increasingly regarded as something akin to a lawless and tempestuous ocean inhabited by monsters and ravaged by corsair ships that launch frequent attacks on workers and local communities. Global flows of finance, trade, services, information and people, celebrated by neoliberal economists as sources of economic prosperity, are now often seen as scourges to be defended against.

This sense of vulnerability also applies to other areas of our everyday experience, including social media, that have exposed us to public scrutiny, as well as to the unwitting extraction of our data, leading many to retreat from it therapeutically, either temporarily or for good. Even global travel, long celebrated as an opportunity for exploration and to develop business relationships, has now been reframed as a means of accelerating the spread of viruses, while global trade has spawned biosecurity threats brought by invasive non-native species.

Global capitalism has ushered in a redoubled externalization. Virtually all aspects of our everyday life, our cities and our social relationships are becoming commodified: spare rooms rented out on Airbnb; hours of work on sale on Amazon Turk or in service to food delivery companies; our every behavior on social media being tracked and repurposed as an opportunity to target our eyeballs. The sense of exposure that derives from this situation of market colonization of virtually all area of human activity, is now producing its own negative feedback effect, responding to globalization’s drive for externalization with an opposite push.

Over the course of the 2010s political scientists have often used the notion of “regression” or “backlash” to refer to these and similar phenomena. They have argued that the likes of Donald Trump represented a dangerous moment of inversion vis-à-vis a long trajectory of cultural progress under the aegis of neoliberal globalization. While it is true that the populist right involves an attempt to erode the partial victories that have been secured in terms of civil rights and cultural tolerance over the last decades, the idea of the present moment as being just a regression fails to capture the different facets of the present moment.

Rather than merely a movement back, we are also witnessing a movement inward at the moment, as befits a moment of implosion. It is a phase of internalization, to use Polanyi’s words; a moment which revolves around the attempt of re-embedding economic processes in social and political institutions. After the push of neoliberal globalization towards externalization as a means to increase profits and lower political control, now contemporary reality seems to be heading in the opposite direction.

State interventionism, long decried by neoliberals, is coming back with a vengeance amid massive spending and investment programs, and countries like the US look with a mixture of disdain and envy at the example of Chinese capitalism and the way it has outperformed Western neoliberal capitalism in many respects. Furthermore, experts are pointing to a partial re-nationalization and regionalization of the economic system. Faced with the supply chain crisis fueled by the COVID-19 emergency, countries have been trying to partly reshore their supply system so as to make it less prone to failure and risk.

This new post-global world presents many risks of closure and involution, as represented by the tribal and chauvinistic discourse of the populist right. Positively, however, it also offers an opportunity to reground economic processes, and find a better compromise between planetary economic integration and political and territorial control. For example, it is easier for workers to organize and demand higher salaries when the threat of relocation of manufacturing is not as strong as it was in the heydays of neoliberal globalization. A more bogged down capitalism, offers workers and social movements greater opportunities to exact concessions from power holders.

The left should come to terms with the change in political conditions, in order to leverage the new opportunities that have now opened up. The coming years are bound to be a moment of experimentation and invention, as these competing tendencies will increasingly come at loggerheads.