[Insight & Opinion] Systemic and Political Risks of Globalization

Since the end of the Cold War, most countries around the world have pursued economic globalization characterized by openness and liberalization. However, the main issue in the current international economy is rapidly shifting from economic globalization to economic security. If the fundamental social goal driving globalization was efficiency, the goal of economic security is stability. The direct cause of economic security, which emphasizes stability rather than efficiency, emerging as a key issue in international political economy is the concern that the deepened economic interdependence caused by globalization can be used as a political weapon, as well as the disruption of global supply chains caused by the COVID-19 pandemic. The advent of the era of economic security means that not only achieving the economic efficiency brought by globalization but also suppressing the economic risks that globalization may cause must become core tasks of economic diplomacy.

The deepened economic interdependence due to globalization has increased efficiency but has also amplified the risks that can cause economic difficulties due to disruptive events such as the COVID-19 pandemic. Suppressing and managing the risks that economic globalization may cause is an essential task to maintain the stable growth of the Korean economy. However, focusing on economic security issues must also consider blocking the possibility of leading to ‘deglobalization.’ In other words, economic security aimed at stability should not be pursued in a way that seriously undermines the efficiency brought by globalization.

For the pursuit of economic security not to undermine the liberal international economic order, it is necessary to distinguish between the ‘systemic risks’ and ‘political risks’ caused by globalization. Systemic risks are problems that inevitably arise as economic interdependence increases due to the integration of the global economy. In contrast, political risks arise because there are countries attempting to strategically use economic interdependence as a political weapon. Since the only unrealistic way to completely eliminate systemic risks is to form a self-sufficient economic system, systemic risks are not problems to be eliminated but issues to be managed through international cooperation. On the other hand, political risks are issues of restructuring the global economy by reducing the share of countries that use interdependence as a political weapon in the global economy.

At this point where major countries in the global economy are pursuing their own country-centered economic security, South Korea also needs to pursue economic diplomacy in a way that maximizes its national interests. At the same time, preventing economic security issues from undermining the stability of the liberal international economic order is also a matter of safeguarding South Korea’s national interests. The economic risks arising from disruptions in global supply chains are largely systemic risks inherent in the characteristics of the international economic order called globalization, rather than political risks caused by specific countries strategically using economic interdependence. Therefore, international cooperation to manage the systemic risks of globalization is as important an issue as economic security. In this regard, the Korean government needs to distinguish between the systemic risks arising from the deepening of economic interdependence and the political risks caused by the politicization of interdependence, and simultaneously conduct multilateral diplomacy and alliance diplomacy in the era of economic security.

Jae-Hwan Jeong, Professor, Department of International Relations, Ulsan University