1 Introduction

«History does not repeat itself, but it often rhymes» (credited to Mark Twain)

The war in Ukraine goes hand in hand with other manifestations that signal the non-zero probability of a future of severe economic and political instability and of possible large-scale, if not global, conflicts. Economic protectionism and trade wars are escalating. Global and local economic crises are slowing down the world’s economy and are opening up prospects for much lower growth rates than those experienced in past decades. The emergence of new economic superpowers (China, in primis) calls into question the market and geopolitical equilibria that have been consolidated in the “Long Peace” period since after the Cold War. Global value chains (GVCs) are showing a strong reactivity to endogenous and exogenous shocks, as evidenced by the COVID-19 epidemic, thus opening the way toward possible de-globalization and regionalization processes. In ideological and political terms, nationalism and populism oppose and threaten multilateralism. Military conflicts are growing throughout the world, and now also affect industrialized regional areas, such as in Ukraine. This scenario has even made Francis Fukuyama think that not only should “the end of history” be postponed—as human history is still a long way from reaching its peak and its end, in terms of the social and cultural development of humanity—but that perhaps «the end of the end of history must be admitted».Footnote 1

These manifestations seem to be caused by the growing imbalances and instability of the global economic and political order. They interact with each other and can activate feedback loops that may lead to a very serious disease for humanity, which needs to be treated before it explodes in all its pathological effects. Understanding this complex evolving world requires a massive collective effort by the best human minds. Much more modestly, this article aims to contribute to the formation of an awareness of the phenomena closest to industrial economics and to open a future, hopefully fertile, debate on policy remedies that can be taken to cure the causes rather than the manifestations of the disease. The first section provides empirical evidence on some of the main manifestations, namely economic protectionism, the slowdown in the world’s economic growth, and the reorganization of GVCs. The second section proposes a vision of the dynamics that link these factors in determining their developments and outcomes, including military conflicts. To this end, reference will be made to recent literature, based on comparative historical analysis (CHA), which studies the dynamic causalities, historical sequences and temporal structures of world events in distant time periods, in order to draw comparative historical conclusions and lessons. The third session opens the way toward some industrial policy considerations and encourages a more in-depth debate on such considerations.

2 Empirical evidence and stylized facts

2.1 “Global protectionism”

After decades of integration and globalization, the 2008 Global Financial Crisis (GFC) triggered a protectionism movement against the economic liberal order, which has increasingly strained international trade and relationships. Protectionism and state discrimination have proliferated rapidly and have become the “New Normal” (Hoekman, 2015) as governments engage in geopolitical conflicts. The questioning of the existing rules-based international order has originated from multiple sources, although it has primarily been driven by the rise of China and economic nationalism in the United States and around the world. Some episodes that have marked this e(re)volution in recent years are illustrative. In 2016, the majority of people in the UK voted for Brexit. In 2017, the US unilaterally withdrew from the Trans-Pacific Partnership (TPP) and forced a renegotiation of the North American Free Trade Agreement (NAFTA). In parallel, the Transatlantic Trade and Investment Partnership (TTIP), promoted by the United States, was declared over by German and French governments. The same happened to CETA (the EU-Canada agreement). The EU raised customs duties on Russian and Chinese steel by 35%, and then added heavy duties to steel imports from Turkey. In 2018, the Trump administration imposed tariffs of $50 billion on Chinese imports and Section 232 tariffs on steel and aluminum, and also increased the tariff rates on imports from many countries, including Canada. China eventually reacted with retaliatory tariffs on American products. According to the “America First” agenda, i.e. the official foreign policy doctrine of the Trump administration, concerns over a rising impact of China on American hegemony gained increasing bipartisan attention in the US. In 2019, the Japanese government removed South Korea from its white list of countries that receive preferential treatment for export licensing. The perceived threat to national industries led to a Korean consumer boycott against the purchase of Japanese products and services. Finally, since 2021, USA’s President Biden has shown little inclination to veer away from Trump’s policy on China or on a WTO dispute settlement. The protectionist legacy is still very much alive under the Biden administration, which aims to protect USA manufacturing and target some strategic rivals (Menaldo & Wittstock, 2021).

Evenett and Fritz's (2020, 2021) reports, based on the Global Trade Alert (GTA) database, allow us to draw a clear picture of the policies undertaken by states. Since 2008, the GTA database has recorded all the measures implemented by the different states, on the one hand, in favor of the liberalization of markets, and on the other hand, which harm the foreign commercial interests, through barriers, restrictions and distortions of the free market (for a detailed description of the measures, see Evenett, 2019). Figure 1 compares the consistency and dynamics of the liberalizing and discriminatory interventions implemented by the G20 countries since November 2008.Footnote 2 It is clear that the accumulation of protectionist and discriminatory measures has taken place on a much greater scale and with greater dynamics than that of liberalization. In 2021, the former reached a number of interventions equal to 28,552, against 5474 of the latter. The lion’s share of the interventions concerns the US (25.8%) and China (20.6%), which, together, are close to half of the overall total. Significantly, these two countries are not protagonists in terms of liberalization: the shares of the US (7.6%) and China (8.2%) do not reach 16% of the total and are individually overtaken by such countries as Brazil (13.2%) and India (9%). According to this evolution, the percentage of exports of G20 countries potentially at risk to the foreign discrimination policy instrument increased on average from 40% in 2009 to 83% in 2021 (Evenett & Fritz, 2021).

