World War I and the global economic depression in the early 1930s ushered in the demise of a previous era of globalization. Apart from a resurgence of trade barriers and capital controls, an important explanation for this demise is the fact that more than 40 percent of all countries at the time entered default, cutting many of them off from the global capital markets until the 1950s or much later. By the time World War II ended, the new Bretton Woods system combined domestic financial repression with extensive controls of capital flows, with little resemblance to the preceding era of global trade and finance.
The modern globalization cycle has faced a series of blows since the financial crisis of 2008–2009: a European debt crisis, Brexit, and the U.S.-China trade war. The rise of populism in many countries further tilts the balance toward home bias.
The coronavirus pandemic is the first crisis since the 1930s to engulf both advanced and developing economies. Their recessions may be deep and long. As in the 1930s, sovereign defaults will likely spike. Calls to restrict trade and capital flows find fertile soil in bad times.
Doubts about pre-coronavirus global supply chains, the safety of international travel, and, at the national level, concerns about self-sufficiency in necessities and resilience are all likely to persist — even after the pandemic is brought under control (which may itself prove a lengthy process). The post-coronavirus financial architecture may not take us all the way back to the preglobalization era of Bretton Woods, but the damage to international trade and finance is likely to be extensive and lasting.