The Globalization Myth

For decades, globalization was conceived as one of the main drivers of positive transformation in the international system. The prevailing belief among academics and policymakers was that the intensification of flows of goods, services, capital, and people would promote economic growth and greater political stability. Interdependence among states, by creating shared interests, would reduce incentives for conflict and consolidate a more cooperative international order. In this sense, globalization would integrate the world and make it more peaceful.

This view found empirical support in the last decades of the 20th century and the beginning of the 21st. Emerging economies began to grow rapidly, driven by exports and integration into global value chains. The expansion of international trade contributed to the formation of middle classes in various countries, while multinational companies expanded their global presence. At first glance, it seemed that the world was moving, albeit unevenly, toward economic and political convergence.

The distributive failure

Despite aggregate gains, globalization revealed a fragility in its inability to distribute benefits equitably within societies themselves, especially in advanced economies. Although increased productive efficiency and the expansion of international trade raised overall wealth levels, these gains were highly concentrated. Labor-intensive sectors, particularly traditional manufacturing, became the main losers in this process, as international competition—especially from lower-cost countries—pressured companies to cut costs, automate processes, or relocate operations abroad. This movement eliminated jobs and disrupted entire regions whose economic and social identity was rooted in industry.

The impact was therefore economic, social, and political. Unlike previous economic transitions, in which new sectors quickly absorbed displaced labor, reabsorption in these cases was slow, incomplete, and uneven. Many workers did not possess the qualifications required by new sectors, often more technology- and knowledge-intensive, resulting in trajectories marked by underemployment, informality, or permanent exit from the labor market. Meanwhile, the benefits of globalization manifested in a diffuse and often invisible way in everyday life. Consumers gained access to a wider variety of products at lower prices, and companies increased their margins and global competitiveness. However, these gains were not perceived with the same intensity as concentrated losses. Costs are localized and visible; benefits are dispersed. This asymmetry contributed to the construction of a negative narrative around globalization, even though, in aggregate terms, it generated net gains.

The absence of effective public policies amplified this imbalance. In many developed countries, there was a gradual weakening of social safety nets precisely when they became most necessary. Job retraining programs were insufficient or poorly targeted, tax systems failed to redistribute gains meaningfully, and regional development policies did not succeed in revitalizing areas affected by deindustrialization. As a result, globalization became associated with a broader sense of abandonment by the state.

This mismatch between economic efficiency and social legitimacy made globalization politically vulnerable. Complex problems—such as the impact of automation, the financialization of the economy, or tax policies that favored income concentration—were often reduced to a single visible cause: external competition. In this context, political leaders and movements began to instrumentalize this discontent. Globalization was framed as an external, almost predatory force responsible for weakening national economies and threatening state sovereignty. This narrative found fertile ground in societies marked by economic insecurity and institutional distrust. By offering simple explanations for complex problems, it enabled the political mobilization of broad segments of the population.

This politicization had direct consequences for economic policymaking. Protectionist measures—such as tariffs, restrictions on foreign investment, and incentives for domestic production—gained political legitimacy and came to be presented as mechanisms of national defense. Economic policy, in this context, began to incorporate more explicitly considerations of identity, sovereignty, and security. However, the previous paradigm—based on the idea that international trade generates mutual gains and beneficial interdependence—was progressively replaced by a more conflictual view. Globalization ceased to be seen as a positive-sum game, in which everyone can win, and came to be interpreted as a zero-sum game, in which one party’s gain necessarily comes at the expense of another.

This shift in perception is crucial, as it alters policies, expectations, and the behavior of economic and political actors. When globalization is perceived as exclusionary and unfair, its legitimacy erodes, opening space for responses that, while attempting to correct its failures, may end up deepening economic and political fragmentation. In this sense, the crisis of globalization is both material and narrative, as it stems both from its concrete effects and from how these effects are interpreted and mobilized in public debate.

Rivalry between the United States and China

The transformation of globalization can be observed in an emblematic way in the relationship between the United States and China. In the early decades of the 21st century, economic integration between the two countries was seen as mutually beneficial. China’s entry into the global economy, following its accession to the WTO, intensified trade and deepened financial ties between the two powers. American companies expanded their production chains into Chinese territory, taking advantage of lower costs, while China consolidated its position as the world’s main manufacturing platform. In this context, interdependence was interpreted as a stabilizing mechanism. The greater the level of integration, the lower the incentive for conflict.

However, this relationship began to reveal deep tensions. The increase in the U.S. trade deficit, the loss of industrial jobs, and Chinese economic practices—such as state subsidies, joint venture requirements, and restrictions on foreign companies—fueled perceptions of unfair competition. The so-called “China shock” became a symbol of the costs of globalization for American workers, especially in industrial regions affected by offshoring. Interdependence, once seen as an asset, gradually came to be perceived as a source of vulnerability.

