The concept «globalization» can be understood in several ways. According to Spanish Professor García Díaz-Ambrona, we can understand the globalization in three ways. First, as «Hyperglobalization«. This view tackles the phenomenon as an extreme interdependence of the economic actors at a globalscale. This is the «golden strait jacket». In second place, globalization as a VUCA environment. It is, a world ruled by volatility, uncertainty, complexity and ambiguity. All those characteristics force policymakers to approach any issue through a holistic view and bearing in mind that the status quo is very liquid. Third, we can understand globalization as a synonymous of all the changes and challenges associated with our contemporary world. This last concept is about the need of the States and other actors to adapt to changes rapidly, accepting that foreign challenges not only affect to internal affairs but also became national challenges.
Globalization exists and data prove it. But has it been positive or negative? From a social and economic perspective, there is no doubt that globalization has brought more benefits than disadvantages. The number of poor people has been reduced worldwide, which has also helped to create and consolidate a new middle class in countries where it would previously beunthinkable, such as China, India or Singapore. Regardless of the considerations on this phenomenon: Is the current model sustainable?
Which are the limits of globalization?
In my opinion, there are mainly six kinds of limits that may be a brake onglobalization in the short term. Thus, exceeding those limits could generate more losers than winners. In this essay, I am trying to answer those questions, using in different times the stranding of the Ever Given in Suez Canal in March 2021 as a signal of the limits of globalization.
1. Environmental limit
The creation of a world common market means an increase in CO2 emissions and pollution. Poisoning the planet damages environmental and atmospheric resources, and this damage is probably irreversible. When we talk about the environmental limit, we mean that the pollution generated by globalization can be so significant that makes impossible to inhabit certainphysical spaces. For instance, in India in February 2021 pollution has already become the third cause of death in the country. In my opinion it is a paradox of a «meta-contamination» since it damages the places where we develop our lives, those sites in which we enjoy the goods and services that globalization itself offers us.
Taking Ever Given case as a reference, cargo ships are the main source of CO2, according to El Confidencial newspaper. Opening to markets increases the speed of trade but requires more cargo ships and mega ships sailing the oceans. This leads us to think that the backbone of globalization is the market, which in turn is based on consumer and B2B sector demands. According to the United Nations, in 2020 the 84.7% of the energy consumed on the planet had a fossil origin: coal, natural gas and oil. Asolution to the environmental limit could be that the main polluting subjects of the logistics processes adopt green energies. In fact, this is something that is already being done, but the transition is slow and sometimes it is not economically profitable.
2. Infrastructure and geographic limit
Currently there are only twenty ports in the world with the infrastructure capable of hosting mega ships, such as the Ever Given. Thirteen of them are in Southeast Asia and only three in Europe. Demand for these types of ships is expected to increase and their cargo capacity is going to increase as well. According to El Confidencial, since 1970 the cargo ships have quadrupled itscapacity. This leads us to conclude that the country that does not adapt its ports to the new requirements of globalization couldlose weight in world trade. The OECD has affirmed that mega ships are a boundary to the advance of globalization due to the adaptability of infrastructure that they require when they reach land.
On the other hand, the geography is also a limit for globalization. In fact, certain cargo ships and mega ships have difficulties to cross the Panama Canal which is an inscrutable axis of world trade. Globalization tends to be defined many times as the access to the great world market, but is the planet ready to host this great world market? The Ever Given case highlights that geographicconditions define our way of living and trading and points out a limit to globalization. Although there has been a commercial multiplication in last decades, the infrastructures remain unable to adapt efficiently to the market flows. Consequently, States that lack the necessary infrastructure and means risk being left aside.
3. Depletion of natural resources
As I mentioned previously, global energy consumption is currently based on fossil fuels. From my point of view, it isparadoxical that It has been 4,500 years since the prehistory but the human being continues depending on natural resources (minerals, the sun, the sea…). Indeed, we are so dependent on mother earth that we declare wars and create conflicts to gain access to them.
We have coined the concept of «energy dependence» for those States that need to import energy resources from other countries. However, the planet faces not only the pollution generated by fossil resources, but also their depletion. There are other non-renewable natural resources beyond fossils that are also in high demand, such as tantalum in the Democratic Republic of the Congo or phosphate in Morocco. Hyperglobalization means putting the mechanisms of exploitation of natural and energy resources to work to the maximum, so the depletion of non-renewable resources is an inscrutable path. Even the exploitation ofso-called “renewable” resources generates negative externalities. For example, the expulsion of indigenous groups in the mountains of Mexico to install wind parks or the eviction of four million farmers in China to build The Three Gorges Dam.
4. The extreme interdependence of markets and economic agents
I consider we live in a hyperglobalization system in terms of interdependence. According to Rodrik’s trilemma, currently most countries, including the most relevant on the international agenda, have renounced their state sovereignty to maximize economic efficiency. It is, having access to the common world market. Nevertheless, participating in this market requires a disadvantage in turn: fragility to external shocks. The 2008 financial crisis highlighted the interdependence of the financial sector as a result of globalization. States and large banking entities had accessed the large market, but they had also been integrated into a system in which they would not have weapons to defend themselves against crises. Besides, they were muchmore sensitive to crises and the lasts were more difficult to foresee. It is the maximum expression that we live in a VUCA world.
