Charting Globalization’s Turn to Slowbalization After Global Financial Crisis

IMF Blog, February 8, 2023

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Canonical URL: Charting Globalization’s Turn to Slowbalization After Global Financial Crisis

Authors: Shekhar Aiyar, Anna Ilyina
Date: February 8, 2023
Main point: Using the trade openness metric—the sum of exports and imports of all economies relative to global gross domestic product—globalization plateaued in the decade and a half since the global financial crisis, an era often referred to as “slowbalization.”
Contextual issues highlighted: geoeconomic fragmentation, trade fragmentation, and technological decoupling.

Definition preserved from source: "the sum of exports and imports of all economies relative to global gross domestic product."
Finding: Over a century and a half of data, the main phases of globalization are visible using this metric.
Observation: The Chart of the Week shows that globalization plateaued in the decade and a half since the global financial crisis.

Industrialization era
- Dominant economies: Argentina, Australia, Canada, Europe, and the United States.
- Mechanism: Facilitated by the gold standard.
- Drivers: Transportation advances that lowered trade costs and boosted trade volumes.

Interwar era
- Outcome: Dramatic reversal of globalization.
- Causes: International conflicts and the rise of protectionism.
- Features: Trade became regionalized amid trade barriers and the breakdown of the gold standard into currency blocs.
- Note: The League of Nations pushed for multilateral cooperation but did not prevent regionalization.

Bretton Woods era
- Configuration: United States emerged as the dominant economic power with the dollar, then pegged to gold, underpinning a system with other exchange rates pegged to the greenback.
- Drivers: Post-war recovery and trade liberalization spurred rapid expansion in Europe, Japan, and developing economies.
- Policy shifts: Many countries relaxed capital controls.
- End of era trigger: Expansionary US fiscal and monetary policy driven by social and military spending made the system unsustainable; the United States ended dollar-gold convertibility in the early 1970s and many countries switched to floating exchange rates.

Liberalization era
- Drivers: Gradual removal of trade barriers in China and other large emerging market economies.
- Institutional change: World Trade Organization established in 1995 as a multilateral overseer of trade agreements, negotiations and dispute settlement.
- Effects: Liberalization accounted for most of the increase in trade; cross-border capital flows surged, increasing complexity and interconnectedness of the global financial system.
- Additional note: Integration of the former Soviet bloc occurred during this era.

“Slowbalization” era (post-global financial crisis)
- Timeframe description from source: "the decade and a half since the global financial crisis."
- Characteristics: Prolonged slowdown in the pace of trade reform and weakening political support for open trade amid rising geopolitical tensions.

The narrative links shifts in trade openness to changing configurations of economic and financial powers as well as evolving rules and mechanisms for economic and financial ties between countries.
The post-2008 plateau is framed as a distinct era with policy-relevant implications for how policymakers should view geoeconomic fragmentation and trade policy going forward.

Source: Charting Globalization’s Turn to Slowbalization After Global Financial Crisis (IMF blog entry, February 8, 2023).