Fig. 1
figure 1

Source: Evenett and Fritz (2021)

Number of discriminatory and liberalizing interventions imposed since November 2008, G20 countries.

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Importantly, if we only look at the policy initiatives that affect foreign direct investment (FDI), the adopted policy mixes are becoming less favorable for inward FDI (Evenett & Fritz, 2020). The share of newly implemented policy interventions that are conducive to FDI dropped from about 60% in 2009 to about 40% in 2021 for the G20 countries, thus also marking a prevalence of protectionist and discriminatory measures in these international transactions (Fig. 2).

Fig. 2
figure 2

Source: Evenett and Fritz (2020)

Share of newly implemented policy interventions conducive to FDI.

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The rise of protectionism and state discrimination is a much-debated issue among economists, but on the basis of shared thinking. As Dany Rodrik set in stone: «economists disagree about a lot of things, but the superiority of free trade over protection is not controversial» (Rodrik, 2018, p. 74). Empirical studies on the effects of protectionism have mainly focused on international trade, with various findings on its relevance as a cause of the slowdown in trade (e.g., Constantinescu et al., 2020; Ghodsi et al., 2017; Kee et al., 2013; for a review on this topic, see Kiyota, 2022). Recently, taking a long-term view, Gregori (2021) has found that protectionist trade policies surely play a role in explaining the declining responsiveness of world trade to GDP, as protectionism elasticities are always estimated as negative and significant.

However, these approaches often reflect a “traditional” view of the protectionism associated with trade restrictions (Corden, 1971; Irwin, 2011). Consistently, such studies have evaluated the advantages and disadvantages derived from trade protectionism for a national economy or for a group of countries, or even for the whole world. In agreement with other scholars (e.g., Enderwick, 2011; Evenett, 2019), we here propose a different approach that underlines how the current protectionism and state discrimination measures have a broader scope and deeper roots in a ground shaken by the seismic waves caused by the breaking of equilibria in post-war international relations and the emergence of an economic nationalism built on a country’s identity, security, power, unity, and on policy instruments aimed at protecting national economic and social structures. Even as globalization erodes the power of individual nations, Enderwick (2011, p. 326) noted that economic nationalism persists in an era of market liberalization and is rising in such powerful countries as China, India and Russia, which are moving toward industrializing or rebuilding their economic systems.

By defining this new protectionism as “global protectionism”, we are following Enderwick in his outline of the main differences from traditional protectionism: (i) the scope of protectionism is expanded beyond trade restrictions to include restrictions on capital movement, FDI, offshore sourcing, migration; (ii) such forms of protection include traditional ones—tariffs, quotas, non-tariff barriers—but also subsidies, public procurement, industrial policies, the creation of national champions, the promotion of state-owned enterprises, finance measures, health and safety concerns; (iii) the protection sentiment relies on both economic weakness (as in the past) and economic strength (e.g., commodity exporters who leverage on their protected economic rent to benefit the national economy, such as Russia for gas and oil); (iv) the pressures come from local producers, but also from national leaders, industry bodies, consumer association, trade unions; (v) selective strategic approaches are followed to maximize the benefits of globalization, but also to avoid the costs; (vi) the geographical scope of protectionism extends to all the developed and emerging countries.

The “state as strategist” (Lenway & Murtha, 1994; Stopford, & Strange, 1991), cemented by economic patriotism and national security, is the governing actor in the new system of global protectionism, which is more articulated, adaptive and powerful than in the past. Understanding the determinants of global protectionism is hence of crucial importance, especially for policy purposes.

2.2 The slowdown of the world’s economy

The expected slowdown in the growth rate of the world’s economy is linked to the recurring debate on secular stagnation (Gordon, 2015; Summers, 2015). Here, we make pragmatic reference to the baseline scenario, built by the OECD in 2018, to predict the trend of the world’s economy up to 2060 (Guillemette & Turner, 2018). Being dated in this way, such a scenario does not take into account the latest events (e.g., COVID-2019 and the Russian–Ukrainian war), so that it projects the evolution of the economy in a neutral way, i.e. as if everything will be business as usual, assuming the substantial stability of the structural factors in the absence of both exogenous shocks and new intentive policies.

