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Globalization of business and the rise of State neo-liberalism


Human desire to trade is old as mankind but the costs of trade has always been the main constraint for Centuries. While the first industrial revolution of 19th Century took place because the cost of moving goods abroad lowered, giving rise to the “great divergence” (production of goods was located away from consumers, seeking comparative advantages), the fall in the costs of communication during the 4th Industrial revolution of the 21st Century is giving us the “great convergence” where international trade can happen at lower cost without moving people around.


Globalization of business

The drivers of the 21st Century globalization have been politics and technology. Big firms took (cost) advantage of the possibility of moving around the globe goods and people by outsourcing production stages in developing worlds (China). The consequence was that we have seen an uneven economic development between Nations in the last 20-25 years (de-industrializationin the West of the world and industrialization in the East). The consequence of all that was an increased gdp per capita in China while it stagnated in real term in the West. This caused unemployment and lower salaries in the West. Under these lenses we can better understand the rise of populism(right) and the cancel culture(left). These are rising around the globe principally because of an increased wealth gap between people in the developed world. Those who were able to recognize and take advantage of the changes in the mutated social economic and geopolitical condition became wealthier (a small 1%) while the majority became the losers of today’s western world.


Global power shift :social political and economic consequences

During the last 20 years China de facto attracted capital mainly because of the cheap labour costs and its huge population. It became the manufacturing base of the world. It is now ready to challenge America thanks to the lead in AI automation and digital technologies of the future. It is slowly emerging a New Cold War between US and China with China intention to become the economic and political leader of the 21st Century.

Tech innovation is going to be the battleground and the cause of future international conflicts between the 2 Nations in the years to come. There will be huge social economic and political consequences.

Economic consequences : The Disruption of established supply chains will bring some of the production back to the developed countries(De-globalization)

Political consequences: Countries will have to pick sides and will also have to find new resources to invest in digital transformation to achieve digital sovereignty. In fact, investments' cost will be higher because of trade barriers that will be erected (see Huawei /5g battle)

Social consequences: the competitive advantage (cost) of emerging economies over mature economies could vanish if /when machines start winning the race over humans (produce more output with less cost|).This would bring production closer to the consumers which means shorter supply chain reinforcing the de globalization phase.


State neo-liberalism vs classical market liberalism

The globalization trilemma is based on the History ‘s assumption that liberal Democracy, National sovereignty and economic integration are mutually incompatible

It was perhaps understandable why writers like Fukuyama could talk of an "end of history" and the victory of liberalism back in 1989. But this is no longer credible. Indeed, with the Western world experiencing depressed growth rates, governments are unwilling to put global growth ahead of national interests.

In the last four decades, China has been the engine of the world economy gradually upgrading its position in the world. Since the 2008 global financial crisis its foreign policy has moved from a “keeping a low profile” approach to one of "striving for achievement" challenging US supremacy. One of the ways It is seeking to achieve this is through the "Belt and Road Initiative "(BRI), also known as the 21st-century Silk Road with the goal to strengthen trade routes and supply chains and to ensure sustainable flows of goods and services. BRI essentially aims to promote strategic international economic partnership with the goal of reinvigorating global economic growth.

BRI is built on the idea that State is the most responsible actor for bringing about prosperity, while the market is the main instrument through which this can be achieved. This is something different from the western "market classical liberalism" and has been called "State neoliberalism”. This is built on the idea of the supremacy of the nation-state but while it is bringing back the State in the economy, it aims to safeguard and advance global markets and free trade. China is obviously trying to acquire soft power by creating a vision of how relations between Nations should develop in this Century but the idea of a strong State with political stability has called into question Democratic values.


Classical liberalism's ideas instead(the political ideology of US and the West) are committed to individualism, liberty, and equal rights. They believe these goals requires a free economy with minimal Government interference. Economic liberalism is based on private property in the means of production and opposing to government intervention in the economy, e.g. opposing to public ownership and opposing the regulation of industries

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