This shift gained concrete form during the administrations of Donald Trump. The United States launched a trade war by imposing tariffs on hundreds of billions of dollars’ worth of Chinese products, arguing the need to correct unfair practices and reduce the trade deficit. Beijing responded immediately with retaliatory tariffs on American goods, initiating a cycle of escalation that broke with the previous logic of trade liberalization. Bilateral trade, once a symbol of cooperation, began to be used as an instrument of political pressure. At the same time, rivalry expanded into the technological domain. The U.S. government imposed severe restrictions on Huawei, prohibiting American companies from supplying essential components and software. The justification was based on national security concerns, reflecting fears that technological infrastructure could be used for strategic purposes by the Chinese government.

Under Xi Jinping’s leadership, China responded by intensifying its strategy of economic and technological autonomy. Massive investments in domestic innovation and industrial policies aimed at self-sufficiency moved to the center of the economic agenda. At the same time, tensions escalated with U.S. controls on the export of advanced semiconductors and manufacturing equipment, restricting China’s access to critical technologies. In response, Beijing began to leverage its dominant position in strategic supply chains—such as rare earths—as a bargaining tool, highlighting the growing instrumentalization of interdependence.

This environment of distrust also affected multinational corporations. Giants such as Apple began diversifying their supply chains, shifting part of their production to countries like India and Vietnam as a strategy to reduce geopolitical risk. Meanwhile, Chinese companies sought new routes for international integration, investing in countries with greater access to the U.S. market, such as Mexico and Southeast Asian economies. The logic of pure efficiency, based on cost, was replaced by a hybrid logic in which security and political alignment play a central role.

Gradually, economic interdependence came to be interpreted as a strategic risk. Globalization now appears as a field of strategic competition, reflecting the transition from a model of integration to one of fragmentation and rivalry.

The fragmentation of globalization

Far from disappearing, globalization has entered a new phase characterized by fragmentation. Unlike the previous model, primarily oriented toward economic efficiency, the new configuration is heavily influenced by geopolitical considerations. Business decisions and public policies increasingly prioritize security, resilience, and alignment. This shift reflects a reinterpretation of vulnerabilities exposed in recent decades, from financial crises to supply chain disruptions and, above all, the intensification of rivalry between major powers such as the United States and China under Xi Jinping.

In this context, practices such as reshoring and friend-shoring have gained relevance. Companies seek to relocate their production chains, bringing them closer to their home countries or political allies, even if this implies higher costs. Governments, in turn, partially abandon the classical liberal stance and adopt more assertive industrial policies. The logic is to reduce dependencies considered critical, especially in sensitive sectors such as energy, defense, and advanced technology.

However, this reconfiguration does not occur uniformly or without costs. The fragmentation of global supply chains implies duplication of production structures, loss of economies of scale, and increased final costs of goods and services. This can result in less efficient and more expensive supply chains, affecting consumers and reducing global economic dynamism. Moreover, fragmentation introduces new forms of instability. By replacing broad interdependence with more restricted and politically aligned networks, the international system tends to divide into blocs. This dynamic may reduce cooperation among countries and increase the likelihood of trade and technological disputes. Paradoxically, while attempting to mitigate specific risks—such as dependence on a single supplier or country—this new form of globalization may amplify systemic risks by weakening the mechanisms that previously encouraged cooperation and conflict moderation.

Economic cooperation, which once acted as a restraint on political rivalries, loses part of its moderating capacity. The result is a more volatile international system, in which crises can spread more rapidly and where the predictability of economic relations is significantly reduced. The implications of this transformation are particularly concerning for developing countries. Historically, integration into global value chains has been one of the main drivers of industrialization and growth. Asian countries, for example, rapidly increased their income levels by inserting themselves into global production networks, initially in lower value-added segments and gradually moving toward more sophisticated activities. This model depended on a relatively open international environment, in which trade barriers were reduced and investment flowed more freely.

With the fragmentation of globalization, this path becomes more uncertain. The reorganization of production chains based on geopolitical alignment may exclude countries not integrated into relevant strategic blocs. Additionally, industrial policies adopted by advanced economies—often with strong state support—may hinder competition from developing countries, which have fewer resources to subsidize their productive sectors. Trade barriers, regulatory requirements, and political criteria begin to limit market access, reducing opportunities for international integration.

The potential result is the crystallization of a new global hierarchy, in which opportunities for economic advancement become more restricted. Instead of an open system that allows relative mobility among countries, fragmentation may consolidate structural divisions, perpetuating inequalities and hindering convergence trajectories. This new phase of globalization, while responding to legitimate concerns about security and resilience, carries the risk of weakening one of the main historical mechanisms of economic development for much of the world.