The baseline scenario forecasts a decline in the world’s real GDP growth trend from about the present 3.5–2% in 2060 (Fig. 3).Footnote 3 Such a slowdown is mainly due to the deceleration of large emerging economies. The world’s economic center of gravity is shifting toward Asia. China and India will take on a rising share of the world’s economy, eventually overcoming the weight of all the OECD countries together (Fig. 4). This slowdown will in large part be driven in coming decades by demographics (the working-age population, and the aggregate employment rate) and productivity (labor efficiency and capital per worker).

Fig. 3
figure 3

Source: Guillemette and Turner (2018)

World trend real GDP growth rate, 2005–2060.

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Fig. 4
figure 4

Source: Guillemette and Turner (2018)

Composition of world output in USD at 2010 PPPS, 2005–2060.

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The OECD report elaborates alternative scenarios that call for institutional and policy reforms to change the course of the world’s economy; however, it seems sensible—even if rather obvious—to argue that this trend could worsen even further, due to the epidemic and the recent war shock, with unpredictable consequences and an increase in international economic and political instability. Under these conditions, no historical determinism is justifiable. However, a negative worldwide scenario is credibly possible, and avoiding it is thus at least desirable. Cultural and social changes and economic policy interventions that are perhaps deeper than those suggested by the OECD are needed to effectively address the epochal perspective of the coming decades.

2.3 The changing structure of global value chains

The post-GFC New Normal has manifested itself as the “great trade collapse”. Between the end of 2008 and the middle of 2009, international trade underwent a sudden, severe, and synchronized downturn (Baldwin, 2009). It was the sharpest fall in recorded history and the most devasting since World War II. The decline in trade was much more pronounced than during the Great Depression. In fact, during the Great Depression, it took 24 months for world trade to drop to the level it did in the nine months after November 2008. International trade recovered after the collapse, but at a modest rate of 3% or less (Gregori, 2021). This “trade slowdown” has captured the attention of scholars from all over the world who have opened the ongoing debate on de-globalization (for a review, see Witt, 2019). The post-GFC New Normal has manifested itself as the “great collapse of trade”.

Attention has been focused on the issue of value chains, which have been recognized as no longer just being exposed to the risks of idiosyncratic shocks (single times, single sectors, single nations), but also to the risks of systemic shocks, mainly due to structural factors, such as climate change and sustainability, geopolitical tensions, and digital disruptive innovation. The literature has mainly studied the dynamics of risk propagation, the resilience of GVCs—i.e., the ability to bounce back after a shock—and the robustness of GVCs—i.e., the ability to continue production under shock—(Baldwin & Freeman, 2021). Obviously, systemic shocks include the exogenous one of the global COVID-19 pandemic and, in accordance with Clausewitz’s dictum that war is merely a continuation of politics by other means, the endogenous shock of the Russian–Ukrainian conflict, which is the most recent expression of the current geopolitical imbalances and international competition for political supremacy.

UNCTAD (2020) proposed four scenarios for the evolution of GVCs throughout the world: (i) reshoring, to shorten and fragment the value chains less, thus leading to a reduction of efficiency-seeking FDI to ensure against risks, and a greater geographical concentration of value added; (ii) GVC diversification, to stimulate new entrants (economies and firms) to participate in GVCs, thus leading to a wider worldwide distribution of economic activities; (iii) regionalization, to move from global to regional investments and to limit the physical length of supply chains; risks are reduced by insulating GVCs in geopolitical areas populated by friendly and reliable partners, with whom economic cooperation, shared industrial policies and investment promotions can be activated; (iv) GVC replication in multiple locations across all the major trading blocks, to increase outsourcing to local producers and service providers, thereby gaining proximity to the market and high degrees of product customization, as well as a reduction of idiosyncratic risks.

According to UNCTAD, reshoring and replication are the two least likely scenarios and can only materialize for specific sectors/technologies/countries. The megatrends of increasing international political tensions and sustainabilityFootnote 4 push more toward the shortening of GVCs and favoring the scenario of regionalization. On the other hand, digitization favors both their resilience (thanks to remote control) and geographic flexibility (thanks to the replacement of labor-intensive activities with technology-intensive activities).

