Globalization, deglobalization, reglobalization: find the differences

January 2025 by Ana Carrisso

Globalization has created a regime marked by the integration of local economies into a kind of world market economy. However, in 2020, with the outbreak of the COVID-19 pandemic, deglobalization began, that is, the process of reversing globalization.

Since the end of the Cold War and until the arrival of COVID, globalization has been a constant in our lives. It is a megatrend that encompasses the economy, politics, culture, trade, industry, technological development and much more, having profoundly transformed international relations over the last 50 years. 

Globalization has created a regime marked by the integration of local economies into a kind of world market economy, so that any company can produce and sell its goods and services anywhere in the world. This brought with it familiar words – such as relocation –, gave a boost to large multinational companies, encouraged the free movement of capital and laid the foundations for the consumer society we still know today. 

The COVID-19 pandemic and the beginning of deglobalization

In theory, it was a new order that benefited everyone, making any product or service manufactured elsewhere in the world available to anyone at a relatively low cost. Companies could move their production facilities to countries that offered more competitive labor costs, and countries would compete to pass laws that were more favorable to business activity. This would stimulate migration flows, encourage international trade, and thus contribute to global economic growth. 

But the outbreak of the pandemic in March 2020 exposed the vulnerabilities of this new order. Mandatory lockdowns have made companies realize the need to reduce the number of links in supply chains. The shortage of essential goods, such as medicines or masks in the most acute phase of the epidemic, made governments aware of the need to retain strategic industries on national territory. Working from home was encouraged, posing new challenges to cybersecurity, as access points to corporate and state networks multiplied, which were not always properly protected. Suddenly, the idea of free movement of people didn't seem so attractive. 

2020 marked the beginning of deglobalization, that is, the process of reversing globalization. Over the past five years, we have seen the widespread acceptance of protectionist policies (such as Donald Trump's famous trade war in his first term), greater restrictions on the movement of people (see Brexit) and the shortening of supply chains, with many companies choosing to move their factories closer to their places of origin (a process known as reshoring or onshoring). Added to this was the sharp increase in geopolitical risk with events such as the war in Ukraine or the conflict between Israel and Palestine, which have also had an impact on the global political and economic balance.

Deglobalization or reglobalization?

The main victim of this deglobalization process was China, once known as “the factory of the world”. The winners are countries like Mexico in America, Poland in Europe, or Vietnam in Southeast Asia. For these reasons, some people prefer to talk about reglobalization rather than deglobalization: It is not a process of inversion, but of reconfiguring international relations with political, economic, commercial, social and cultural implications. 

Behind this review of the global balance are reasons such as risk mitigation, but also the protection of own resources (whether tangible or intangible assets, human or corporate) and, let us not forget, it has a strongly inflationary component, causing industrial processes to return to countries with higher labor costs. 

After the decade 2008-2020, marked by zero interest rates and deflation in the Western world, a more protectionist, regionalist world with structurally higher prices seems to be before us. How long this trend will last, what impact it will have on stock markets in the long term or what could change in the course of events are questions that still have no answer, but which investors should observe closely and carefully.