How technology is shaping a new era of ‘vertical’ globalisation

Since the postwar liberal order was fashioned by the US and its allies, the entire world progressively became integrated into a uniform system of institutions, protocols and ideas.

If a country wanted to develop, it had to adhere to the theodicy of globalisation or become a pariah state like North Korea and Iran.

Meanwhile, multinational corporations flourished as new markets were systematically pried open. Enormous progress was made – economic growth, technological and infrastructural development, alongside the global movement of people.

But as all of this happened, resentment grew as winners and losers from the regime of globalisation emerged. The more nations globalised, the more they saw foreign interests dictating their future. Outsourcing to China and India meant they were unable to be economically competitive. As economic and social barriers were knocked down, with it came the perceived erosion of identity and culture.

There appeared to be no choice but to accept this paradigm – until now.

With the help of technology, governments are finding themselves able to walk away from longstanding institutional arrangements to forge a new independence and reassert control over their destiny.

In doing so, has a new phase of globalisation been ushered in?

“Instead of the world being open and accessible as it has been for decades, now it is becoming full of technology-based walls and barriers,” geopolitical futurist Abishur Prakash tells TRT World.

“The world is becoming vertical,” he stresses. “These walls and barriers are not only blocking out other countries and companies, but they are splitting the world along new fault lines.”

Prakash’s latest book The World Is Vertical: How Technology Is Remaking Globalization, attempts to diagnose the formation of a new world order that is being fuelled by technologies like AI and 5G. As the era of global cooperation and connectivity comes to an end, he forecasts how this new vertical design of globalisation will drive the world for decades to come.

Institutions

One of the biggest drivers of globalisation is the institutional interconnectedness that every single nation was plugged into.

Now, however, a new set of institutions are emerging that do not involve the whole world. From the UK creating the D10 (an alliance of 10 democracies that would set the global rules for 5G), to the Global Partnership on Artificial Intelligence (a group of 20 countries looking to govern the use of AI and algorithms), formations are becoming exclusive and tech-focused.

“These all represent new tribes of nations that are emerging,” observes Prakash. “Instead of governments looking to cooperate with one another, they are looking to cooperate with like-minded nations.”

Institutions, then, are facing perhaps the biggest crisis of relevance: What is their purpose? Who are they leading?

Because tech-focused institutions are becoming exclusive, there won’t be just a few of them. China and Russia could create their own equivalents. It also raises new questions: What happens when nations are simultaneously part of various groupings, whose rules are followed?

Inevitably these multiple competing institutions, which are trying to govern the same technologies, will only drive global splitting, says Prakash.

Corporations

Multinational corporations reaped the windfalls of globalisation to the point where companies like Apple are worth more than the GDP of most countries. Those like General Electric, IBM and Facebook succeeded because they were able to expand into markets around the world with few restrictions to access consumers.

“Now with governments establishing tech-based laws and barriers, they are blocking out corporations from certain countries,” Prakash notes.

The most significant example is the case of Chinese telecoms giant Huawei, which has been brought to its knees on the back of vertical decisions taken by western governments. China is similarly decoupling from its reliance on foreign hardware technologies to build up semiconductor independence, as is the EU with Gaia X and its pursuit of cloud sovereignty.

There are unprecedented approaches too. Prakash points to how in India ecommerce companies like Amazon and Flipkart will display the origin of where a product was manufactured. Why? Because of New Delhi’s rising tensions with Beijing, India doesn’t want its consumers to buy Chinese products.

By utilising technology to restrict how it does business with China, the Indian government is influencing its citizens to “buy patriotically” – a trend Prakash sees as part of a new form of techno-nationalism which will start to express itself around the world.

Companies are also starting to pick sides, a cardinal sin in the previous iteration of globalisation, where profitability was ostensibly tied to political neutrality. Decisions like Wells Fargo telling its employees to delete TikTok, or Australian sovereign wealth fund Future Fund drawing down investments to China are becoming more common.

As a result, corporations will need a brand new strategy for how they will operate in a world where they will not be able to effortlessly transcend borders and service global consumers as they once did.