The literature largely converges on the emerging of “regional value chains” (RVCs) as a result of both pre-pandemic and post pandemic factors (e.g., Enderwick & Buckley, 2020; Gereffi, 2014, versus Ciravegna & Michailova, 2022; Gereffi, 2021; Pla-Barber et al., 2021). A report published by the Asian Development Bank (Xing et al., 2021) provides some preliminary data on the evolution of GVCs. The results seem to show how international political tensions and the pandemic have favored the transition from a “hyperglobalization” to a “slowbalization”, thereby strengthening the creation of regional trade agreements in favor of the formation of RVCs, even though there does not seem to be a strong reduction in inter-block exchanges (e.g., between NAFTA and the European Union). Using the OECD trade in value added database, Miroudot and Nordström (2020) found that supply chains have been shortening since 2012, with a main trend toward the domestic rather than regional dimension. Elia et al. (2021) paid particular attention to implemented reshoring policies that lead to both domestic and regional value chains, and they reviewed the agendas of governments to boost reshoring initiatives in major countries, such as France, Japan, Korea, the US, and the UK. In this regard, a new jargon has been introduced to describe the new geopolitical dimension that the GVC regional fragmentation assumes. For example, “Ally-shoring” indicates a reshoring process that is not restricted to domestic production but leans toward economic partnerships with those who share the same values and strategic interests (Dezenski & Austin, 2021). With the geopolitical aim of increasing self-reliance, the Biden administration has adopted the term “friend-shoring” by analogy (Sullivan & Deese, 2021). Europe’s economic policy initiatives should also be recalled in this context. In 2021, the European Parliament published a document that outlined some guidelines in favor of the return to Europe of some strategic supply chains, including pharmaceuticals, medical, semiconductors and photovoltaic panels (Raza et al., 2021). Some regions in various European countries are moving in this direction, thus promoting the imperative of “reshoring and attractiveness”.Footnote 5 Finally, IMF (2022, Chapter 4) questions common wisdom, arguing that the GVC diversification and the substitutability in inputs reduce global economic losses more effectively in response to supply disruptions. The report notes that there is currently still a significant home bias in the sourcing of many intermediate inputs, and that dismantling GVCs through fragmentation and re-shoring is not the right answer.

It is easy to predict that the ongoing war will fuel the strength and perhaps contradictoriness of the changing factors of GVCs, thereby testing the models and interpretations proposed in the literature to explain the relevant long-term trends. At the time of writing, some working papers on the subject have already been published (e.g., Canuto, 2022; Felbermayr et al., 2022; Korn & Stemmler, 2022a; 2022b).

3 A historical perspective

How can we link together all the phenomena we described in the previous section, as well as the war in Ukraine, which are but manifestations of the dramatic changes and instability that are taking place in international economic relations? It would not be out of place to hypothesize the establishment of a vicious circle between the emergence of protectionism, exacerbated by the prospects of a slowdown in the world economy, the disruption of crucial value chains (such as those related to energy and food) and the escalation of war conflicts in the world. As early as the nineteenth century, the French political economist Frédéric Bastiat claimed, «when goods cannot cross borders, armies will» (cited in David Boaz, 1997, p. 181).

Moreover, some empirical evidence could corroborate Bastiat’s famous dictum. Figure 5 shows the evolution of state-based military conflicts in the world from the end of World War II to 2020. The number of conflicts, after reaching a peak of 53 in 1991, declined to 31 in 2010, but has since then increased to a maximum of 56 in 2020.Footnote 6 The reduction in conflicts after the early 1990s can be explained through considering a combination of factors, such as the balance of power, nuclear weapons, the increasing destructiveness of conventional warfare, democracy, international institutions, and economic interdependence. Specifically, Gaddis (1986, p. 142) argued that: «The Cold War, with all of its rivalries, anxieties, and unquestionable dangers, has produced the longest period of stability in relations among the great powers that the world has known in this century; it now compares favorably as well with some of the longest periods of great power stability in all of modern history. We may argue among ourselves as to whether or not we can legitimately call this “peace”: it is not, I daresay, what most of us have in mind when we use that term. But I am not at all certain that the contemporaries of Metternich or Bismarck would have regarded their eras as “peaceful” either, even though historians looking back on those eras today clearly do».

Fig. 5
figure 5

Source: UCDP—Uppsala Conflict Data Program

Numbers of State-based military conflicts in the world, 1946–2020.

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The resumption of war hostilities, which basically coincide with the occurrence of the GFC, leads to questions about the end, or not, of the “Long Peace” (e.g., Cottey, 2022), and the contributory causes and mutual interdependencies of these major events. However, we do not believe that econometrics or other quantitative exercises can help us unravel the complex causal relationships at play. In order to try to shed some light on such relationships, we turn our attention to those few studies that have applied the CHA process tracing method, to explore how historical events and their chains of cause-effect relations can provide explanations that go beyond their time to help understand subsequent events and outcomes (Mahoney & Rueschemeyer, 2003).

Dent (2020) found striking similarities between today’s early twenty-first century economic and geopolitical situation and its late nineteenth century equivalent, whose endgame was World War I. At the risk of oversimplification, with respect to the author’s argumentation, the main features shared by both periods can be summarized as follows.

