Has capitalism gone global?

Core idea

Global capitalism is not new — it is on its third wave. The first was the merchant capitalism of the 15th and 16th centuries, when European trading companies, the Atlantic slave triangle, and silver from the Americas first wove the continents into a single commercial circuit. The second was the 19th-century imperial economy, organised around a hard division of labour: a small core of industrial nations manufactured goods, while the rest of the world supplied food, raw materials, and captive markets behind imperial borders. The third — running from roughly 1980 to today — is qualitatively different because production itself has gone global. Transnational corporations now operate inside dozens of countries simultaneously, capital flows are continuous rather than periodic, and labour markets are increasingly integrated through cross-border production chains.

Author's argument: Globalisation is not a single event but a long oscillation. Each wave was enabled by a communications revolution — sail, then steam and telegraph, now containers and the internet — and each transferred power between capital, labour, and the state in a different way.

Why it matters

Treating globalisation as new misreads the politics around it. It is not the existence of cross-border capitalism that distinguishes our era — that has been true for five centuries — but the organisational shape of the current phase. When goods crossed borders but production stayed national, governments could tax, regulate, and bargain with capital from a position of strength. When the production process itself spans borders, those tools weaken: a corporation can relocate a factory faster than a parliament can legislate. Recognising that this is a phase, not an endpoint, also matters — the 19th-century global economy reversed into protectionism between 1914 and 1945, and the post-1980 phase is not guaranteed to be permanent either.

What's actually different this time

Two structural shifts separate this wave from the earlier ones. First, production has been disaggregated: a single product is assembled from components made in a dozen countries, designed in a thirteenth, financed from a fourteenth. Second, the imperial container is gone. Earlier global capitalism ran inside formal empires that linked metropoles to colonies through political control. Post-1945 decolonisation removed those walls; capital and labour now cross frontiers that have no single sovereign behind them.

Why the power balance shifted

When capital is mobile and labour is not, the bargain between them tilts. A unionised plant in Manchester cannot easily threaten to walk out when its employer can relocate to Shenzhen — but the employer can. Nation-states feel a parallel pull: cutting taxes, weakening labour law, and softening environmental enforcement become tools for attracting capital rather than constraining it. This is the dynamic the term race to the bottom describes.

Key takeaways

Mental model

Copy sourceZoom

Practical application

Diagnose globalisation claims with the three-wave test

Spot the race-to-the-bottom dynamic

When a government justifies weakening labour, tax, or environmental rules by saying it must "remain competitive" for investment, the structure of the argument is the race to the bottom: because capital is mobile and because other jurisdictions have already lowered their standards, this one must follow. The question is not whether each individual concession makes the country attractive — it usually does — but whether the cumulative effect across all competing jurisdictions leaves anyone better off. The mobile factor (capital) captures the gain; the immobile factor (labour, environment) absorbs the cost.

Watch for the reversal signal

Wave 2 reversed after 1914 into tariffs, capital controls, and imperial preference. A reversal of Wave 3 would look similar in structure even if the politics differ: rising tariffs, reshoring incentives, restrictions on cross-border data flows, and bilateral deals replacing multilateral rules. None of these mean the end of capitalism — Wave 2 ended without ending it — but they would mean that the bargain between capital, labour, and the state is being rewritten in favour of the state.

Example

Consider how a mid-range pair of running shoes reaches a shopper in Berlin in 2024 — and how that journey would have looked in each previous wave.

Wave 1 (1700). A Berlin merchant buys English-made leather shoes, manufactured in a single workshop in Northampton from English hides. The exotic content is the dye, perhaps indigo from a Bengal plantation reached by a Dutch East India Company ship. Production is national; only the inputs and the final shipping are international.

Wave 2 (1900). The shoes are made in Birmingham from rubber tapped in British Malaya and hides processed in Argentina, sold across the British Empire on preferential terms. A Berliner buys them through a German importer who paid in sterling, settled via the gold standard. The factory, the firm, the workers, and the regulations are all national — only the commodities and the financing cross borders.

Wave 3 (2024). The shoes are designed in Oregon, the sole moulded in Vietnam, the upper stitched in Indonesia, the laces and packaging sourced from China, the logistics coordinated from a Dutch warehouse, the brand owned by a German parent, and the final retail margin captured by an algorithm running on US servers. No single country contains the firm; no single workforce can negotiate with it as a whole. If Indonesian workers organise, the upper can move to Bangladesh within a year. The shopper benefits from the lower price; the German shoemaker who once worked in Pirmasens does not.

The product looks similar across all three eras — but the political object underneath it is unrecognisable from one wave to the next. That is what is genuinely new about this phase of global capitalism.

Related lessons