The Myth of Deglobalization: Multinational Corporations in an Era of Growing Geopolitical Rivalries

Abstract

Globalization is past its peak, we are told. The rise of populist anti-globalization movements and the return of geopolitical rivalries among great powers in the 2010s has put an end to free-wheeling corporate global capitalism. Or has it? This article summons available data on cross-border corporate investments at the level of countries (balance of payments), firms (subsidiaries and affiliates), and corporate managers (industry surveys). It pays special attention to the period between 2015 and 2021, which spans the election of President Trump and the outbreak of the Covid-19 pandemic that have unsettled global politics. We analyze global patterns in foreign direct investment positions and in particular the evolution of investments by US corporations in China, arguably a "most likely case" for deglobalization. Our analyses find no evidence that economic cross-border integration is in decline. The global allocation of corporate investments across the world's major economic regions has remained stable. US corporations have not notably reduced their global activities. If anything, their aggregate investment position in China has increased during the Trump administration's trade war. Overall, the results cast empirical doubts on prominent narratives about the state of the global economy. Geoeconomic transformations in world economic infrastructures may well be underway, but they are better understood as new and adapted forms of internationalization rather than the end of globalization.