  1. (i)

    The economy in both periods experienced a wave of globalization that has been pushed by techno-industrial revolutions. In the former period, new ground-breaking communications systems and transport technologies were the engines of innovative forms of globally coordinated activity; economic interdependencies in the world economy mainly remained trade-based, but the spread of organizational innovations, such as “multinational corporation”, occurred. Today, digitalization, new transportation and production technologies have fostered a much more integrated global economy, in which cross-border GVCs have created a complex and interdependent division of labor throughout the world. In both periods, as technological innovations spread and intensified, the initial financial crises translated into successive periods of recession and stagnation. A long depression began in 1873 and lasted until the mid-1890s, with a flatter world GDP growth punctuated by a series of mini-recessions. For comparison purposes, as we mentioned in the previous pages, the economic phase was opened by the 2008 GFC. As a result of these developments, deeper economic rifts emerged between winners and losers in society at the end of the nineteenth century, thus leading to growing political and social unrest. Fast emerging economic superpowers disrupted the previous global order, trade protectionism and tariff wars escalated, populist nationalism and authoritarianism became more entrenched in many countries, and discontent over globalization’s distributional impact grew. Relevant similarities with the past are discussed hereafter.

  2. (ii)

    The geopolitical conditions of the early twenty-first century closely resemble those of the late nineteenth century. In the earlier period, the emerging economic superpowers challenged the incumbent leading nations, and Britain and France in particular. The main emerging country was the United States, which was rapidly expanding its sphere of influence over the American continent and in the Pacific. Meanwhile, the imperial nations of Europe were further extending their empires, but other emerging countries, such as Germany and Japan, were shaping a new multipolar world. Indeed, such rising nations as Austria-Hungary, Italy, and Russia also sought the status of great power, based on the pursuit of territory, techno-industrial supremacy, and trade. «This was an era of hegemonic transition, intensifying geoeconomic competition and premodern mercantilism, based on a toxic blend of nationalism, militarism and imperialism that eventually precipitated WWI» (Dent, 2020, p. 341, with reference to Wolf, 2004).

    Britain’s current relations with Europe also show marked similarities with its late nineteenth-century equivalent.Footnote 7 Brexit represents a similar withdrawal from integration with Europe to the British policy of “splendid isolation” that the British government undertook in 1890 under increasing pressure to protect key national industries whose once strong commercial competitive advantages were rapidly waning. Just as Britain refused deep forms of integration with continental Europe in the course of its EU membership, it also did so in the late nineteenth century, eventually leading to a Brexit-like withdrawal from European affairs. A globally focused Britain—as proposed in 2017 by Prime Minister Theresa May (it was time for Britain «to become even more global and internationalist in action and spirit»—see Dent, 2020, p. 344)—, but without international alliances, subsequently found it increasingly difficult to manage its vast imperial borders (e.g., in the Western Hemisphere, with the rise of the United States). As a result, in order to achieve his foreign policy goals, Britain “returned to Europe” (Kennedy, 1988), through a series of treaties with different continental powers.

  3. (iii)

    In both periods, the emergence of protectionism was preceded by an intense phase of multilateral trade liberalization, subsequently opposed by the incumbent trade powers that adopted defensive economic nationalistic positions. The commercial protectionism of the late nineteenth century originated in France in 1870 with the new government of the Third Republic, but the increase in tariffs was followed by other countries in Europe and especially by Germany in 1879, whose withdrawal in 1879 from the Conventional Tariff System that had created a more open global trading environment, decreed its end. This was followed by the escalation of trade protectionism, a series of tariff wars between 1988 and 1995 (France versus Italy, Germany versus Russia, France versus Switzerland) and, finally, the formation of trade blocs. The creation of stronger imperial trading blocs gained popular support in France and Britain. Today, the Trump administration in the US can be considered equivalent to the 1870’s French administration, that is, the major catalyst of international protectionism. Section 2.1 has already offered details on the rest of the story of the ongoing global protectionism.

  4. (iv)

    In both periods, populist nationalism emerged and was/has been reinforced by the aftermath of the global recession, which in turn created/has created social unrest that further aggravated the populist reactions against the distributive consequences of globalization. Populism has given credence to forms of economic nationalism that are aimed at protecting domestic industries and jobs from the risks posed by foreign competitors in the integrated world economy. Its protagonists played on feelings of vulnerability and national victimhood, and thus strengthened internal support of trade protectionism. Today, Brexit and Trump have become symbolic of neo-nationalist trends in a possible de-globalized world. In Trump’s address to the United Nations Assembly in September 2018 he stated: «we reject the ideology of globalism and embrace the doctrine of patriotism». The Brexit “taking back control” campaign resonated strongly with those who were unhappy with the EU’s trade regulations and immigration policies. At the same time, patriotic and nationalist movements and parties have established themselves in many countries, and authoritarian states around the world have strengthened.

