“The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades,” Larry Fink, the CEO of BlackRock—the world’s largest asset-management firm—wrote in the latest of his widely read annual letters to shareholders. It’s an idea gaining currency. Adam Posen, the head of the pro-globalization Peterson Institute for International Economics, says in Foreign Affairs—the flagship publication of the influential U.S. organization the Council on Foreign Relations—that the war has accelerated a “corrosion” of globalization. And the prominent American columnist David Brooks wrote in The New York Times that “globalization while flows of trade will continue, … globalization as the driving logic of world affairs—that seems to be over.” Why would a war between two countries with relatively limited roles in the world’s economy cause such a historical transformation in it?

Adam Tooze is the Kathryn and Shelby Cullom Davis professor of history and director of the European Institute at Columbia University, as well as the author of books about World War I, German economic history, the Great Recession, and the economic effects of the Covid pandemic. Recently, on The Signal, Tooze spoke about how the war has worsened already rising commodity prices and redefined global economic power through unprecedented sanctions. Here below, he addresses the ways the conflict is revealing changes in the dynamics of globalization that started a decade ago. The source of these changes, he says, is the growing hostility between the U.S. and China, and Washington’s worries about losing economic power to Beijing. But Russia’s attack put an end to one of the most deep-rooted beliefs about globalization: that countries tied together through trade would become more peaceful and law-abiding. What’s really changing now, Tooze says, is how people think about globalization.

Michael Bluhm: What’s happening with all the talk about the end of globalization?

Adam Tooze: It’s saying that the Russian invasion of Ukraine has put an end to the globalization we’ve experienced over the last three decades. It’s not saying globalization as such is coming to an end; it’s saying globalization as we’ve known it is coming to an end.

The first wave of contemporary globalization, from the 1990s and 2000s, began to plateau in the early 2010s. That wave had included the North American Free Trade Agreement and China joining the World Trade Organization, which was a massive shock to the foundations of American society. We’re still living through the reverberations. The plateau was partly because of a deterioration in relations between the U.S. and China since 2011—and certainly since the Trump administration—which the Biden administration shows no sign of reversing. Then, Covid-19 raised a question about supply chains, in quite a dramatic way.

But what we’ve seen is not de-globalization but this plateau—a reconfiguration, politicization, and weaponization of interdependence.

Bluhm: What do you mean by that?

Tooze: Weaponization means the geopolitical use of interdependence, as with the current sanctions against Russia. These sanctions are a time-limited tactic. If you do that two or three times, folks who feel that they might find themselves in antagonistic relations with the United States—and it’s a relatively short list of countries—will start to wonder whether it’s safe to hold foreign-exchange reserves in dollars.

Mike Kononov

Russia thought it had learned that lesson and had a cunning plan: It diversified its foreign-exchange reserves out of dollars into the euro. It turns out that if you invade a European country with an army of 150,000 people and start bombing civilians, the Europeans will join the Americans in sanctioning those foreign-exchange reserves.

We should call it a euro-dollar trap. And it is a trap; it’s weaponized. But it’s not obvious where you can go if you want to get out of it. Rather than the emergence of a new currency system, it’s more as though a cold war has broken out within a currency system that’s very difficult to change. It’s like trench warfare within the financial system. It is antagonistic, but it doesn’t actually shift anything very much, because there’s nowhere for countries to go.

Bluhm: What other changes would you associate with the end of the globalization we’ve experienced over the last three decades?

Tooze: The one-directional “End of History” vision of globalization was almost a metaphysics, a law-like process moving the global economy inevitably toward greater trade and economic interdependence. That’s given way to something much more uncertain, debated, and fought over in power politics, but it remains a hardwired, massive reality that isn’t going to shift much anytime soon.

The “end of the globalization we’ve experienced over the last three decades” doesn’t mean a rapid de-globalization. We’ve been debating serious geopolitical clashes with China now for almost six years, and Apple’s supply chain for smartphones has barely budged.

The “end of the globalization we’ve experienced over the last three decades” doesn’t mean a rapid de-globalization. We’ve been debating serious geopolitical clashes with China now for almost six years, and Apple’s supply chain for smartphones has barely budged.

