Blame my younger sons for introducing me to BTS. Until this month, I had managed to maintain my middle-aged ignorance of South Korea’s greatest gift to popular music.
BTS, for those of you who don’t have tweenagers, are a seven-member South Korean boy band formed in Seoul in 2010. Originally, BTS stood for Bangtan Sonyeondan, which translates as “Bulletproof Boy Scouts” — not a bad name for a band, except that Boy Scouts in my day did not wear earrings, makeup and androgynous clothing.
Like the internationally successful South Korean television series “Squid Game,” BTS are the epitome of cultural globalization. In 2020, they became the first band simultaneously to reach number one on both the Billboard Hot 100 and the Billboard Global 200 with their single “Dynamite.” To hear (or better, see) “Dynamite” is to understand that there can be no reversing the fusion of Western and Asian popular culture. The sound owes a debt to Motown. But the look is more Seoul than soul.
With my sons’ BTS playlist engraved on my musical memory, I was in completely the wrong mood for the World Economic Forum in Davos, Switzerland, two weeks ago. This year’s theme was “cooperation in a fragmented world.” To set the tone, its annual “Global Risk Report” warned darkly that:
Concurrent shocks, deeply interconnected risks and eroding resilience are giving rise to the risk of polycrises — where disparate crises interact such that the overall impact far exceeds the sum of each part. Eroding geopolitical cooperation will have ripple effects across the global risks landscape over the medium term, including contributing to a potential polycrisis of interrelated environmental, geopolitical and socioeconomic risks.
My first assignment at Davos was to discuss the dire prospect of deglobalization on a panel with Columbia’s Adam Tooze, who is a big believer that we are in a polycrisis. The WEF briefing documents set the scene. “The ties that bind the world economy together have frayed in recent years,” I read on my flight to Zurich. “Has globalization reached the end of the line?”
The idea that globalization has passed its peak is not a new one. I have been hearing it since soon after the global financial crisis back in 2009. The argument goes something like this. Globalization reached a zenith in around 2007. After that, seven forces tended to dial it back. First, simple economic convergence: the gap between North American and Chinese wages was bound to narrow over time, reducing what were once overwhelming arguments in favor of “offshoring” manufacturing.
Second, technological change was also bound to reduce the arguments for elongated supply chains by enabling (for example) local 3D printing of components. Third, the global financial crisis came as a shock to the system of cross-border capital flows, exposing the vulnerability of Scandinavian pension funds and German savings banks to the dubious alchemy that had transformed Americans’ subprime mortgages into overrated collateralized debt obligations.
Force four was the populist, protectionist, nativist backlash against globalization that propelled “Leave” to victory in the 2016 Brexit referendum and Donald Trump to victory in the presidential election that same year. Fifth was the descent of Sino-American relations from the “win-win” era of what I called “Chimerica” into something much more like Cold War II.
Then came the Covid-19 pandemic — conclusive proof that globalization could literally be bad for your health. Finally, there was last year’s Russian invasion of Ukraine and the sanctions subsequently designed to exclude Russia from at least the Western-controlled parts of the global economy.
Eyeballing the data for a class I taught at Harvard two years ago, I had no trouble finding charts to illustrate this compelling narrative of deglobalization.
Since the financial crisis, global trade has flatlined relative to industrial production and declined relative to world GDP. Global capital flows (measured by current account balances) have not regained their 2007 peak (much less their 1917 peak). The US current account deficit has shrunk relative to its high of 6% of GDP in the third quarter of 2006.
The foreign-born share of the US population was close to regaining its 1890 peak, but its growth slowed after 2012. Globally, migration peaked circa 2007. I noted that globalization in cultural terms had peaked in 2012, the year that foreign films’ share of the Chinese box office exceeded that of Chinese films.
And yet I have come to see that there are other and more compelling ways to measure globalization — and I don’t mean only the rising South Korean share of streaming music and video around the world.
Consider the US-Chinese bilateral trade deficit. That accounted for just under a third (32%) of the total US trade deficit in 2007. It reached a peak of 48% in 2015. But even in 2021 — after all the shocks to globalization listed above apart from the war in Ukraine — the share was still 32%, the same as in 2007.
Apple, I have read in many articles, is seeking to reduce its dependence on China when it comes to manufacturing its key hardware products. In reality, the proportion of AirPods, iPads, iPhones and Macs assembled in China has gone down only slightly, from 100% in 2020 to between 85% and 95%.
We have been led to believe that Western sanctions have cut the Russian economy off from Europe. In reality, the value of Russian exports to the European Union was higher in 2022 than in 2021. Only seven EU countries spent less on Russian goods last year than the year before.
As for cultural globalization, BTS is part of a wider trend toward Asian fusion. TikTok, a Chinese platform, now has over 1.53 billion users, close to a third of the world’s online population.
In an illuminating series of articles published last year, the economist Richard Baldwin (an American who teaches at the Graduate Institute in Geneva) debunked what he called “the peak globalization myth.”
