Globalization, deglobalization, reglobalization: learn about 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, i.e. the process of reversing globalization.

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

Globalization has shaped a world marked by the integration of local economies into a kind of world market economy, so that any company can produce and market its goods and services anywhere in the world. This brought with it familiar words (such as delocalization), 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 win-win order, making any product or service manufactured in another part of the world available to anyone at a relatively low cost. Companies could move their production units to countries that offer more competitive labor costs and countries would compete to pass laws that are more favorable to business activity. This would stimulate migratory 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. Compulsory feedlots have made companies realize the need to reduce the number of links in supply chains. The shortage of basic necessities, such as medicines and masks during 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 for cybersecurity as access points to corporate and state networks multiplied, not always properly protected. Suddenly, the idea of the free movement of people didn't seem so attractive. 

2020 marked the beginning of deglobalization, i.e. the process of reversing globalization. Over the last 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 opting to move their factories closer to their places of origin (a process known as reshoring or onshoring). Added to this is 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 world's political and economic balance.

Deglobalization or reglobalization?

The main casualty of this deglobalization process has been China, once known as “the factory of the world”. The winners are countries like Mexico in the Americas, Poland in Europe, and Vietnam in Southeast Asia. For these reasons, some prefer to talk about reglobalization rather than deglobalization: This is not a process of reversal, but a reconfiguration of international relations with political, economic, commercial, social and cultural implications. 

Behind this revision of the world balance are motives such as risk mitigation, but also the protection of own resources (be they tangible or intangible, human or corporate assets) and, let's not forget, it has a strongly inflationary component, bringing industrial processes back to countries with higher labor costs. 

After the decade of 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 upon us. How long this trend will last, what impact it will have on the stock markets in the long term, or what it might change in the course of events are questions that have yet to be answered, but which investors should watch carefully.