The post-globalization world is already here. For three decades, we were taught that free markets, open trade and global supply chains were the most efficient way to generate prosperity. However, recent years tell a different story, as countries increasingly prioritize trust over cost efficiency. This shift reflects a deeper transformation in how nations define economic rationality in a world shaped by geopolitical risk.
This is the age of techno-nationalism, where technology is no longer just a driver of growth but a strategic asset tied to sovereignty and power. Control over semiconductors, artificial intelligence, data and digital infrastructure is now seen as essential to national security. As a result, governments are more willing to intervene in markets, even at the expense of efficiency, to secure technological independence.
The shift did not happen overnight, but rather emerged from a combination of geopolitical rivalry and systemic shocks. The growing tension between the United States and China turned technology into a central arena of competition, while the COVID-19 pandemic exposed the fragility of global supply chains. Together, these forces accelerated a move away from pure market logic toward strategic economic thinking.
Out of this transformation emerged a new organizing principle: friend-shoring. Production and investment are increasingly redirected toward politically aligned and strategically reliable countries, even if they are not the lowest-cost option. This represents a fundamental reordering of global capitalism, where trust and alignment increasingly outweigh efficiency and price signals.
At the same time, the very definition of “friends” in international economics is evolving. The relationship between Israel and key Gulf states, including the United Arab Emirates and Saudi Arabia, illustrates this shift clearly. Shared concerns over regional threats, particularly Iran, have pushed former adversaries toward closer economic and strategic cooperation, redefining alliances in real time.
The result is a gradual fragmentation of the world into technological and geopolitical blocs. On one side are countries aligned with the United States, while on the other are those orbiting China. In between lies a group of non-aligned or “swing” states that attempt to maintain flexibility and extract benefits from multiple systems.
Israel occupies a unique position within this emerging structure. It is deeply embedded in the Western technological ecosystem, yet also serves as a critical supplier of advanced technologies. In areas such as cybersecurity, artificial intelligence and defense systems, Israel has become an indispensable partner for the United States and its allies.
In this sense, techno-nationalism may strengthen Israel’s position. In a world where countries prioritize trusted partners, Israel offers technological excellence combined with strategic reliability. Over the next decade, economic and technological ties between Israel and the United States are likely to deepen further, especially in sensitive sectors such as cyber defense, AI and advanced military technologies.
However, this transformation comes at a cost to the global economy. We are already observing three parallel dynamics: trade diversion toward trusted partners, trade creation within aligned blocs and trade destruction as previous relationships erode. These shifts reduce global efficiency, increase redundancy and raise costs across industries.
Investment patterns are also changing in profound ways. Capital no longer flows solely based on expected returns, but increasingly reflects geopolitical considerations. Investors must now evaluate not only market opportunities but also political alignment, regulatory risk and exposure to technological blocs.
Prof. Ilan Alon Photo: CourtesyThe confrontation between Israel and Iran offers a clear illustration of techno-nationalism in action. This is not only a military conflict but also a technological one, involving cyber operations, intelligence systems, missile technologies and AI-driven capabilities. Technology is no longer peripheral to power but at its very core.
Data governance has become another critical battlefield. Countries are imposing stricter controls over where data is stored and who can access it, reflecting the growing recognition that data is both an economic resource and a strategic asset. The control of information flows is increasingly tied to national security and global influence.
The global system is not collapsing, but it is being fundamentally restructured. We are moving from a fully globalized model to a network of technology alliances shaped by trust, security and shared interests. This new system is more fragmented, but also more reflective of geopolitical realities.
For Israel, the challenge is twofold. It must leverage its position as a leading technological partner within the Western bloc while maintaining enough flexibility to navigate an increasingly complex and divided global landscape. Success will depend not only on innovation, but also on strategic positioning within these emerging alliances.
The coming decade will not be defined solely by economic growth or military strength. It will be shaped by control over technology, data and algorithms. In that sense, the global economy is no longer purely free, but increasingly political, strategic and ultimately organized around trust.
- Professor Ilan Alon is a professor of Economics and Business at Ariel University (Israel) and the University of Agder (Norway)