The value and supply chains have been globalized and distributed in several countries, which is one of the backbones of the interdependence. A change in regulation, a disruptive political manoeuvre, a supplier that fails in its work, may cause the mismatch of the final product. The stranding of the Ever Given showed the world the limit of interdependence that globalization is experiencing. How in two minutes a ship clogged a canal that had been built in ten years, paralyzing 10% of world traffic. According to Spanish Radio TV, more than one hundred ships were affected by this event and losses of more than 8 billion euros were generated per day. The effects of the stranding were immediate in other continent: hundreds of ships on their way to the Suez Canal had to dock in nearby ports after receiving the news about the event. This caused a collapse in the port of Los Angeles, and considerably increased the influx in the ports of Barcelona and Valencia, which lack the infrastructure to adequately receive such a high number of ships. Therefore, interdependence is a structural limit of globalization.
Not only the Ever Given case, but also the Covid-19 pandemic has underscored the severity of the negative effects of interdependence. Globalizing the production of essential goods such as health and medical equipment has damaged the health sector. It shows the fragility to which hyperglobalization is exposing us. Besides, this becomes even more serious if we consider the difficulty of reaching consensus between countries. Thus, global chains can be used by some States as weapons in a hybrid warfare. In conclusion, the interdependence of markets and economic agents is not only a visible limit, but also a structural one to the entire phenomenon of globalization.
5. The Deindustrialization of developed countries in favour of developing countries and its social consequences
«The Elephant» is a graph realized by Milanovic explaining the effects of globalization in different societies. In a nutshell, The Elephant shows that the phenomenon of globalization has reduced the number of poor people worldwide, creating a middle class in countries such as India and China. In detriment, it has worsened the labour and economic situation of the middle classesof developed countries due to the reduction of employment. This climate of hopelessness has favoured in Western countries the revival of a new way of thinking, ruling and legislating: populism. This is a global phenomenon already present in countries like Hungary, Spain, France, Germany, the United States, Brazil, Italy, Bolivia or Finland. As the ABC newspaper, «Populism is already a fundamental part of the political map of Europe». Populist leaders have been able to take advantage of the discontent generated by the negative effects of globalization on the middle and lower-middle classes in developed countries. They have grown thanks to them, and they promise to give those classes the solution to this hyperglobalization system that has taken away their welfare state.
In my opinion, this fifth limit of globalization pivots in one question: how long will endure the social discontent of middle and lower-middle classes caused by globalization? The relocation of industries and new markets from developed to developing countries is taking away jobs and changing the labour markets, mainly in America and Europe. That causes a social tension thathas hardly been seen in recent years. A society that is polarized and severely against certain aspects of the phenomenon of globalization. This rejection of globalization goes even further and permeates hatred in certain groups and turns them against cosmopolitanism and multiculturalism. The anger against globalization is shaken, and later collected by populism. These populist groups are already reaching power in certain countries and they are not simply political parties that are inoperative in the opposition. As we could see in the Brazil with Bolsonaro or in the USA with Trump, those groups have been voted indemocratic elections and are capable of legislating.
Therefore, the fifth limit is the industry relocation to developing countries, and how the social confrontation derived from thisthreatens the future of globalization.
6. The exacerbation of multiculturalism
The flexibilization of borders and the improvement of accessibility to means of transport has favoured the exchange of people and their cultures.
In the past we lived on a planet where we could clearly identify where on the planet each culture was anchored, but today this identification is more complex. There has been a global shift of paradigms. The values of the societies were rooted in the religions in which they had believed for centuries or even millennia, but the access to new cultures and the ease of moving around have changed the paradigms of each cultural region. Does it mean a limit to globalization? In my opinion It does, but it is not a structural limit, like the extreme interdependence. If cultural relativism were the only limit, it would not be able to brake globalization. Nevertheless, if we also take into account the rest of the existing limits, a great synergy formed by all of them may generate a high impact response in globalization.
Populism often handles the traditional values of each country or region as the basis for presumably achieving its political, economic, or own survival goals. The interaction of cosmopolitan values is a limit, but I think we must face it as a challenge, not as a boundary. Communication between populations and the exchange of cultures is positive, but we ought to be aware that have effects on the bases and values of societies. Their behaviour pattern and social schemes of a society are displaced for brand new ideas and it requires new paradigms that incorporate values to the demolished ones. The exacerbation of multiculturalism is a very important issue, as much as other concepts of influence practices. Culture has become another weapon to include into the arsenal of the hybrid warfare. Joseph Nye, a Professor at Harvard University, in his 1990 book «Bound to Lead: The Changing Nature of American Power«, was the first author to use the term «Soft Power.»
In conclusion, there is not any doubt that we are living in a VUCA world and we need to approach it with a global view. We cannot conceive the importance of the stranding of the Ever Green if do not we bear in mind, for instance, the commercial interdependence of the continents and the need of the ships to shorten its journey. In my opinion it is almost impossible totalk about a «deglobalization» process but the current limits of globalization are very heterogeneous and, at least, may be a brake in this phenomenon.
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El Confidencial. 2021. ¿Está el mundo preparado para los megabarcos como el Ever Given?. Disponible en: https://www.youtube.com/watch?v=v68TS0y_y5M (Consultado el 23/05/2021).
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Soy graduado en el máster en asuntos internacionales de la Universidad Pontificia Comillas (ICADE) y actualmente estoy cursando el máster de acceso a la abogacía en la Universidad de Oviedo. He participado en proyectos de las Clínicas Jurídicas de la Universidad de Luxemburgo, de Oviedo y de la Universidad Pontificia Comillas, y he realizado una beca de seis meses en la Secretaría General del BBVA en el 2022. Mis principales ámbitos profesionales de interés son el derecho internacional privado y el asesoramiento mercantil.