The writer is an FT contributing editor and writes the Chartbook newsletter
As 2023 unfolds, the world of economic analysis and commentary is marked by a disjuncture between discourse and data. On the one hand you have feverish talk of deglobalisation and decoupling. While on the other the statistics show an inertial continuity in trade and investment patterns.
There are at least three ways to reconcile this tension.
Option one: you can cleave to the old religion that economics always wins. In which case you dismiss the talk of deglobalisation as journalistic hype. This debunking posture has the air of empiricism and common sense about it. But to hold this view you have, in fact, to believe many things, chief among them being that the Biden administration does not mean what it says.
If you take Washington seriously it is hard to avoid the conclusion that whatever the statistics tell us about the current state of affairs, the US is bent on revising the world economic system. It intends to reprioritise domestic production and to face up to the historic challenge posed by China’s rise. If there is one thing that America’s divided polity can agree on, it is the necessity to confront China.
Adopting this view leads you to option two: rather than business as usual, we are on the cusp of a new historical epoch, a new cold war. And this is not the cold war of the detente era. In Washington these days even coexistence with CCP-led China is up for debate.
Taken at face value this is a scenario of high-stakes confrontation that overshadows every other priority. In recent weeks there have been efforts to de-escalate — first the G20 meeting between Xi and Biden, then China’s dovish appearance at Davos. But these moves do not presage a return to business as usual.
Rather than reconciliation and reconvergence, the Biden team holds out something far weirder. They do not want to stop China’s economic development, they insist, just to put a ceiling on every area of technology that might challenge American pre-eminence.
How that is supposed to work is anyone’s guess. But in its sheer otherworldliness it points to interpretive option number three. We are witnessing not a reversal of globalisation, or full-scale decoupling, but a continuation of some aspects of familiar pattern, just on fundamentally different premises.
A future world economy might be made up of a patchwork of antagonistic coalitions divided by more or less visible data curtains. States that have the resources will launch national policies such as the US Inflation Reduction Act, which blends green industrialisation and “buy American”, with an anti-China stance and a push for friendly supply chains. That the IRA has caused a ruckus with Europe and South Korea is not a bug. It is a feature.
Perhaps a harbinger of the future is the crazy quilt of Covid vaccines: the US driving Operation Warp Speed; the Europeans trying to broker a complex bargain that includes exports to the rest of the world; India as a manufacturing hub; China pursuing an inadequate national solution; and a third of the world’s population excluded altogether.
You might shrug and ask whether this mélange of geopolitics, economic nationalism and the occasional pandemic is really new. Is it not just “history” as we have always known it — unpredictable and red in tooth and claw? But, in saying that you give the game away. The promise of globalisation, as it was understood from the 1990s onwards, was precisely that it would usher in a new era. So to admit not only that a slew of unexpected and diverse shocks is disrupting the world economy, but that they are multiplying and becoming more intense, is, in fact, to admit a fundamental disappointment of expectations.
Whereas the advocates of business as usual declare that it is still “the economy, stupid” and the new cold warriors rally around the banner of “democracy versus autocracy”, the third position faces the reality of confusion, the kind of confusion registered by a term like “polycrisis”.
Polycrisis has its critics, and at Davos 2023 it risked becoming something of a cliché. But as a catchword it serves three purposes. It registers the unfamiliar diversity of the shocks that are assailing what had previously seemed a settled trajectory of global development. It insists that this coincidence of shocks is not accidental but cumulative and endogenous. And, by its currency, it marks the moment at which bullish self-confidence about our ability to decipher either the future or recent history has begun to seem at the same time facile and passé.