The smartphone supply chain is one of the most complex artifacts of human ingenuity ever devised, and you can’t simply pull up stakes and shift a state-of-the-art chip factory to someplace in the U.S. that makes you an attractive subsidy offer. Apple will—but over a 5-to-10-year time horizon. And it’s quite unlikely that Chinese chip factories will close; they’ll still be there.

Bluhm: Then what are the consequences of this new era?

Tooze: The microchip story is the most important one. But we should be clear about the vector of change: It’s not Russia, and it’s not China—it’s the United States. The United States has chosen to break up this system because it sensed that it might be losing its preeminent power position.

America doesn’t have the capacity to do this kind of chip manufacturing. The key technology is in Europe, and the installed capacity is in Asia—and that was a rude awakening for the United States. The same is true of 5G; America doesn’t have a 5G alternative to Huawei.

Breaking this system was a deliberate choice by the U.S. government. The United States is the first mover. It’s not obvious that even the American microchip firms are very keen on this choice. It is less efficient than the existing arrangements.


Will it be a return to the Flintstones? No, because you can compensate, to a degree, through investment. America’s industrial policy is all about trying to grow back, and the Europeans are doing the same. The U.S. and Europe want to build the sorts of networks of innovation, collaboration, and R&D domestically that are now centered in the manufacturing hubs of East Asia.

Bluhm: Breaking up this system seems like a major economic shift?

Tooze: It’s a huge pivot from the direction of America’s social and economic development in recent decades. It will, in the short run, generate costs that could have been avoided; it’s less efficient.

Will it drive inflation? This will be a one-off hit to efficiency, so that will drive a one-off adjustment in prices, which we’re choosing as a result of geopolitical or industrial policy. And that has a cost. Will it drive a permanent increase in inflation? That depends on whether it’s accommodated by the central bank.

Those are the ramifications of the transformation of globalization as we know it. This isn’t a story about Putin; it’s a story about America’s decisions on the frontier of technology.

Those are the ramifications of the transformation of globalization as we know it. This isn’t a story about Putin; it’s a story about America’s decisions on the frontier of technology.

It’s more consequential than the Russian oil-and-gas story because oil and gas are fungible. The microchip complex in East Asia isn’t; there’s only one of it. It is tremendously delicate and staggering in its complexity. Trying to replicate it in other places through deliberate state intervention is a huge departure in industrial policy—and a huge experiment. We don’t know if it’ll work.

Bluhm: What is this transformation of globalization going to look like? Will it create two competing systems, one oriented around the U.S. and Western Europe, and the other around China? Something like the two opposing blocs of the Cold War?

Tooze: We are seeing the return to Cold War polarities, in which politics, economics, culture, and society align. The most fundamental damage from Moscow’s aggression will be to any vision of a unified Europe.

Europe, after all, was the incubator of the Cold War; in Europe, we really had an Iron Curtain. We’re going to see something like that with Russia, but it’s very hard to imagine that spilling over—like the original Cold War did—into a more general bloc formation.


I’d distinguish between blocs and polarization. We’ve already seen polarization in the antagonism between the United States and China. But it’s the difference between two Lego sets and something like a single network with two alternate sources of power and attraction.

The Cold War model was distinctive; it was like two Lego sets. Everything went together—society, economy, politics, and geopolitics. That’s something we’re going to see locally now in Europe, along the front line.

But I don’t think it’s a model that’ll apply to the relationship between, say, Brazil and the United States—or Brazil and China. The government of Brazil feels torn between two poles, but it isn’t confronted with the choice of blocs.

You can see the limitations of the bloc model in the difficulty the Biden administration has had in putting together a strategy for dealing with Beijing. They can get potential partners in Asia to line up on security issues. None of them will say no to an American security guarantee against Chinese aggression. But the U.S. won’t be able to get Asian countries to line up on an economic choice between the U.S. and China. If that’s what the Americans were offering, the Asians wouldn’t take it. They’d rather be neutral, because they’re too invested in China’s economic growth.

The most fundamental damage from Moscow’s aggression will be to any vision of a unified Europe.

