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Europe in Times of Deglobalization by Peter A.G. van Bergeijk

The current phase of deglobalization is a challenge for social sciences. Peter van Bergeijk discusses what we can learn from previous deglobalizations. What do the periods of the Great Depression and Great Recession currently imply for Europe?


Both the “Roaring Twenties” and the “Roaring 2000s” were characterized by ‘globality’, a combination of belief in openness and optimism about our future. With open and global markets, capital freely moved around the globe. The speed and level of global change was unprecedented. New products changed our daily life, new economies emerged, and life expectancy improved, creating hope while strengthening confidence. The pre-crises years were characterized by an increasing share of internationally traded products, as illustrated in Figure 1.

pic 1

Source: van Bergeijk 2019.

However, this changed dramatically with the Great Depression and the Great Recession. First and foremost, there was the impact of the financial crisis that gave rise to the idea of secular stagnation. Openness as we can see in Figure 1 entered a downward phase for more than a decade.  In the international political arena, the erosion of the hegemon’s (in the 1930s the British Empire and nowadays the United States) position associated with the rise of previously peripheral countries in the global trade system was an important element. Countries in the periphery grew faster than the advanced economies and competition from the previous-outs created doubt about the future rules and norms of the world trading and investment system.  Figure 2 illustrates how the position of the hegemon is being handed over roughly at the time when deglobalization made its mark. In the 1930s, we see that an eminent change at the top takes place as the United States undercut economic power of the British Empire. Today we witness how the emergence of China challenges the position of the United States.

pic 2

* UK before 1950 covers the British Empire. Calculations based on Bolt et al. 2018.


On the other hand, significant differences could be noted between the deglobalization of the 1930s and 2010s. Both in a North–South and South–South context, trade in the Interbellum period relied on specialization based on comparative advantage, and not on intra-industry trade organized in international value chains which is an increasingly important characteristic of today’s trade. Protectionism is often seen as an important reason for trade destruction in the period after the breakout of the world trade collapse during the Great Depression, but much less so for the Great Recession and its immediate aftermath. Trade-wise, the most important difference is perhaps the fact that our deglobalization experience started from a much higher intensity of globalization and that according to current projections, a fall to the level of the 1930s is not likely.


The very existence of the European Union is a fundamental difference to the 1930s when the European continent was fragmented, confrontational and bellicose. While Europe is missing the military might that is often seen as a necessary condition for world leadership, there could be a possible scenario in which the European Continent has to act as the hegemon of last resort. In this scenario, neither the US nor China may assume the role of the world leader, either by choice or forced by internal and external circumstances. A hot trade war between the United States and China could fit into this scenario, for example, because trade is diverted to Europe. In this scenario, China refocuses its internationalization strategy and reorients from serving export markets to serving domestic markets. The US strengthens its isolationist policies and withdraws from a number of international agreements.

If that happens, European cohesion will increase as the costs of leaving the European Union become very clear to the member states (and their populations) after the dust settles on Brexit. So, while a particular weak spot of Europe currently is the lacklustre support of its basic philosophy amongst the large former communist countries (Poland, Hungary, Romania) and even among increasing parts of the Dutch population, coherence of the European Union may actually increase, especially if the British exit is as disastrous as many predict. With China and the US being unwilling or unable to provide global economic leadership, the world would turn towards Europe.

Indeed, the European Union was built on the idea of the Liberal Peace and can be expected to further democratization and the multilateral trade system. Maintaining good relationships with China, Japan and the United States will be crucial, however, for the extent to which progress can be made with the European external agenda.

Bolt, J., R. Inklaar, H. de Jong and J. Luiten van Zanden, 2018, ‘Rebasing ‘Maddison’: new income comparisons and the shape of long-run economic development’, GDC Research Memorandum 174, Groningen University: Groningen.
Peter A.G. van Bergeijk, Deglobalization 2.0, Edward Elgar, 2019.

This article is a shortened version L’Europe à l’ère de la démondialisation that appeared in French on Telos. 

In 2018, Bliss Blog featured a series on deglobalisation. Articles of this series can be read here, here and here.

About the author:

pag van bergeijk

Peter van Bergeijk (www.petervanbergeijk.org) is Professor of International Economics and Macroeconomics at the ISS.

The New World “Order”: Brexit, Trump and the Developing Countries by Peter A.G. van Bergeijk

Deglobalisation is not the mirror image of globalisation. The losers of globalisation will thus not be the winners of deglobalisation. Indeed, the vulnerable and poor will be the big losers of deglobalisation both in the Global North and Global South.