Reform

Given this scenario of fragmentation, geopolitical tensions, and loss of social legitimacy, the response should not be the abandonment of globalization, but rather its profound reform. The experience of recent decades demonstrates that, despite its aggregate benefits, globalization failed to distribute its gains evenly and to create institutional mechanisms capable of sustaining itself in the long term. Reforming it is therefore not only desirable but necessary to prevent its distortions from undermining its positive potential.

At the domestic level, the starting point is to recognize that open markets and international integration generate both winners and losers. The absence of effective policies to address this imbalance was one of the main factors that eroded political support for globalization. In this sense, it is essential to strengthen social safety nets, expand investments in education and professional retraining, and develop public policies that facilitate the transition of workers between sectors. The goal is to create conditions that allow individuals to reintegrate into new economic dynamics, especially in sectors that are intensive in technology and knowledge.

In addition, more progressive fiscal and tax policies can play a central role in reducing the inequalities exacerbated by globalization. In many countries, the concentration of income and wealth has been intensified by regressive tax structures and insufficient regulation of financial markets. Correcting these distortions is essential both to promote social justice and to restore the political legitimacy of an open economic system.

At the international level, reforming globalization requires the revitalization of multilateral institutions, whose credibility and effectiveness have been progressively eroded. Organizations such as the WTO must recover their capacity to arbitrate disputes and ensure compliance with rules in a consistent and impartial manner. This includes the willingness to confront unfair practices by both major powers and smaller economies, avoiding perceptions of selectivity or politicization. Similarly, international financial institutions such as the IMF and the World Bank must adapt their governance structures to better reflect the growing weight of emerging economies. Without adequate representation, such institutions tend to lose legitimacy and, consequently, their capacity for coordination.

Another central element of this reform is the need to establish clearer and more balanced rules for issues that have gained strategic relevance, such as technology, data flows, investment, and industrial policy. The lack of consensus in these areas has contributed to the escalation of disputes between countries, as evidenced in tensions between Donald Trump and Xi Jinping. Creating mechanisms of cooperation that reconcile economic interests with security concerns will be one of the greatest challenges of the next phase of globalization.

The sustainability of globalization will depend on its ability to balance three fundamental dimensions: economic efficiency, social cohesion, and political stability. Ignoring any one of these tends to generate imbalances that, as observed, can compromise the entire system.

Conclusion

The current international system is not less globalized, but rather globalized in a different way—more selective, more politicized, and more conditioned by strategic interests. Flows of trade, capital, and technology remain intense, but are increasingly filtered by geopolitical criteria, reflecting an international order in the process of reconfiguration.

The contemporary challenge, therefore, is to determine on what basis globalization can operate in a more balanced and sustainable way. This requires recognizing both its benefits and its shortcomings, avoiding simplistic narratives that treat it exclusively as either a solution or a problem. If properly managed, globalization can still significantly contribute to economic growth, innovation, and international cooperation. Otherwise, it risks becoming yet another vector of division in a system already strained by power disputes and recurring crises.

In this context, the future of globalization remains open. It will be shaped by political, institutional, and strategic choices. The way governments, companies, and societies respond to current challenges—from internal inequalities to rivalries between major powers—will determine whether the next phase of globalization will be capable of recovering its integrative potential or whether it will consolidate a dynamic of lasting fragmentation.

Between integration and conflict, the world finds itself at an inflection point. The outcome of this trajectory will depend on the collective ability to reform, rather than abandon, one of the most transformative processes of contemporary history.

References

K. O’Neil, Shannon . “It’s Not Deglobalization, It’s Regionalization.” Yale University Press, 2023, yalebooks.yale.edu/2023/10/26/its-not-deglobalization-its-regionalization/.

---. “The Globalization Myth.” Council on Foreign Relations, 2022, www.cfr.org/articles/globalization-myth.

Manak, Inu, et al. “A Year after “Liberation Day,” Experts Review the Costs of Trump’s Tariffs.” Council on Foreign Relations, 2026, www.cfr.org/articles/a-year-after-liberation-day-experts-review-the-costs-of-trumps-tariffs.

Prasad, Eswar. “How Geopolitics Overran Globalization.” Foreign Affairs, 2026, www.foreignaffairs.com/united-states/how-geopolitics-overran-globalization.

João Pedro Nascimento holds a Bachelor’s degree in International Relations and a postgraduate qualification in Public Policy. He has experience in business internationalization, expansion into foreign markets, international negotiations, and strategic partnership management.

He is a consultant in foreign policy and international economics, as well as a partner in a financial advisory firm, connecting companies and investors to global opportunities through scenario analysis, risk assessment, and strategic structuring.

He is the founder of RI Talks, an independent platform for analysis and debate on national and international affairs..