18 March, 2026
Security, Power, and the Fragility of Economic Order
Thesis
Deep globalization is historically exceptional rather than normal. Periods of extensive international economic integration appear only when political leaders judge the risk of great power conflict to be sufficiently low to allow economic systems organized primarily for efficiency rather than security. When those judgments change, governments reorganize economic arrangements around industrial capacity, resource access, technological leadership, and reliable alliances.
The globalization of the post Cold War era (1991-20??) therefore appears less as the culmination of economic history than as a temporary phase enabled by unusually low perceived geopolitical risk. Modern economic history reveals a recurring pattern in which periods of global economic integration emerge when the strategic environment appears stable, only to erode as geopolitical competition intensifies beneath the surface. When security concerns return to the forefront, economic efficiency ceases to be the dominant organizing principle of international economic life.
Economic Order and National Security
Economic systems cannot be separated from the strategic realities faced by states. The ability of a nation to sustain military power ultimately depends upon industrial capacity, energy supply, technological leadership, and secure access to critical resources. Trade, finance, and production networks therefore exist within a broader structure shaped by geography, political authority, and the security needs of societies.
When governments judge the geopolitical environment to be relatively benign, they tolerate extensive economic interdependence. Trade barriers fall, capital flows increase, and firms distribute production across borders in pursuit of efficiency. Under these conditions international economic integration can expand rapidly.
When leaders perceive rising geopolitical rivalry, they reach different conclusions. Governments begin to emphasize domestic industrial capacity, secure access to resources, and economic resilience. Supply chains shorten, trade becomes more regional, and economic policy becomes more closely aligned with national security priorities. Economic history therefore reflects a sequence of political judgments about the strategic environment.
The First Globalization: 1870–1914
The late nineteenth century produced the first modern era of globalization. Between roughly 1870 and the outbreak of the First World War, international trade expanded rapidly. Steamships and railways reduced transportation costs and integrated commodity markets across continents. Capital flowed across borders on a large scale, with London serving as the central hub of global finance. Tens of millions of people migrated between Europe and the Americas.
To many contemporaries, the system appeared stable and peaceful. Economic interdependence was widely interpreted as a force that would promote international cooperation and reduce incentives for conflict. Yet beneath the appearance of stability, geopolitical tensions were intensifying.
European powers competed aggressively for colonial territories during the Scramble for Africa. Kaiser Wilhelm II pursued policies that openly challenged the geopolitical position of the British Empire, including naval expansion and more assertive diplomacy. Nationalist movements destabilized the multiethnic empires of Eastern Europe and the Balkans. In East Asia, the collapse of the Qing dynasty and Japan’s rapid modernization introduced new strategic dynamics, leading to conflicts with China and Russia over Korea and Manchuria.
Industrialization itself intensified the struggle for resources. Expanding industrial economies required reliable access to metals, rubber, fossil fuels, and agricultural commodities. Control over resource rich territories became increasingly central to national strategy.
The late nineteenth century global economy therefore operated on two levels. Economic integration expanded rapidly on the surface while geopolitical rivalry intensified beneath it. When the First World War erupted in 1914, the integrated economic system collapsed quickly. Trade contracted, capital movements halted, and governments delinked their currencies from gold and mobilized and militarized their economies for sustained wartime production.
Strategic Autarky and the Road to World War II
The period from 1914 to 1945 constituted a single strategic era dominated by attempts to reorganize national economies around security and resource control. The First World War exposed the vulnerability of industrial states that depended heavily upon global trade. Naval blockades and shipping disruptions deprived Germany of food, fertilizers, and industrial inputs. German leaders concluded that the country had been dangerously reliant on imported resources.
Many German strategists subsequently argued that national survival required economic self sufficiency secured through territorial expansion. Eastern Europe was viewed as a potential agricultural and resource base capable of sustaining German industry and population during prolonged conflict.
Italy and Japan drew related conclusions from the international order that emerged after the war. Leaders in both countries believed that the dominant powers, particularly Britain, France, and the United States, had constructed a global system that marginalized late industrializers and denied them secure access to resources and geopolitical status.
Japanese leaders intensified efforts to secure control over resource rich territories in East Asia. Industrialization increased the demand for raw materials and agricultural commodities, reinforcing the perceived need for territorial expansion across China and Southeast Asia.
The globalization of the late nineteenth century had therefore not eliminated geopolitical competition. Instead, industrialization intensified rivalry over resources, industrial capacity, and geopolitical status. It fuelled resentment, revanchism, and irredentism. The Second World War represented the culmination of these strategic and economic conflicts.
The Cold War Economic Order
The international economic system established after 1945 differed fundamentally from both the nineteenth century globalization and the later post Cold War model. The Bretton Woods system did not create a single integrated global economy. Instead, it organized economic cooperation among the United States and its allies within a broader geopolitical confrontation with the Soviet Union.
Institutions such as the International Monetary Fund, the World Bank, and the General Agreement on Tariffs and Trade helped stabilize financial relations and facilitate trade among Western economies. At the same time the United States financed reconstruction in Western Europe and Japan while maintaining extensive military alliances such as NATO.