In the world economy, the guards are changing: we see the emergence of China as the major trading economy of the world continue and at the same time the crumbling of the economic power of the United States of America. Handing over world economic leadership is always a painful process, and it is certainly not a new phenomenon. The rise of the British Empire ended the period of Dutch hegemony. After the Second World War, the USA became global leader, and now we see China emerging on top of many economic rankings. Both before and during these phases of geo-economic transformation, similar processes occurred that reflected shifts in the costs and benefits of hegemony.[1]


A non-contested hegemon has significant market power and can appropriate a substantial part of the benefits of the rules and regulations of the world order. These benefits enable the hegemon to finance the costs of world order maintenance. However, when an emerging economic power contests the incumbent, the balance of costs and benefits shifts to the detriment of the hegemon. It also becomes apparent that the division of the benefits of the world order are not proportional to the costs. Clearly, US actions currently are being fed by popular sentiments (and also feed these sentiments!), but a rational explanation of what we see happening is certainly not beside the point. Modelling exercises of a great diversity of trade disturbances and trade wars show that the United States hurts itself, but that China has to pay a higher price (Figure 1).

Figure 1

Source: J. Bollen and H. Rojas-Romagosa, 2018, ‘Trade wars: Economic impacts of US tariff increases and retaliations. An international perspective’, CPB Netherlands Bureau for Economic Analysis, The Hague.

Making America the Greatest Again can be done in two ways: either by putting more effort into improving the US economy, or by trying to hurt China more. In the current context, the outcome of the second option is more certain, especially in the short run. Economists therefore cannot but conclude that this form of neomercantilism for the United States in a political sense is quite effective. A trade war that involves the United States, China, and the European Union (the blue bars in figure 1) consistently finds that the negative impact in other regions is always larger than for the United States. For an all-out trade war of the US with all advanced economies (the orange bars in Figure 1), a somewhat different picture emerges, but still China is hurt most.

It is important to recognise that the current context extends well beyond trade disturbances and that this is part of a new long downward phase. Indeed, an important empirical finding is that Make America Great Again and Brexit should be seen as symptoms rather than causes of deglobalisation: already long before the elections and referendum, a significant break could be observed in the pace and direction of internationalisation of leading democratically oriented economies.[2] It is not obvious that a change can be expected with respect to these trends in the near future. Indeed, policy uncertainty is on a clearly upward trend and has entered uncharted territory (Figure 2). This increase in uncertainty already has a negative impact on investment decisions of firms and consumers. Certainly, deglobalisation has a much broader palette than the trade disturbances that presently make the headlines.

Figure 2 Global policy uncertainty (monthly data 2000-2018)


Source: S. J. Davis, 2016. “An Index of Global Economic Policy Uncertainty,” Macroeconomic Review, October, http://www.policyuncertainty.com

The impact of deglobalisation goes further and also includes development cooperation and other international flows. Attacks on global institutions and multilateral agreements is an essential element of neomercantilism and its impact is felt all around the globe. A comprehensive deglobalisation scenario of the International Futures Model shows that the long-run losses are large and always negative (Table 1). The impact in the US in this scenario is relatively limited, and strong losses in income level appear on other continents. A recent study of the German Institute for Development has analysed the impact of Brexit and finds that losses outside the UK are important. In particular, the impact on the least developing countries is significant.[3]

Table 1 Estimated impact of deglobalisation on per capita income in 2035


Source: Hillebrand, E. E., 2010, ‘Deglobalization scenarios: who wins? Who loses?’ Global Economy Journal 10 (2) article 3 available at: http://www.ifsprev.du.edu/assets/documents/hilldeglob.pdf

The European Union can make a difference here. It is clear that developing countries are not part of the conflict between the big powers and that their plight is due to collateral damage. The European Union has always supported trade as a means to achieve development. It should step up efforts to facilitate trade and help the least-developed countries to divert their trade so as to make up for the losses caused by the deglobalisationists.

[1] Z. Olekseyuk and I.O. Rodarte How Brexit Affects Least Developed Countries, Deutsches Institut für Entwicklungspolitik, Briefing Paper 2/2019

[2] P.A.G. van Bergeijk, On the brink of deglobalization … again, Cambridge Journal of Regions, Economy and Society 11, 59–72. In the same vein China’s support for the multilateral trade and investment system did not come unexpectedly.

[3] P.A.G. van Bergeijk, Deglobalization 2.0: Trade and openness during the Great Depression and the Great Recession, Edward Elgar Cheltenham 2019. https://www.e-elgar.com/shop/deglobalization-2-0 https://www.e-elgar.com/shop/deglobalization-2-0

In 2018, Bliss Blog featured a series on deglobalisation. Articles of this series can be read here, here and here.

About the author:

pag van bergeijk

Peter van Bergeijk (www.petervanbergeijk.org) is Professor of International Economics and Macroeconomics at the ISS.