Globalization, understood as a political and economic project based on the supremacy of the global market with respect to states and citizens, is currently experiencing a profound crisis. The world appears increasingly fragmented and marked by new forms of conflict – both military and trade – that testify to the breakdown of the old order. The United States are among the principal drivers of this change. The country that led the process of trade integration, from which it has drawn ample benefits – especially in the technology and financial sectors – is today being swept by social malaise. This has given rise to a profound political reaction that has ushered in a new historical era.
But this is not just an American experience. At the global level, a succession of crises and the inadequacy of the responses adopted have undermined the consensus around the economic order that has been under construction since the 1990s. So people are again speaking about new global rules that can support the transition from the crisis of free trade to the construction of a more balanced fair trade.
To address this challenge the tensions being experienced by today’s capitalism must be examined. On the one hand, the paradigm of a “technocapitalism” fueled by data and artificial intelligence is dominant; and on the other, the application of advanced technologies to manufacturing could pave the way for a reindustrialization process in the mature economies. In this scenario, the defense and infrastructure sectors play a central role, thanks not least to the return of public intervention in the economy. In an era marked by disintegration, the role of states remains crucial, especially in building a new global cooperation architecture that can meet the challenges of disorder and inequality.
Reindustrialization plans are also central with respect to the decoupling of China and the West: a scenario that sees the raising of barriers and the reduction of interdependencies but which clashes with the reality of what have become deeply integrated supply chains. Against this background the construction of a new model that is more flexible and better adapted to global uncertainty could be based on a variable geometry for international trade: a framework of minimum rules that are applicable to all, accompanied by regional or multilateral agreements between willing countries. With the United States holding a less and less central position in the multilateral system, the opportunity beckons for Europe to play a more important role.
If it is to grasp this opportunity, Europe must examine its own economic model. In the comparison with two currently more competitive systems – those of the United States and China – Europe’s limitations emerge most clearly, starting with the excessive regulation imposed by the European Union. This produces rigidities in the labor market and low investment in innovation.
And it is in innovation that the key to recovering competitiveness lies, with the focus not just on applied science but also on basic science, which has always been the fundamental driver of progress. The same focus must be applied to one of the pillars of European development: the green transition, which needs to be tackled with less red tape and more innovative investments. There is no lack of scientific expertise and the opportunities to stimulate research are numerous. What is needed are policies to attract capital and talent – a challenge made all the more urgent by the ageing of the population.
Another critical point is Europe’s dependence on exports: a model based on the trade surplus has led to a reduction in domestic investment and today can be seen as a limitation in an increasingly protectionist world. A strategic reset is required: to strengthen domestic demand, retain capital, and encourage investment. Only in this way will it be possible to provide greater strategic autonomy in a turbulent geopolitical landscape.
However, the debate on the future of capitalism does not just involve the western democracies. In a world experiencing the United States’ progressive disengagement from global leadership, China remains a central player. Its system does not fit the traditional categories: it is at one and the same time a developing country, a systemic actor and a strategic rival of the West. Its capital allocation decisions, both internal and external, have significant global implications. China occupies an intermediate position between statism and the market, combining public control and the capacity to innovate, especially in high technology sectors.
To understand current trends it would be useful to review the short-, medium- and long-term historical cycles. The Chinese model can be defined as a “state-controlled technological capitalism” in which advanced production and innovation capacity are also viewed from a military and strategic perspective. It is a peculiar model: strong state intervention, a dynamic private sector, and a weak welfare system. China operates on a much bigger scale than other Asian countries such as Japan, South Korea or Taiwan. Unlike them, it influences global markets, maintains a pervasive control and has not embarked on democratization processes. Domestic consumption, which is still limited with respect to GDP, reflects the country’s continuing focus on production, which it views as a competitive advantage in its rivalry with the United States.
The Chinese economy has changed dramatically with globalization and has played a decisive role in creating the current global imbalances. For this reason too, in an environment characterised by the crisis of the neoliberal paradigm, the return of the state as an economic player, and the need for a new international framework, Beijing cannot be ignored in the construction of a more inclusive and stable world order.