The Cold War world economy was therefore bipolar rather than global. The Soviet Union organized its own economic network through the Council for Mutual Economic Assistance (COMECON), which coordinated trade and industrial planning among socialist states. Economic integration occurred primarily within each bloc, and trade, finance, and industrial policy were closely tied to strategic considerations arising from geopolitical rivalry.
Monetary and Energy Shocks in the 1970s
The Cold War economic system evolved significantly during the 1970s in response to monetary and energy disruptions. In 1971 the United States ended the convertibility of the dollar into gold, effectively terminating the Bretton Woods monetary system. Governments adapted by shifting toward floating exchange rates while the dollar retained its central role in global finance.
Soon afterward, the oil shocks of the 1970s exposed another vulnerability in industrial economies. The Arab oil embargo of 1973 and the second oil crisis of 1979 demonstrated the dependence of modern economies upon reliable access to energy supplies.
Western governments responded by negotiating agreements with Saudi Arabia and Arab Gulf states to price oil in US dollars, establishing strategic petroleum reserves, strengthening energy diplomacy, and expanding domestic energy production where possible. Despite these adjustments, the broader strategic framework of the Cold War remained intact. Economic arrangements continued to serve geopolitical objectives within a divided international system.
The Post Cold War Globalization
The collapse of the Soviet Union fundamentally altered how many leaders interpreted the strategic environment, and there was a real sense of euphoria in the West. Fukuyama’s End of History and the Last Man captured the mood. Liberal democracy and market economics seemed to have won, and great power rivalry looked like a thing of the past. Based on this assumption, governments expanded global economic integration through trade liberalization, financial globalization, and the development of multinational supply chains.
China’s entry into the global trading system transformed the structure of the world economy. Rapid industrialization and export led growth made China the central manufacturing hub of the global system. This export boom generated enormous capital surpluses within China. Because the Chinese financial system remained heavily controlled and insulated from full domestic liberalization, much of this surplus capital had to be deployed externally.
Chinese firms and state institutions therefore began investing heavily across the globe in infrastructure, energy, mining, manufacturing, and technology. These investments expanded China’s economic influence across Asia, Africa, Europe, and the Americas. For roughly two decades the global system appeared highly successful and economically efficient.
Erosion Beneath the Surface
The political foundations of globalization began to weaken well before the disruptions of the 2020s. China’s rapid industrial and technological expansion altered the global balance of power, while Russia increasingly challenged the post Cold War settlement, most visibly in Vladimir Putin’s 2007 Munich Security Conference speech.
The global financial crisis of 2008 further weakened confidence in the Western led financial order and intensified political skepticism toward globalization. Despite these developments, global economic integration continued for many years. As in the late nineteenth century, the system once again operated on two levels. Economic cooperation continued on the surface while geopolitical rivalry gradually intensified beneath it.
The Shock of 2020
The COVID pandemic exposed the fragility of the globalized system. Disruptions to transportation, production, and logistics revealed the extent to which many countries had become dependent upon long and complex supply chains for essential goods, including medical equipment, pharmaceuticals, and semiconductors.
Governments responded by reassessing earlier economic assumptions. Political leaders began emphasizing domestic industrial capacity, supply chain resilience, and technological sovereignty. Economic efficiency remained important, but it was no longer treated as the sole organizing principle of the international economy.
Strategic Implications: The Return of Security Economics
If globalization is historically exceptional rather than normal, the current reorganization of the world economy reflects a shift in strategic judgments rather than a collapse of an otherwise stable system. Industrial capacity is returning to the centre of national strategy. Steel, aluminum, energy systems, semiconductors, advanced manufacturing, and logistical infrastructure form the material foundation of military power.
Emerging technologies are also becoming central to strategic competition. Artificial intelligence and quantum technologies are increasingly viewed as critical capabilities with both economic and military applications. Supply chains are therefore increasingly treated as strategic assets rather than purely economic arrangements. Dependence on rival powers for essential components creates vulnerabilities during geopolitical crises.
Governments are responding by relocating critical production, diversifying suppliers, building strategic stockpiles, and prioritizing trade relationships with politically reliable partners.
Implications for Canada
For resource rich countries such as Canada, the return of security economics has significant implications. Industrial metals, energy resources, and critical minerals are not merely commercial commodities. They are strategic inputs essential to advanced manufacturing, technological systems, and modern military capability.
Canada possesses large reserves of energy, metals, and critical minerals, as well as advanced technological and industrial capabilities. In an era of renewed geopolitical competition these assets position the country as an important supplier within the industrial and technological networks of allied states.
The challenge for Canadian policymakers is to recognize that these resources are strategic as well as economic. Industrial policy, energy development, and resource production therefore form part of the broader architecture of national and allied security.
Conclusion
The globalization of the late twentieth and early twenty first centuries now appears less like the culmination of economic progress than like a temporary configuration enabled by favourable geopolitical conditions. Modern history reveals a recurring pattern. When leaders judge the strategic environment to be relatively stable, they allow the development of economic systems organized around efficiency and international integration. When geopolitical rivalry intensifies, those same leaders reorganize economic life around security, resilience, and control over critical resources.
The international economy therefore reflects political judgments about power and risk rather than autonomous economic forces. Periods of globalization are fragile political achievements. When the strategic environment changes, the economic order changes with it.
© 2026 Richard Martin | The Strategic Code