Globalism 2.0 – An Update
On Oct 4, 2018, VP Mike Pence went before the Hudson Institute to officially acknowledge the end of classic Globalism—the post-WWII system of economic integration characterized by minimal trade barriers and multilateralism. In his talk, he said the quiet part out loud: strategic competition between the US and China was fragmenting the old order and ushering in a return to exclusionary trade blocs and competing national economic interests.
This by no means signaled the end of global trade, but it altered the system to the extent that today’s Globalism 2.0 (G2) bears little resemblance to the old order. Nationalists, nativists, and isolationists, however, shouldn’t rush to declare victory just yet. International trade always finds a way. You may not care about globalism – but globalism cares about YOU.
International trade will continue. Our job is to figure out how to win at the new economy. Let’s get started.
End of the story first:
Globalism 2.0 is characterized by the following features:
1. Economic competition replaced cross-border cooperation. US-China competition is the main trade conflict right now, but there will certainly be new players involved in new conflicts. Globalism Classic pretended to be “win-win”. Globalism 2.0 is straight-up competitive.
2. Global supply chains are fragmenting to fit exclusionary trade blocs with strong barriers to entry.
3. Technology will be both weapon and battleground. Tech competition goes beyond restrictions on exports (embargoes) and punitive tariffs. Technical standards – who writes them and who administers them – will be a significant source of conflict. Tech lock-in will become a national issue.
4. Populism and nationalism outweigh trade efficiency and national self-interest – and will keep things ugly. Globalism 2.0 is more hostile and exclusionary than Globalism Classic – by design. “Wolf Warrior” diplomacy set a bad precedent, and the rhetoric of the Trump Administration didn’t help. Suspicion and hostility are baked into every negotiation and cross-border encounter.
5. Scarcity is back. Globalism Classic was about abundance. The resources, materials, and labor you needed existed somewhere in the world– all you had to do was find them. Globalism 2.0 starts by creating the most important shortage of all by throttling access to markets. We will also face more mundane shortages as well – including water, land, electricity, materials, know-how, and certain kinds of labor.
Post 2018 Developments
Globalism2.0 has gone through some significant developments since 2018, when I first started studying this.
1. The US is once again the unchallenged global economic leader. Remember all that talk about “the China Century”, the “rise of the global south”, and the unstoppable “China-Russia Partnership without Limits”? It has NOT come to pass. Comrade Xi has been busy engineering China’s new “Great Leap Forward”, and Russia’s economic plans are anyone’s guess – but they may very well include bread lines and heavy use of the Chinese Yuan.
2. Another Globalism 2.0 development has been the shift away from cost-cutting and boot-strapping entrepreneurialism. It’s a Fortune 500 MNC world again. Late state Globalism Classic (remember when Mitt Romney and Bain Consulting turned outsourcing into an industry in the early 90s?) was about cost savings, outsourcing, and contract manufacturing. You didn’t need a product, a factory, or an idea. You just needed to be able to market your product. Globalism 2.0 isn’t built for bootstrappers — it is expensive and only works at scale. (Think Tesla Gigafactory.)
The Characteristics of Globalism 2.0:
1. Geopolitical Competition has replaced multilateral cooperation.
Globalism Classic separated business from politics, no matter how rocky international relations got. International trade was seen as an end unto itself, and global pros were expected to separate international politics (and often security) from trade. The Hainan Incident in 2001 is a case in point. A US Navy reconnaissance plane was buzzed by a PLA fighter jet while on routine patrol in the South China Sea. The US plane had to land on China’s Hainan Island – but the Chinese plane crashed AND THE PILOT WAS KILLED. Trade relations were unaffected and continued to accelerate rapidly. This would not happen today.
Globalism 2.0 uses trade as an instrument of political competition. Not only is the US doing everything it can to disengage from China, but it is actively pressuring allies to join it in sanctioning and restricting trade with China. Large MNCs were quick to see the writing on the wall and began splitting their supply chains into two. The North American chain complies with sanctions and restrictions and focuses on local or regional content requirements. The China supply chain focuses on the China market. Disengagement seemed impossible in 2018, and many experts predicted that the trade conflict would be short-lived and unsuccessful for the US. Countries like Mexico, Vietnam, and India, however, quickly stepped in to provide additional capacity.
What this means to front-line decision-makers and analysts: Access to the North American and European trade blocs is a competitive advantage, and you should be looking for ways to maximize the benefits. First, optimize your firm’s position within the North American Trade bloc or Eurozone. Spoiler alert: compliance is a key competitive advantage. Firms that can streamline the import process will have a huge advantage over those that cannot.
2. Fragmented Global Supply Chains & US-China Relations
The idea of seamless global trade seemed like sound economics once, but today it’s considered borderline treasonous. The idea of a single open global market is not only outdated, but many now consider it offensive and dangerous – and kind of socialist.