Regarding the past, Dent (2020) reminded us of the protectionist movements of the “imperial league” that emerged in the wake of the Long Depression, particularly in the cities of the British industrial working class most exposed to the effects of competition from foreign trade and higher tariffs on British manufacturing exports. Pressures from these movements led the British government to practice the so-called “free trade imperialism” in the 1890s, effectively enforcing liberalization in accordance with its nationalistic policy in commercial relations, especially colonial ones. Dent also drew a parallel between the US president Donald Trump and the Republican arch-protectionist William McKinley, who became the US president in 1897. Like Trump, McKinley explicitly appealed to the rising populist nationalism movement to bolster the legitimacy of his government's strong assertion of the US’s geo-economic interests worldwide and his protectionist program that introduced tariff hikes that remained in force until World War I. McKinley’s adherence to protectionism as a political tool was deeply ideological and based on the theories and concepts of economic nationalism developed in the nineteenth century, following the seminal contributions of Alexander Hamilton in the US and Friedrich List in Germany, which were mainly focused on competing against the then dominant British industry and trade (Dent, 2020, p. 346).

Dent (2020) carried out a detailed analysis of the concatenation of events, in part to reduce room for doubt about the possibility of some historical parallels being linked by coincidence rather than similar causality. Certainly, this promising historical research, which offers evidence of the causal relationships and reflection on the profound differences between the historical periods under consideration, deserves further investigations. The global economy of the twenty-first century is much more functionally integrated than in the past. Today’s value chains between the US, China and other major economies are qualitatively much more mutually dependent than their late nineteenth-century British-German equivalent. The ascendency and now domination of multinational corporations in the decades after WWII is a major point. They are responsible for some 80% of the world trade, of which about a third is on an intra-firm basis (UNCTAD, 2013). Their activities and interest are key in any discussion on the effects of international trade policies (e.g., just think about protectionist policies: when the US imposes sanctions on imports from China it may well be restricting the imports of goods produced by Chinese subsidiaries of American multinationals). Furthermore, the closer and more complex interdependence has favored the development of multiple channels of interstate, trans-governmental and transnational agencies. Although not proving themselves very well in the current Russian–Ukrainian war, they have the potential to defuse tensions, sustain multi-level diplomatic ties and manage international cooperation. In the same way as for the GFC, states have shown that they are able to address crises more effectively, through monetary and exchange rate policies, by preventing chain reactions to bank failures with swift and sharp actions, such as dumping liquidity into the financial system. Governments are now able to act counter-cyclically and insulate their economies from contagion, which in turn helps prevent excessive protectionist reactions (Link, 2018). They also seem better equipped to implement active public investment policies that more effectively address the unfair distributive consequences of neoliberal globalization.

Furthermore, «caution must always be exercised when drawing lessons and conclusions from CHAs, especially when making ‘repeat of history’ predictions concerning the future. More broadly, care must be taken not to discount non-linearity, unpredictability and randomness when studying the movement of history» (Dent, 2020, p. 351). Certainly, it cannot be inferred from this historical parallel that a new major world conflict is likely in the coming decades. However, this does not preclude learning from the past, to avoid that, according to Twain’s dictum that opened this article, the future rhymes with the past.

4 In search of effective economic and industrial policies

GVCs are perhaps the clearest paradigm of how the organization of international production has changed in the last century. This reorganization has produced wide-ranging positive externalities, including «the revolutionized development options facing poorer nations» in that rather than «having to invest decades in building their own», they can join GVCs …. «This reversal of fortunes constitutes perhaps the most momentous global economic change in the last 100 years» (Baldwin, 2012, p. 13). Yet, events such as the pandemic and the Russian–Ukrainian war have now put the self-reliance of nations on the agenda, raising the question of a return to autarchy, understood as an extreme form of inward-centered economic nationalism, which results in minimizing international economic linkages (Helleiner, 2021) and, therefore, the above-mentioned benefits. And sadly, when economic nationalism meets ascendant populism, any rational utilitarian cost–benefit weighting that also incorporates externalities vanishes. Furthermore, the secular prospect of a slowdown of the world economy exacerbates collective sentiments, ideologies and actions.

It is between the extremes of neoliberal globalization and domestic autarky that we must move in search of an economic and industrial policy that can avoid a future era ravaged by a “toxic blend of nationalism, militarism and imperialism”. Along this continuum, various approaches have emerged in the history of economic thought. Helleiner (2021) pointed out how the nineteenth-century German thinker Friedrich List (1841) put forward a neo-mercantilist version of economic nationalism as an alternative to autarky, which seeked to promote domestic industries capable of competing successfully in an open world economy. This activist outward-looking policy was re-proposed by Chang (2002) and Reich (1991), who argued that national interests can be better served by state investments in education, infrastructure and other public goods that are able to enhance the competitiveness of domestic firms. Upon a closer inspection, the very concept of “global protectionism” that we discussed in Sect. 2.1 appears to be a mix of inward- and outward-looking policies.

