Globalization Retreats, Manufacturing Resurges
Suzanne Berger Institute Professor, MIT Department of Political Science
In a world advancing towards globalization, strong competitive pressures force companies to operate as if there were a single world market with the same prices for goods, capital, and labor. After decades in which the costs of distance declined and countries lowered the border-level barriers to trade, globalization has now reversed and global markets are fragmenting. There are three main causes for this shift: political unrest blamed on globalization; supply chain failures during COVID, which reinforced the value of resilience and domestic production; and above all, national security concerns with war in Europe and US-China tensions. New border-level barriers include tariffs, export controls, import controls, and immigration restrictions. In such a world each state tries to ensure the production of vital goods and services at home or in allies through “friend-sourcing.” Supporting domestic manufacturing ---which was dismissed as unimportant only a decade ago –has now become a key objective in all major countries.