When we first started talking about “decoupling” and “de-risking”, it was common for Old China Hands and incumbents to insist that it would be impossible to separate the US & Chinese economies. 6 years later, Mexico has overtaken China as the US’ major source of imports.
The US-China decoupling is driving a realignment of global supply chains, with firms diversifying away from China to mitigate risks. Mexico has become a key player, especially for US companies nearshoring production.
What this means to you: Our new broken global supply chain accelerates the switch from Just In Time logistics to Just In Case logistics to minimize logistics risks. For those of you selling to the US market, this means building a Mexican presence.
3. Technological Competition.
If Globalism Classic was about competing on cost, Globalism 2.0 is about competing for market dominance – and technology is both the weapon and the battleground. Basic technology and the commercial standards that make it useful have become competitive battlefields (CHIPs Act, restrictions on networked vehicles), and that is likely to intensify. If you think the EV market is competitive, wait for AI, Quantum, CRISPR, space travel, semiconductors, 6G, green energy, robotics, and automation. The competition will take two forms: applied science (products, systems) and commercial standards. At the end of the day, control of technical standards will be more significant.
What this means to you: Old-school global trade was about reducing costs and leveraging other people’s resources. The hot processes/technologies in Globalism Classic were drop shipping, contract manufacturing, and virtual companies (or virtual anything). Globalism 2.0 is about scaling expensive new technologies to dominate the market. Your value as a manager will be measured by your ability to stay current with and integrate new technologies into your company’s operations. Don’t overlook the “boring” technologies like smart warehousing and optimizing logistics.
4. Rise of Populism & Nationalism
In Globalism 2.0, hostility and suspicion of other countries is the starting point of every negotiation. Xenophobia is the new normal.
We used to rely on multilateral institutions like the UN, WTO, and World Bank to safeguard the international trade regime, but they are fading into irrelevance (largely unrelated to the shift in Globalism). Nowadays, big MNCs negotiate their deals directly with governments. The rest of us are stuck fighting a rearguard action to protect the rights and processes we hope to keep. A case in point is the USMCA review process in 2026. The USMCA has been a huge creator of value, and there are few people involved in international trade who don’t see it as one of the most successful trade agreements in history. Yet many are worried that the deal will not survive the upcoming review process (2026) intact, due to politics.
Populism and nationalism are increasingly influencing domestic and international policies, with protectionism and anti-globalization sentiment on the rise. The result will be new regulations, restrictions, inspections, and paperwork.
What this means to you: Populism and nationalism lead to increased compliance costs. Here in the US, members of Congress seem to be having a contest to see who can produce the most anti-China legislation – even if they don’t know how they will be interpreted or applied. A good way for front-line managers to add value within their firm is to stay current on new regulations and find ways to streamline the compliance process. Compliance is competitive in the new Globalism 2.0.
5. Resource Scarcity, Security, & Market Access – economic & non-economic barriers.
Globalism Classic assumed an endless pool of resources and services. Materials, capacity, and low-cost labor were all available – somewhere. The only challenge was finding them – and there was usually an entrepreneur for that. Globalism 2.0 is characterized by selective shortages. Established MNCs have gotten so good at securing their own supply chains that newcomers are left to scramble for excess capacity. In China that was no problem – but in Mexico and SE Asia, you may encounter bottlenecks, delays, and low quality.
Water, land, and electricity top the list of scarce physical resources. The biggest shortage companies will encounter in Globalism2.0, however, is markets – and that’s the point. Trade restrictions and tariffs are designed to force a market shortage onto actors from outside your bloc. China is said to be drowning in finished goods right now – particularly in EVs – but is being denied access to the markets it needs.
What this means to you: You need a strategy for developing a reliable stream of business intelligence. If you are operating in places like Mexico or Vietnam, there’s a good chance that you are getting your market information from salespeople – who tend to be less than forthcoming about shortages, bottlenecks, and potential problems. If you were active in China during Classic Globalism then you received a steady flow of top-notch reporting, analysis, and commentary. That doesn’t happen in Mexico, where investigative journalism is not a popular job (due to the danger). Invest the time and energy to developing a system for monitoring your company’s key variables. This will make you invaluable.
Final Word
Globalism 2.0 is more fragmented, competitive, and nationalistic than “Globalism Classic” – and it’s by design. As global trade breaks down into blocs, success depends on access. In Globalism Classic, just about everyone had access to the US market – including subsidized low-cost Chinese production.
The future of Globalism 2.0 is more restrictions and barriers. For incumbents that already have access to the North American Trade bloc or another profitable group, this not only gives you market access but also makes you a potentially high-value partner for outsiders.