Category: Globalization

Trump is attracting investment to the US – but at a huge cost to workers and the environment

benjaminselwynLeave a comment

Early in his second presidency, Donald Trump’s imposition of tariffs was met with widespread scepticism. Critics warned of economic decline and a global backlash. Yet the current landscape for the United States paints a more complex picture.

Less than a year into his second term in office, the White House claims that Trump is bringing manufacturing back to the US. It also proclaims that Trump has secured trillions of dollars of foreign direct investment (FDI) in 2025 alone. Other voices, however, estimate that these commitments will amount to just a fraction of that.

So what’s the true picture? Much of this FDI is going into the US’s burgeoning semiconductor sector. This inward investment is indeed a stark reversal from the post-1991 trend of outbound American capital, when US firms raced to set up factories in countries where it was cheaper to manufacture.

And the surge is bolstered by commitments of US$300 billion (£225 billion) in capital investment commitments from tech giants like Amazon, Microsoft, Alphabet and Meta. These investments reflect both Trump’s aggressive diplomacy and his close relationship with Silicon Valley’s tech elite.

Despite concerns about a tech bubble, these investments signal a deepening state-private partnership, and a reorientation of priorities with a view to coming out on top in the global AI race.

Central to this strategy is the reshaping of global supply chains. At a conference of venture capitalists in March, US vice-president J.D. Vance criticised US firms for their reliance on cheap overseas labour. He warned of the risks of losing the US’s technological advantage, especially to China.

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Geopolitics isn’t killing global supply chains—it’s powering them

benjaminselwynLeave a comment

Global supply chains (GSCs) – which account for around 70 percent of international trade – are often referred to as the backbone of the world economy. As tensions rise between major powers—especially the United States and China – many commentators fear for the future of GSC’s and hence the world economy. Such projections overlook how geopolitical rivalries have stimulated the development of advanced technologies, which in turn enabled the rise and ongoing transformation of global supply chains.

A close look at the US-led development of technology during the Cold War shows that it enabled the formation and expansion of many contemporary global supply chains. China in turn has made efforts to catch-up to US technological development, and in response, the US has been deploying strategies to curb China’s tech rise amid a new geopolitical rivalry.

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What You Exported Matters: Persistence in Productive Capabilities across Two Eras of Globalization

isabellamweber2 Comments
This blog was first published on the Rebuilding Macroeconomics website.

By Isabella Weber, Tom Westland and Maya McCollum

“The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep…” This was how John Maynard Keynes described the globalisation of the Belle Epoque before the First World War. London, and by extension Britain, was at the centre of the world economy: not just a global manufacturing powerhouse, but also the ruler of a vast colonial domain upon which the sun famously never set. The global division of labour was stark: Britain and other Western nations largely produced manufactured goods. But they also exported a whole range of temperate agricultural goods like wheat, beef and barley. Elsewhere in the European colonial empires, products like cotton, cocoa and coffee were exported, often at very low prices and sometimes with forced labour, to sate a growing demand in the global economic core for tropical luxuries. 

More than a century has passed since World War I heralded the collapse of this world order. Today, another globalization wave that has shaped the world since the 1980s is ebbing. The question we ask in our ESRC Rebuilding Macroeconomics project What Drives Specialisation? A Century of Global Export Patterns is simple: what is the legacy of the First Globalization of the late nineteenth and early twentieth centuries on the economic fortunes of countries during the Second Globalization? Or in other words, to what extent have countries’ positions in the international economic order been persistent across the two globalizations with some trapped at the bottom and others floating on top?

To answer this question, we have assembled a large new database of global commodity exports from 1897-1906. We exploit the fact that this period was the high point of colonial trade statistics and use a large variety of primary sources in five languages. To the best of our knowledge, ours is the most ambitious census of world trade for the previous globalization to date. This allows us to investigate the long-term wealth of nations in ways that aren’t possible with GDP data. The latter is sparse and unreliable for large parts of the world before the Second World War.

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Big ships were created to avoid relying on the Suez Canal. Ironically, a big ship blocked it.

Laleh KhaliliLeave a comment

The 2021 blockage is another reminder of the fragility and lack of accountability in global shipping.

On the morning of March 23, a gargantuan freighter laden with containers, heading north to the Mediterranean, ran aground in the Suez Canal. The weather was blustery, with sandy gusts blowing across the canal. A strong gust and the hydrodynamics of shallow waters pushed the merchant vessel Ever Given into the east bank of the canal.

It was immediately clear that the bulbous nose at the prow of the ship had lodged in the canal’s bank, and the 1,300-foot body of the ship lay diagonally across the waterway, blocking traffic. Ironically, as my new book explains, the most dramatic leaps in ship sizes were precipitated by Suez Canal politics in the 1950s and 1960s. Decades later, it’s the vast size of the ship that makes refloating it so difficult.

By Friday, more than 160 ships were anchored in the Mediterranean and the Red seas. Egyptian officials appeared confident the canal could reopen within days, while salvage engineers cautioned that freeing the stuck ship might take weeks. Oil prices jumped up by a few dollars on Wednesday; and insurance claims on freight delays have begun to trickle in.

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Separated under the Same Roof: The Revived Relationships of State-Market Institutions. 

