We need to ask a question, prompted by the Bob Dylan song, about globalization: Are the times a-changin’? I say that they are.
After six months in Asia, advising at several policy institutes and lecturing, it is apparent to me that the world’s largest continent is moving toward a national, or regional, economic focus. Part of this shift can be attributed to the Covid-19 pandemic. In most of the world, but particularly in Asia, Covid exposed the weaknesses of “just in time” production. The global supply chain is not as reliable and as secure as we once assumed. And when international delivery systems are disrupted for long periods, people look for nearby sources of goods.
The global supply chain is not as reliable and as secure as we once assumed.
Continuing geopolitical crises have also led the United States and many economically advanced countries to seek greater energy independence and to rely less on foreign goods and foreign sources of components in key industries like transportation, communications and health care. The financial system will remain digitally connected on a global basis, but even in this sector, we are seeing less reliance on the U.S. dollar. For example, Russia’s invasion of Ukraine in 2022 triggered a big shift in trade financing from the U.S. dollar to Chinese currency, the renminbi (yuan).
What are the implications for the United States from this receding globalization? I foresee significant changes in higher education, trade and the environment.
Higher education. Fewer and fewer students from China are coming to U.S. universities. (Something like the reverse is also true: Fewer and fewer international students are going to Chinese universities.) Chinese students are either staying home or going to universities in Hong Kong, Japan, Australia or other places closer than the United States. Meanwhile, Korea is sending large numbers of students to the Philippines, where they can learn English and take advantage of excellent programs in such fields as nursing and accounting.
In part, this trend comes from the success of Chinese students at U.S. universities. Most of them have not been able to stay in the United States after graduating, instead returning home and obtaining university appointments with ample research funding. This means that many Chinese universities have greatly improved their international standing, offering doctoral programs in English not only for the Chinese but also for students from all over Asia.
The U.S. brand name in higher education faces serious competition.
This has also happened in Singapore, South Korea, Taiwan and Japan: Students no longer need to take on the costs of obtaining a prestigious degree in the United States, or from international centers associated with U.S. universities, since they can obtain the same type of degree at Asian institutions. Looking at international journals in my own field of economics, I see that many of the authors are affiliated with Asian universities, and several U.S. universities have recruited impressive faculty members from these same universities.
The bottom line is that the U.S. brand name in higher education faces serious competition. A second Trump administration could accelerate this trend, as foreign students would likely face more restrictions in obtaining visas to study here.
That could be good news for parents of college-age students in the United States. Tuition will start to fall, or the usual increases will slow, as U.S. universities adjust to smaller student pools from abroad. Schools will try to make up for lost enrollments from full-tuition-paying foreign students by trying to become more attractive to Americans, perhaps by lowering tuition costs. But with the exception of universities with large endowments, the reduced income from tuition will mean that faculty will have to get by with fewer perks and reduced salaries. Universities will be forced to realize that their brand names no longer command the same premium prices.
Trade. U.S. consumers are accustomed to low-priced goods made abroad, but global dependency has raised national security concerns. Can we risk relying on Asian countries for producing all of our computer chips? Can we continue to rely on the Middle East for our energy needs?
I am not predicting that Americans will abandon Toyota or Honda cars, but even those will have more American-made components, in part because of domestic-content laws. For example, the Biden administration is proposing subsidies for U.S. companies that relocate to economically depressed geographical areas and employ only union workers. This preference for domestic industry plays well in an election year, and this trend is not likely to be reversed by whoever is in the White House next year. Still, fewer imported inputs and higher-cost domestically produced components will mean higher prices for many consumer goods.
The environment. Progress on global accords to respond to climate change has been slow and cumbersome. Last year’s meeting of the U.N. climate change convention (COP28) revealed the limits of what countries are willing to sacrifice in terms of living standards to meet future “green” targets. This means that environmental goals will take a more national or regional focus, perhaps in cooperation with neighboring countries that suffer the spillover effects of environmental disasters. In many ways, this is a return to the past, when environmental crises had widespread effects but were mostly addressed by national governments (see the Exxon Valdez oil spill in 1989). International protocols are especially likely to be set aside or go unenforced under governments less sympathetic to “green” concerns.
“Green” U.S. investors will have to become more regionally focused.
“Green” U.S. investors will have to become more regionally focused, looking for greater cooperation with Canada and Mexico to create environmental benefits throughout the region. Those investors will have to settle for less ambitious but more sustainable longer-term projects under environmentally friendly national governments.
I am not saying that the United States will regress to the isolation of the 1920s. Hopefully, students at U.S. universities will continue to study modern languages and world history, and will seek careers in diplomacy or at international organizations. The global tourism sector will continue to boom, and foreigners will still visit the United States, even if they do not enroll in our universities.
But there is no doubt that the pendulum is swinging away from a global focus in trade, investment and education. As with any change in the economic landscape, there will be some who are better off and others who are worse off. The realignment will take time, but it is unlikely to slow down in the post-Covid economic and political landscape.
