A Roadmap To Globalization's End

The global system is primed for fragmentation, but chaos will reign before order is restored.

Globalization is a complex system. It is complex because it relies on numerous independent actors across geographies to act in accordance to a predetermined set of norms and rules. Without this level of coordination, the system falls apart.

Creating a complex system takes a tremendous amount of energy from a hegemon. It is the hegemon’s responsibility for not only bringing each player to the table, but also for establishing and maintaining the norms and rules that keep the system functioning. Consequently, there is a cost to hegemony which is sometimes referred to as “imperial overstretch.” Eventually, the costs of maintaining hegemony and the order aren’t equal to the benefits received.

Striking a balance between costs and benefits is always a challenge for complex systems. Take for instance infrastructure. In a simple society that is developing, one dollar invested in roads may reap thousands of dollars in benefits. Compare this to NYC where subway construction costs $3.5 billion per mile. The more complex the system, the higher the cost of maintenance.

The tragedy of complex systems is there eventually comes a point in which each additional unit of complexity yields less benefits. People tend to look at the sunk cost of an investment as well as the previous returns and immediately want to double down. The problem is past performance is never a guarantee of future results. You gotta know when to hold ‘em and when to fold ‘em.

When the marginal costs of complexity outweighs the marginal benefits, a system tries to find a new equilibrium by devolving and fragmenting. A central authority may be able to temporarily delay this devolution, but it ironically makes the inevitable adjustment far more drastic. That’s because when the hegemon puts more resources into preserving a failing systems, there is less of a backstop for the system’s new equilibrium.

While it is clear that the era of the U.S. as the uncontested global hegemon is coming to an end, it is less clear what this new equilibrium will look like. However, applying network theory to map out the nodes of globalization provides useful insights into the coming fragmentation.

As with any complex system, globalization contains several key nodes that serve as anchors. The most important node is the U.S. while the other two core nodes are the European Union and China. Auxiliary nodes such as Japan, Brazil, India and other G-20 members provide support and resiliency to the system. The more concentrated a system, the less resilient it is. Therein lies the problem for globalization.

Globalization is a highly complex, highly concentrated, highly interdependent, highly interconnected system that is overly optimized for efficiency, I.E., profit. Maximizing economic gains is what matters most for the order. This results in a system that lacks resiliency. Furthermore, since the U.S., EU, and China comprise an astonishing 60% of global GDP, these actors have outsized impacts on the future of globalization.

The end of the U.S.’ unipolar moment combined with the looming challenges of deficits and demographics in the EU and China means the core nodes of globalization are almost certain to fail. The status quo cannot hold. Globalization will devolve.

The end of globalization is by no means the catalyst for a systems collapse akin to the end of the Bronze Age Civilizations or the Western Roman Empire. This view ignores the drastic changes in technology which have altered the baseline possibilities for commerce. Indeed, the past 150 years have bore witness to greater changes in technology and living standards than the other 6,000 years of recorded history put together. Three technologies in particular have altered the course of history: the internal combustion engine, the microchip, and the shipping container.

The internal combustion engine fundamentally changed the human experience. Suddenly, humanity could move materials in quantities and at speeds that would seem magical to our forefathers. What might take a dozen teams of oxen weeks to move could now be hauled by a single truck in the matter of hours. Commerce across vast distances became possible.

Meanwhile, the microchip granted humanity the ability to instantly access treasure troves of information that surpass even the esteemed Library of Alexandria. What's more is the same technology enabled humans from across the world to truly to communicate with and learn from one another in real time. Digital technology enabled humanity to coordinate its efforts at scales once unimaginable.

Finally, the shipping container created a standard format for goods to be speedily and cheaply shipped across long distances. Standardization improved efficiency and efficiency reduced complexity. A simple metal box generated a revolution of shipping and logistics which fueled the growth of global commerce and trade.

Put together, the internal combustion engine, the microchip, and the shipping container permanently changed both the possibilities and expectations for standards of living. Consequently, much of what we label “globalization” or “globalism” isn’t due to a particular political order but to advances in technology.

That’s not to say that political decisions don’t matter, of course they do. What this means is that technological progress plays a greater role in the human existence than many geopolitical theorists care to recognize. After all, technological progress isn’t something that can be cleanly forecasted, especially when you start conducting forecasts a decade out or more. At that point, it become pure speculation and science fiction.

The reality of technological progress is the end of globalization doesn’t mean a total collapse of global living standards. The world today is too interconnected for that to happen. Instead, the more likely scenario is for trade to become less globalization and more regionalized. A decline in the global order means a rise in regional orders. Power abhors a vacuum. Systems will seek a new equilibrium. The great challenge facing humanity is that this transition from globalization to regionalization takes time, and typically times of transition are punctuated by acute chaos.

We are now entering a period of geopolitical chaos and uncertainty.

No one quite knows what the 2020s will bring. Nevertheless, there is a sense of ominous foreboding that permeates the public discourse. The future appears murky, and out of the murky fog comes a whisper which gnaws relentlessly at one's conscience. The reckoning.

What do I mean by the reckoning?

The reckoning is not a moment nor a series of moments, it is the spirit of the age. It is the time in which everything humanity has taken for granted for decades is fundamentally challenged. Ideas regarding government, economics, society, and even religion will be questioned in ways once thought unimaginable. Old institutions will either reform or die as new institutions rise to take their place. The way we interact with one another and process events will consequently change dramatically. The next decade promises to be an era of unprecedented flux.

As globalization unravels, people will be searching for answers. They will be seeking stability in the midst of chaos. While order will inevitably be reestablished, there are several questions plaguing everyone’s mind: How painful will the shift from globalization to regionalization be? How big is the gap between the current and future system equilibrium? What does this new order look like?

That is the debate currently consuming geopolitics. It is a debate worth further exploration.