Princeton University Professor of History and International Affairs Harold James joins Yahoo Finance Live to discuss whether globalization will be reversed in the wake of the Russia-Ukraine war, inflation, and other events leading to economic reorientation.

Video Transcript

BRIAN SOZZI: All right, let's get back on the developing situation between Russia and Ukraine and the response from the West. Harold James is a professor of history and international affairs at Princeton University and joins us now. Harold, good morning to you. I think a lot of us in the world of business remain focused on what Larry Fink said yesterday in his annual letter that it is the end of globalization. What does that mean to you?

HAROLD JAMES: Well, it's great to be with you first of all. Indeed, I've been thinking about the way in which globalization can be reversed for a long time. In 2001, I did a book called exactly that, "The End of Globalization, Lessons from the Interwar Depression." And the interwar depression is always the kind of keystone moment if you're thinking about reversals of globalization where everything collapsed. Trade collapsed, capital movements collapsed, migrations of people collapsed. And it was obviously a decade or so in the 1930s that in the end produced World War.

I thought then in the early 2000s that there was a possibility that something like that might happen again. We're seeing some kinds of similarities I think now. But actually, I wonder, I'm not quite in the same boat as Larry Fink in the longer term perspective on this because I think that in the past, supply chain shocks, sudden surges of inflation reorientations of the world economy, they actually produce more rather than less globalization.

And if you think of the 1970s, and you know, I think we're in a lot of discussion now about whether we're repeating some aspects of the 1970s. In the end the 1970s produced a big, big expansion of trade, a big expansion of capital movements, more population flows. And it was also obviously a moment of inflation. We're seeing that very, very sharply and very seriously now.

But one of the ways that you can think of dealing with inflation is to open up more. And so maybe in the longer run, you know, this is not tomorrow. It isn't in a month's time. But in some years time, we will see more rather than less globalization.

JULIE HYMAN: And Harold, it's Julie here. It does feel as though we are seeing some kind of birthing of a new world order as a result of the last two years of pandemic as well as Russia's invasion of Ukraine. It's difficult to see now what it's going to look like on the other side. But given your deep reading of history both that interwar period you were talking about and more recent periods, what do you think? What kind of big changes are we going to see on the other side of this?

HAROLD JAMES: Well, the big story since the global financial crisis, and I think intensified in the pandemic has been the question about what China is going to do, how China is going to fit into this new world order. And that's a question that's very much in the air at the moment. There are some people in China and the Chinese leadership who think that the story with Russia and Ukraine is an attempt by the West to limit competition and to limit the rise of China. And so they think that they should tie themselves very much to Russia.

On the other hand, I think there's an argument, and it gets stronger day by day that the incompetence of the Russian performance, the brutality of it, the inhuman character of it indicates that this is not something that you want to tie yourself to. And that there's also a perspective that sees that China's future is with a trade system that's open because after all, the Chinese want to sell their products.

They've really got to sell their products. And they're not really going to be able to do that to Russia. So the critical thing I think in terms of thinking about how Russia is going to move is kind of pressure that China will put on it. And I believe that that pressure will get more and more intense to push Russia to end this exercise as quickly as possible.

BRIAN SOZZI: If Russia is booted from the G20, what other dominoes could fall after a maneuver like that?

HAROLD JAMES: I think the G20 has become less central in any case since the global financial crisis. It was incredibly central in 2009, 2010 in orchestrating the response. It's been less than visible really in terms of dealing with the pandemic. And so pushing Russia out of the G20 is a kind of symbolic action. I don't think that's as serious as the sanctions issue.

The sanctions, the issue is really what is going to limit Russia because the question is, who can Russia trade with? How can they buy the kinds of goods that they need? I mean, they need for instance, aircraft parts in order to keep the aviation fleet going. And a lot of the civil aviation in Russia is from Boeing or from Airbus. Where can they get those parts from? Without some kind of connection, Russia can fall apart really easily.

And you can see I think, an increasing desperation in terms of the way in which Russia is thinking of ways of trying to keep its ties to the International economy. And that I think makes the imperative. I mean, this is what President Biden is doing at the moment, the imperative to cut those ties as quickly as possible so that the main I think, sanctions I see as being cutting off financial ties and cutting off above all, trade ties. And you know, whether Russia is in the G20 or not I think is, in the end, a bit peripheral.

JULIE HYMAN: I'm curious your view on another institution, professor, and that is the European Union, which seems to have only been strengthened by this. And I'm curious what you think going forward not just the European Union, but also I know that you have studied Germany. And I'm curious about your view of Germany's role in the EU following this because it seems to have made I think, we could say perhaps some missteps in the decades prior to this in terms of its energy relationship with Russia.

HAROLD JAMES: Yes, absolutely. I mean, that's the one big weakness. And it's also a inherent tension or possible division in the European Union. In the past, in particular, in crisis moments, the European Union, although there are 27 countries there, the European Union in crisis moments became a Germany and France show. And France has a very different kind of set up.

To start with, it's got the nuclear military capacity. But it's above all not as energy dependent because it's done and nuclear energy as a way of managing its energy issues. Germany, on the other hand, has put more and more into thinking of getting the gas links to Russia. And you know, gas is obviously a relatively clean energy. It doesn't have the dangers of nuclear energy. And that was what in the past Germans were very, very concerned with.

So Germany under Chancellor Merkel had really pushed the exit from nuclear energy. The greens and the government now are also historically committed to that. But the consequence has been this gas dependence. And Germany is also very, very dependent on the openness of a multilateral trade order. So you know, Germany is in a sense, the key case.

But I think you're seeing the mood shifting really, really quickly. And the end of Nord Stream 2, the second of the big Russian pipelines is an indication of the way in which Germany is going. And you know, there is I think, that's fundamentally, if you ask what the heart of the European project is, it's about the commitment to values. They've been putting this again and again on the table.

And this is the moment I think when many people will say, is that commitment just blah blah? And you know, is it just verbal rhetoric? Is it cheap talk? Or is there a serious commitment. If there is a serious commitment, then they've really got to do something in terms of sanctioning Russia.