Lorena Lombardozzi1 Comment

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When looking at the way contemporary global value chains/global production networks (GVCs/GPNs) and the articulations of globalised capital have been studied, it is clearly visible that the hegemonic power of Multinational Corporations (MNCs) has monopolised the empirical and theoretical analysis. Indeed, their ability to maintain control over the technological, financial and commercial flows through private-led governance has impacted most of the industrial development and underdevelopment of the Global South. Such footloose private operations have often caused undesired consequences such as eroded environmental standards, low wages and scrapped social protection rights. Governments have joined in a race to the bottom on fiscal and labour deregulations in order to attract foreign direct investment in exchange for low and semi-skilled jobs, resulting in very low fiscal revenue, low productivity, balance of payment imbalances and poor social outcomes. 

The underpinning theory was that countries should follow their comparative advantages and let the market determine prices of labour (costs) and goods in order to be competitive in the world market and maximise returns. Yet, such losing game has been criticised since the start by heterodox development economists who widely denounced how theories and policies of development forgot the role of the state in history and in the present. In other words, public institutions have always played a key role not only in the quantitative making of capitalist accumulation, but also in its qualitative distributional and developmental outcomes. 

Building upon the heritage of such scholarship, and in view of multiple and overwhelming ‘market failures’ in the global South and beyond, a new wave of Marxist-institutionalist inter-disciplinary literature spanning from Geography to International Economics and Finance has been trying to untangle the potential synergies between the public and the private domains by connecting the GVCs/GPNs and Developmental State approach. 

In this debate, it has been emphasised that the state should be seen as a facilitator (i.e. assisting firms in smoothing market transactions); a regulator (combined with distributor to mitigate inequality and negative market externalities); a buyer (i.e. public procurement); a producer (i.e. state-owned enterprises) and a financer as a result of state-capital reconfigurations through sovereign wealth funds and development banks. Therefore, such functions should be foregrounded in analyses of development, because they are key to understanding developmental sources and processes within GVCs. Read More »

RMB internationalisation as an extension of Chinese state capitalism

keanfanlim1 Comment

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Why has the RMB gone global?

More than a decade has passed since the launch of what is now widely known as ‘RMB internationalisation’, or the strategic attempt by the Communist Party of China (CPC) to expand the global reach and usage of the Chinese currency, the renminbi (RMB). Such is the scale and ambition of this strategy, some policymakers and scholars have proclaimed RMB internationalisation as a form of reserve currency succession – as a challenge to the US dollar as the world’s preferred currency for market exchange. This development is especially intriguing given how the financial system within China remains relatively insulated in spite of market oriented reforms since 1978. Could RMB internationalisation truly be about global currency supremacy when financial flows in and through China continue to be highly scrutinised?Read More »

BLOG SERIES: State capitalism(s) – Interrogating the ‘return’ of the state in development

Developing EconomicsLeave a comment

6a00d83452719d69e2014e86055c29970d-800wi.jpgFrom Quantitative Easing to neo-mercantilist policies, the renewal of industrial policy, the multiplication of sovereign wealth funds and marketized state-owned enterprises, increased state participation in global value chains and global networks of corporate ownership, the state seems to be ‘back in business’ everywhere. This raises a series of questions:

  • Are we witnessing a shift to state-led development? A return of ‘state capitalism’ under a globalised and financialized form? Are these processes challenging market ascendance and/or neoliberalism as a global development regime?
  • Has there been a transformation of the developmental state and of the logics and instruments of ‘catch-up’ development? New tools of state intervention for industrial and innovation policy?
  • What are the implications of the resurgence of ‘state-capital hybrids’ (state-sponsored investment funds, state-owned enterprises, development banks, etc.) as key actors in development? Are these transforming the global development finance architecture? What is the relationship between, on the one hand, state-owned, state-controlled, and state-directed capital, and on the other hand, private capital?
  • What are the wider geopolitical and geo-economic shifts in which the rise of the new state capitalism is embedded? What is new about the recent ‘wave’ of state capitalism across the global economy? What are the strategic, structural/epochal, and contingent drivers of its emergence?
  • What is the progressive potential of these developments, both in the global South and in the global North? What are the limits to the new state capitalism, and the various forms of resistance to it?

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State Capitalism Redux?

Ilias ALAMI3 Comments

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By Ilias Alami and Adam Dixon

Recent transformations in the global economy have sparked renewed interest in the role of the state in capital accumulation. Such transformations include a ‘return’ to various forms of state-led development across the global South since the early 2000s (in China, Russia, and other large emerging economies), extensive state intervention following the 2008 global financial crisis in the global North, and the multiplication of various forms of state-capital entanglements such as sovereign wealth funds (SWFs) and state-owned enterprises (SOEs). For instance, the number of SWFs increased from 50 to 92 between 2005 and 2017, while assets under management grew to over $7.5 trillion worth of assets, which is more than hedge funds and private equity firms combined. According to a recent study, ‘SOEs generate approximately one tenth of world gross domestic product and represent approximately 20% of global equity market value’. SOEs now dwarf even the largest privately-owned transnational corporations, with PetroChina currently leading the list with a market value of more than $1 trillion. Three of the top five companies in the 2018 Fortune Global 500 are Chinese SOEs (State Grid, Sinopec Group, and China National Petroleum Corp). Significantly, these state-capital hybrids have also become increasingly integrated into transnational circuits of capital, including global networks of production, trade, finance, infrastructure and corporate ownership. Does this renewed state activism – and its remarkably outward orientation – indicate a changing role of the state in capital accumulation and the emergence of new political geographies of capital?Read More »