Big Tech

Meanwhile, technology behemoths are also facing a paradox: having become global stakeholders and emerging equally as powerful as governments, they are increasingly being confined by borders as governments look to clamp down on their operations to reassert sovereignty.

On the other hand, these companies are creating their own vertical borders too, says Prakash, highlighting how many of the world’s undersea cables are being built by Google, Huawei and Softbank, which would enable them to promote their services to foreign populations by virtue of monopoly over internet connectivity.

Digital currencies are another avenue. While Facebook, which sent shockwaves down the entire financial system when it unveiled its own private currency the Libra in 2019, was “nice enough” to go back to the drawing board, Prakash warns that the next company might decide to wield a disruptive “Uber-style attitude” to fight governments on monetary sovereignty.

“We have to think about the capabilities these tech companies have,” says Prakash, underscoring how a company exerting control over a currency that billions might adopt is a reality that has hitherto never existed, and one with the capacity to fragment the world even further.

For the moment, the only country carrying out a major crackdown on Big Tech is China. Since Beijing’s war on online giant Alibaba started last year, its charismatic founder Jack Ma has virtually disappeared from public life. Alibaba-affiliate Ant Group, has seen its initial public offering blocked, as the technology sector has become the target of an ideological and regulatory frenzy.

For Prakash, it’s a calculated powerplay. “The Chinese government has gained an immense amount of control over tech companies at a time when it’s engaged in a global battle for power.”

The handover of Ant Group’s most ambitious project, a blockchain system for cross-border trade, has given Beijing access to its entire trove of data.

“The crackdown across strategic sectors,” Prakash declares, is picking up pace because Beijing “wants to gain more control and use these companies as tools of geopolitics.”

Individuals

Unlike the previous era of globalisation, the vertical world is set to have a more pronounced effect on people too. Previously, outside of a terrorist attack or war, there wasn’t a reason to care about geopolitics.

“With technology, we are feeling geopolitics in our lives like never before,” says Prakash.

One of the most prominent examples occurred last year after the Himalayan skirmish between India and China, to which India responded by banning Chinese apps like TikTok. However, it was a decision which led to many in India losing their livelihoods overnight.

“By banning Chinese tech, India has established a new wall between itself and China – and now that wall is disrupting the lives of people.”

Just earlier this month, Microsoft-owned social network LinkedIn announced it would be exiting the Chinese market by the end of this year due to a “challenging operating environment,” as another global bridge that connected the Chinese population with the rest of the world is being brought down.

The vertical world is also about society splitting. Take the example of how during Donald Trump’s re-election rally last summer in Tulsa, Gen Z TikTok users reserved seats so Trump supporters couldn’t attend.

Such instances reflect how citizens are playing a new role in the political process, using technology to drive more division as different ideologies clash with each other, adds Prakash.

US-China competition

During the biggest upheaval since World War II, technology has become the terrain upon which the fight for global hegemony is taking place; one that not only will determine whether China becomes a global superpower, but whether the US continues to remain one.

While we exit an epoch where there could only be one superpower, the US and China are looking to carve up the world into two separate and competing centres.

In the process, a bipolar digital world will emerge. As former Google CEO Eric Schmidt and Chinese political scientist Yan Xuetong have said, we are moving towards a “bifurcation into a Chinese-led internet and a non-Chinese internet led by America”.

As this happens, “a digital Iron Curtain is falling across the world, fragmenting the world into US-China camps,” says Prakash.

At the same time, individual countries are recognising they do not have to join either camp.

Japan, which has long depended on the US for its security, is now turning towards AI for its defence requirements. Japanese conglomerate Softbank recently proposed that Japan create its own AI corridor with India and Southeast Asia.

“Japanese businesses are among the most globalised. But now they’re also taking vertical action by looking to connect with specific countries and regions,” Prakash states.

According to Prakash, only a handful of nations like China, the US, UK, Germany and India are driving the vertical world. “The fortunes and fates of every business, economy and society will be defined by the radical decisions that nations are making with technology,” he submits.

“The world that billions have grown up in is fading away. The vertical world that is emerging will put everyone in the hot seat in unimaginable ways.”