First, as Baldwin noted, while it may be argued that the globalization of trade in goods has peaked, cross-border trade in services continues to grow relative to output.
Secondly, the deglobalization of trade in goods is in some ways a statistical illusion. About 60% of the decline in the ratio of goods trade to GDP after the financial crisis was due to the steep drop in the price of mined commodities and fuels after 2010. The rest was due to a fall in the ratio of manufactures to GDP. (To be precise, the share of mining and fuels trade in world GDP dropped from 11% in 2008 to 6% in 2020, while the share of manufacturing trade in world GDP dropped from 33% to 30%.)
Thirdly, it is true that the overall complexity of supply chains has fallen as a result of reshoring or “friendshoring” and technological change, but this reduction in the globalization of manufacturing has as its obverse an increase in the globalization of services. In Baldwin’s words, “the future of globalization is not goods but services — in particular, intermediate services,” that is, services that are not sold to consumers but used as intermediate inputs in the production of other goods and services. He continues: “The divergence between the growth of services versus goods happened because digital technology opened the door to trade in intermediate services, and high-income countries have few or no barriers to this sort of export.”
Rumors of the death of globalization have therefore been exaggerated. As Martin Wolf put it in the Financial Times, drawing on new data from the McKinsey Global Institute, cross-border “flows of services, international students, and intellectual property grew about twice as fast as trade in goods in 2010-19,” while “data flows grew at nearly 50% annually.”
“Crucially,” Wolf noted, “most flows have proved robust during recent disruptions: flows of goods recovered quite strongly after the pandemic.” That was why Americans during the lockdown months of 2020 found it so easy to order exercise equipment — or, for that matter, home-brewing equipment — that was made in China.
If you’re still not persuaded that globalization had proved remarkably resilient, I refer you to Brad Setser of the Council on Foreign Relations. As he noted in a Twitter thread prompted by our Davos panel, China’s exports as a share of the GDP of its trading partners reached a new high last year.
“To be a bit polemical,” Setser wrote, “I would argue that the world will start deglobalizing when American pharmaceutical firms stop taking drugs developed in the US, and then entering into R&D cost shares and other tax arrangements with subsidiaries located in offshore financial centers with favorable tax rates, and then producing patent-protected drugs in Ireland, Switzerland, Singapore and Belgium for sale back to the US, with the majority of their global profits, of course, booked outside the US even though the majority of their sales are in the US.”
It will start deglobalizing, “when the world’s most profitable firm [Apple] no longer produces the bulk of its consumer products in a few cities in China, using chips produced mostly in Taiwan using intellectual property often licensed from a US firms’ tax subsidiary in, say, Singapore, and then notionally sells its consumer goods to its subsidiary in Ireland before re-exporting those goods globally — and, of course, booking the majority of its global profit outside both the US and China.”
And it will start deglobalizing “when Ireland is not the United States’ biggest export market for a range of services — from software to research and development — and when Caribbean tax centers aren’t the biggest US export market for financial services.”
These are not the sort of harsh truths about the global economy that generally get uttered at Davos. But I prefer them to unsubstantiated narratives.
Nevertheless, it is worth remembering that the surprising persistence of globalization is no guarantee of a harmonious world. It is a seductive idea that dates back to the golden age of Victorian liberalism: The spread of international commerce would have the additional benefit of promoting peace between nations. A generation of statesmen after 1945 expended the best years of their lives on free trade agreements and multilateral institutions designed to promote what came to be known as a liberal international order. I have no doubt that this contributed to the sustained economic growth of the postwar era. But it was too much to expect it to transcend ideological and geopolitical rivalries.
Norman Angell’s hugely influential book The Great Illusion — first published in 1909 as Europe’s Optical Illusion — argued that a war between Britain and Germany would make no sense, as its economic and financial costs would exceed any conceivable benefits. That logic did not prevent such a war from breaking out just a few years later.
Enthusiasts for globalization in our time made a comparable error, imagining that integrating Russia and China into the world economy would cause benign transformations of their domestic politics and foreign policies. Nope. I used to think Chimerica would die and be replaced by Cold War II. The surprise is to find that the two can co-exist.
The historic tension between globalization and great-power politics is nicely illustrated by the current predicament of the world’s favorite K-Pop band. South Korea may be to the Twerking Twenties what England was to the Swinging Sixties, but it is also a state menaced by a dangerous and heavily armed northern neighbor.
Under South Korean law, all able-bodied males must serve between 18 and 21 months of military service, usually before the age of 28. In December, BTS’s oldest member, Jin, enlisted as an active-duty soldier (shades of Elvis in 1958). The other band members will soon follow him. On reflection, Bulletproof Boy Scouts was a pretty good name.
BTS have promised to re-form as a group in 2025. I do hope they get an invite to that year’s WEF. A performance of “Dynamite” would lighten up the Davos mood.
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