Part of the problem is that the U.S. can’t make as sweet an economic offer as it made to Western Europe and Japan during the Cold War. Why? Because of America’s broken domestic politics. It doesn’t have the domestic wherewithal to orchestrate offers attractive enough to the Asian powers to force bloc formation.

Bluhm: How is the war affecting this geopolitical dynamic?

Tooze: We’re going to see a world that has a very hard frontline between Russia and Europe, even though gas will continue to flow along those pipelines for a few more years. In the wider world, there will be an incoherent structure in which different forcefields interact. Another way of thinking about this is as five-dimensional chess with different boards. The monetary board is very polarized toward the United States and Europe. But the tech board is polarized more toward East Asia. The trade board has about six different centers—the oil center, the food center, the manufacturing center, the auto network, Latin America—not one.

We’re in this world where the Cold War’s bloc model is unhelpful in describing anything except maybe the frontline between North and South Korea and what we may see emerging in Europe as a result of the Ukraine war, which is very atypical of global power in general.

Brian Kostiuk

Bluhm: When we talk about globalization, it’s more than about the location of high-tech manufacturing hubs. For many, support for globalization was based on the belief that integrating the world through trade would make the world a better place. Countries that participated in the globalized economy would abide by the rule of law, and countries enmeshed in the system would be unlikely to jeopardize it by doing just what Putin did in Ukraine. Germany even had a phrase for this philosophy of globalization: Wandel durch Handel, or change through trade. How is the war changing this idea of what global trade represents?

Tooze: Is this the wreckage of the idea of economic and geopolitical transformation through economic integration? At some level, it clearly is. Putin isn’t behaving in the way we hoped he would—and as the U.S. hopes of China: as a responsible stakeholder in the global system.

But does that mean the idea was completely naive or that we misunderstood what we were dealing with? In fairness to the Germans, they never misunderstood what they were dealing with. The Germans pioneered this model in the 1970s, when they were engaged in a long tug-of-war over the future of East Germany and the prospects of reunification. They knew they were in for a decades-long struggle. They were dealing with the Soviet Union and the United States; they didn’t anticipate that this was going to go smoothly.

Is this the wreckage of the idea of economic and geopolitical transformation through economic integration? At some level, it clearly is.

The model was originally a power play by the Social Democrats in West Germany. It was a play to win over certain key constituencies on the East German side to positions that would be more attractive to the West and may open doors to make the relationship between East and West Germany more manageable for the people of those countries.

It was also a way of civilizing West Germany itself, so that the ex-Nazi, anti-communist right wing could see that it didn’t have to engage in a maximum–Cold War, “better dead than red” confrontation with the Soviet Union. They were engaged in an exercise in social engineering, but it was also a power struggle.

Bluhm: Much of that power struggle ended when the Berlin Wall fell in 1989 and the Soviet Union collapsed two years later. What has happened to the idea of change through trade since then?

Tooze: In the 1990s, that idea turned into something more like a metaphysics, a salvation theology, or a social-science theory that said, It was always bound to work. And that was the naivete.

Envato / The Signal

Moscow and Beijing said, We can see you coming from miles away. We know what your game is. You want to transform us through trade. Well, we’re going to take the other side of that bet; we’re going to learn from trade, and, with the profits from it, we’re going to consolidate our grip on our societies. Yes, that will mean the transformation of parts of our societies; there will be these cosmopolitan, Western-oriented people, and there will be oppositional Alexei Navalnys. We know there’s going to be a huge middle class that loves the change—and is now panicked and despairing in Russia. That was Wandel durch Handel.

But all of this was a power play by the West; the Russians and the Chinese took the other side; and the West is losing on it. The transformation of society in Russia and China is real; it’s just not complete. It hasn’t given the West historic sway. It’s created victims.

Companies like McDonald’s and IKEA have the decency to go on paying their staff in Russia as they pull out, which is remarkable and very much to be commended. They did transform the lives of hundreds of thousands, if not millions of Russians through trade—and simply abandoning them is not compatible with their environmental, social, and governance commitments.

Change through trade works, but it isn’t the only story. This power struggle goes on behind the scenes. The West worked quite hard at it, and Putin will tell us that we pulled off all those color revolutions and flipped a succession of countries in the Caucasus. We tried to flip Ukraine, and he’s trying to flip it back.