Coming to recent times, outstanding economists, such as Stiglitz and Rodrik, have put forward arguments for activist economic nationalism along similar lines to those proposed by List and Reich. They are particularly critical of neoliberal-driven globalization, which has failed to self-regulate market economies to ensure balanced economic benefits for the society. They argued that contemporary globalization has exacerbated income inequalities and that winner-loser divergences have grown at multiple levels, both sub-nationally and internationally. All of this has determined pressures and crises that have led to such undesirable reactions as Brexit and Trump (Rodrik, 2017; Stiglitz, 2017a). Both scholars put forward outward-looking economic policy proposals, to improve national productive competitiveness, and also inward-looking policies, to more effectively distribute the benefits of globalization throughout society.

This article is not the venue for an articulated political proposal, nor do we want to lapse into generic statements or which, at best, could translate into wishful thinking. The existing literature is already overflowing with this. Our intention has instead been to establish some criteria on which to converge to help research find an effective way of designing policies, in light of the very sensitive issues we addressed in the previous pages regarding the close relationships between economic, political and military conflicts. The main pillars we rely on are:

  1. (i)

    Ties between national economies today are stronger and far more closely intertwined, so that the economic policies of individual countries have significant effects on other countries. This mutual influence fuels dynamic games of strategic interaction, which can lead to highly undesirable outcomes for everyone, even in a counterintuitive way. Governments, firms and local communities should be aware of the fact that they are involved in an infinitely-repeated game, for which the folk theorem suggests cooperation and not retaliation, as well as having the motivation and the ability to address externalities that occur at a global scale. In policy design, their utility function should incorporate externalities, so as to take them into account and balance them with internal benefits, according to a long-term perspective.

  2. (ii)

    Protectionist policies traced back to past rationality, perhaps declining mercantilism in a modern version of patriotism, should be consigned to history books. They legitimize copycat behavior that leads other countries to adopt tit-for-tat measures and an escalation of protectionism that ends up in a negative-sum game (Stiglitz, 2017b). Since global protectionism is a mix of policies that, isolated in themselves, can sometime assume a neutral meaning, it is necessary to have a peripheral vision that is capable of bringing the different ingredients of national politics back to systemic unity. In light of this, activist policies adopted to strengthen the national competitiveness of domestic industries should be designed according to a win–win approach, i.e., assuming the co-competitive synergies associated with inter-country economic interdependence as a fundamental driver.

  3. (iii)

    All the supranational economic institutions should converge their efforts to create an environment base on trust, but also made up of rules and constraints that support it, so as to foster a perspective of international cooperation that avoids prisoner's dilemma games that ultimately result in a race-to-the-bottom. Since these institutions, explicitly designed to address the negative externalities on a global scale of both individual state policies and globalization, have a long history of failing to solve the world’s most critical problems, such as war, terrorism, genocide and poverty, vigorous reforms are needed to make their policies more effective.Footnote 8 This is an essential prerequisite for the implementation of national policies, in accordance with the previous points, in a context of a multilateral trading system based on reciprocal commitments (Bagwell, & Staiger, 1999).

A couple of examples can be given to help clarify our argument. First, let us consider the reshoring programs that have gained momentum in many countries, to increase self-reliance and GVC resilience and robustness, and to face the financial crisis, political instability, COVID-19 pandemic, and, today, the Russian–Ukrainian war. Among others, in 2010, the Obama administration launched “Remaking America”, a program that restricted offshoring and promoted reshoring to the US; the Trump administration's “America first” policy greatly strengthened re-shoring in the US, with firms recognizing its political expediency, as well as the potential threat of tariffs on goods imported into the US. Continuingly, Biden stated that «diverse and secure supply chains» are a prerequisite for economic prosperity and that «resilient American supply chains» will rest on a «rebuilt domestic manufacturing capacity».Footnote 9 This approach is currently being confirmed, with particular attention being paid to friendly European nations.Footnote 10 As far as Europe is concerned, the UK has implemented “Reshore UK” to promote the relocation of overseas production facilities back to the country; France has implemented “Colbert 2.0” to encourage “Made in France” products in order to revitalize the domestic demand. Among the Asian countries, Japan and South Korea have allocated funds to incentivize the re-shoring of vulnerable supply chains, as have other countries around the world.

