Much of the debate surrounding the global economy continues to treat the succession of crises since 2020 as a prolonged disruption to an otherwise familiar order. The pandemic, Russia’s invasion of Ukraine, the global energy crisis, the return of industrial policy, renewed tariffs, export controls and the accelerating technological rivalry between the United States and China are often analysed as discrete events, each demanding its own policy response.

Viewed together, however, they suggest something more consequential. They point not simply to a period of heightened geopolitical instability, but to the gradual replacement of the strategic assumptions that underpinned globalization itself.

For more than three decades, the international economy rested on a relatively stable bargain. Economic interdependence was expected to reinforce political stability, while global markets rewarded efficiency above all else. Production migrated to wherever costs were lowest, energy security became synonymous with access to global markets and technological innovation flourished within increasingly integrated supply chains. Governments accepted a growing degree of strategic dependence because the economic dividends appeared to outweigh the political risks.

That calculus is now being reassessed. The shift is frequently described as a move from globalization towards fragmentation. While not inaccurate, this framing risks obscuring what is actually changing. The defining feature of the emerging order is not fragmentation as an end in itself, but the elevation of economic security to a first-order policy objective. Efficiency has not disappeared as an economic imperative; it has been subordinated to considerations of resilience, sovereignty and strategic control.

This evolution is evident across sectors that, until recently, were largely treated as commercial domains. Energy systems, semiconductor manufacturing, advanced computing, telecommunications infrastructure, critical minerals and defence-industrial capacity are increasingly viewed through the language of national security. What matters is no longer simply access to these capabilities, but where they are located, who controls them and under which political conditions they can be relied upon.

As a consequence, the relationship between markets and the state is also being redefined. Industrial policy, once regarded as an exception justified only under extraordinary circumstances, is steadily becoming a structural feature of economic governance. Subsidies, investment screening, export controls and strategic procurement are no longer temporary departures from liberal economic orthodoxy. They have become instruments of statecraft in an international environment where economic exposure is increasingly understood as a source of geopolitical vulnerability.

This transformation should not be interpreted as a retreat from globalization in its entirety. International trade will continue, capital will continue to circulate and technological collaboration will remain indispensable across many sectors. What is changing is the political framework within which these exchanges take place. Cross-border economic integration is increasingly viewed as carrying strategic implications rather than being politically neutral. Governments are increasingly distinguishing between forms of interdependence that foster mutual resilience and those that create asymmetric dependence.

The evolution of relations between the United States and China offers perhaps the clearest illustration of this new logic. Recent diplomatic engagement between Secretary of State Marco Rubio and Chinese Foreign Minister Wang Yi sought to preserve channels of communication and reduce the risk of strategic miscalculation. Yet almost simultaneously, senior US officials publicly accused Chinese artificial intelligence developers of appropriating proprietary American frontier models, while reinforcing the rationale behind tighter controls on advanced computing infrastructure. The significance of these accusations, as explained by Decode39, lies less in whether every claim can ultimately be substantiated than in what they reveal about Washington’s strategic framework. Artificial intelligence was approached primarily as a domain of commercial innovation, but now it is increasingly treated as strategic infrastructure whose control carries implications for military capability, economic competitiveness and geopolitical influence.

The apparent coexistence of diplomatic engagement and technological confrontation is therefore less contradictory than it appears. Rather than choosing between cooperation and competition, the United States and China are embedding elements of both within its broader strategy. Diplomatic engagement is intended to reduce the risks associated with rivalry between two nuclear powers whose economies remain deeply intertwined. Economic statecraft, by contrast, is increasingly directed towards shaping the technological balance of power over the longer term.

This distinction matters because it extends well beyond the bilateral relationship. As strategic competition increasingly revolves around technology, infrastructure and industrial capacity, middle powers are finding that economic policy can no longer be separated from questions of national security. Decisions concerning supply chains, investment screening, research collaboration or digital infrastructure are becoming components of foreign policy rather than merely instruments of economic management.

Europe illustrates this dilemma with particular clarity. The continent derived considerable benefit from an international order characterised by inexpensive imported energy, open export markets and a comparatively benign security environment. Those conditions have weakened simultaneously. As a result, debates over defence spending, industrial competitiveness, energy resilience and technological sovereignty are no longer separate policy conversations. They increasingly constitute different dimensions of the same strategic adjustment.

Whether this emerging order proves more stable than the one it is replacing remains uncertain. Nor is it inevitable that every attempt to enhance resilience will produce greater security; the pursuit of strategic autonomy carries economic costs and risks creating new forms of fragmentation. What appears increasingly difficult to sustain, however, is the assumption that economic integration can once again be treated as politically detached from geopolitical competition.

The challenge facing governments is therefore no longer how to restore the operating conditions of the globalization era. It is how to govern an international economy in which security considerations have become embedded in economic policy itself. That transition is already under way. It is unlikely to prove temporary: security has replaced efficiency, there is no going back.