All of these programs have offered and are offering financial subsidies and assistance, tax reductions, and trade distorting incentives, thus largely contributing to the growth of discriminatory interventions, as illustrated in Fig. 1. Reshoring programs share the idea of supply chain disruption as part of what we have called the New Normal, thereby ignoring the effects of the protectionist policies implemented in the economy of other countries, and the consequent redistributive effects on a global scale. No attention has been paid to the externalities evoked by Baldwin as a source of secular progress, and, indeed, there has been a revival of a zero-sum logic that exacerbates economic imbalances and conflicts between countries. But what is most surprising and embittering is the insufficient reflection on the effectiveness of such programs in terms of national interest. Many doubts have arisen about the actual sensitivity of multinational corporations to financial incentives (e.g., Karatzas et al., 2022; Kim, & Do Chung, 2022), as well as to the superiority, in terms of social optimum, of reshoring subsidies over the alternative of subsidizing diversification, i.e. the formation of a second supply relationship (Grossman et al., 2021). And here is how Rodrik (2018, p. 88) concluded on the global tax-and-subsidy competition between states and the shortcomings of international institutions responsible for trade agreements: «In a world with mobile capital, governments are tempted to offer better terms to globally mobile corporations in order to compete for investment. This results in a sub-optimal Nash equilibrium with larger transfers to corporations and their shareholders than is globally desirable…. In view of the obvious cross-border externalities, enacting global disciplines on tax-and-subsidy competition would make excellent economic sense. Yet trade agreements never touch on this issue. They are replete with restrictions on what home governments can do to impose obligations on foreign investors. But they do not prevent these governments from wasting tax dollars and enriching corporations in a harmful race to the bottom». In the absence of international regulatory governance, reshoring programs seem more at the service of electoral policy and political power than leveraging on populistic nationalism and anti-globalization discontent. From this perspective, even unilateral activist approaches aimed at attracting FDI by competing with other states, through the provision of international investors with real and financial assistance services, should be carefully reconsidered so that they do not become ancillary to purely protectionist policies.Footnote 11

The second example concerns the new techno-nationalism, defined as «an emerging strain of geopolitical thinking and actions that link technological capabilities directly to a country’s national security and geopolitical benefits, and involves legal and regulatory restrictions or sanctions against selected foreign investors or foreign companies» (Luo, 2022, p. 551). The term “techno-nationalism” originated in the 1980s (Reich, 1987). According to the traditional view, it represents a set of policies that is aimed at strengthening the competitiveness of a nation, in the belief that its success, growth and prosperity depend on how well it innovates and spreads technology on the basis of the “national system of innovation”, as it will later be commonly called (Freeman, 1995). The new view adds a combination of ideological, political, economic and security considerations that echo the features of global protectionism. Comparing traditional and new techno-nationalism, Luo (2022) pointed out: (i) globalization is no longer seen as a means to upgrade national economies, but as a dangerous ground on which rival nations operate in the race to impose their own hegemony; in particular, restrictions against technology inflows and outflows and constraints on third country firms from doing business in the target country; (ii) the dominant logic shifts from developmental to national security purpose, with the aim of weakening the technological competitiveness of others rather than strengthening one's own; (iii) the economic doctrine shifts from a Schumpeterian vision to one in which the technological competition between countries is that of win-loss, thus excluding win–win outcomes that are achievable through the cross-fertilization and synergic cooperation that are associated with economic interdependence; (iv) the state does not recognize the relevance of technological interconnectivity and resource complementarity; its role in R&D reflects a new focus on boosting domestic innovation to include an antagonistic strategy of weakening rival countries.

As a consequence, the new techno-nationalism has amplified uncertainty and complexity on international markets and has caused the breakdown or obstruction of technological GVCs, through negative reciprocity policies that include not only funding for the reshoring of strategic manufacturing capabilities, but also the use of export controls, blacklists, blocked acquisitions, and sanctions (Graham & Marchik, 2006; Legrain, 2020; Sacks, 2020), all measures that are responsible for the current prevalence of protectionism and discrimination concerning FDI, as shown in Fig. 2.

No more words are needed to clarify the logical construct of techno-nationalism, which violates all the criteria listed above, and which is supported in this by the theory of political realism in international relations (Gilpin, 1984; Luo, 2022). Nonetheless, techno-nationalism has resurged vigorously as a doctrine embraced by the governments of the major powers. It has also become affirmed because of legitimate concerns, caused by a cross-country digital divide that impacts not only economic growth but also national security. Indeed, technological rivalry has become a fundamental part of the “great power competition” (Abdollahian, 2021; Greenwalt, 2019), as advanced technologies, such as artificial intelligence, quantum computing, big data, robotics, the Internet of things and more are essential for building both a digital society, and the future military-industrial complex. Yet, governments seem to lack the awareness and/or capabilities to concertedly address the dark sides of these policies, which contribute to a great extent to international instability.

5 Conclusion

This article should be considered an open book with many question marks. Therefore, the conclusion is problem-posing and perhaps unusual. The takeaway message is that radical changes are on the agenda of a future that could follow dangerous paths of the past. We argue about this from the economic and industrial policy points of view and with regard to the prevailing themes of the international organization of production. The criteria we have advanced for policy design are open to discussion among scholars. They are not new to literature, but they seem to be largely disregarded. Their adoption in the elaboration and proposition of ideas does not seem problematic. It is harder to express an opinion on whether the current capitalist governance of international relations is able to address and implement what it derives from the application of these criteria. But if this is not achieved, more complex questions will emerge about the current hybrid configuration of democracy and authoritarianism, of private and state capitalism, and of global and nationalistic collective drives. Certainly “the end of history” (Fukuyama, 1992) will have to wait a very long time.