Where next for Globalisation?
Posted by Adam Walters, Founder of Gear Geek, 25 January 2021.
Has Globalisation been in retreat?
It is fair to say that, in recent years, Globalisation as a method of economic and political development has faced significant challenges. First, the global financial crisis of 2008/09 culminated in cross-border investment, such as trade and bank loans, and supply chains, to shrink-causing 'Slowbalisation'. This was coupled with a rising backlash from those population groups that felt 'left-behind' by the fruits of Globalisation, those who lost their jobs due to Deindustrialisation and the unrestrained free movement of people, services, goods and capital. Consequently, opposition to Globalisation grew exponentially, and a rising nationalist sentiment of 'bring the jobs back' was evident across Western democracies, finding particularly fertile ground among impoverished blue-collar workers in areas like Northern England and the Industrial Mid-West of the USA.
This desire to revive manufacturing and bring back 'dignity' spread across the Western world, and subsequently a wave of populist leaders were elected across the globe. From Donald Trump in the US to Jair Bolsonaro in Brazil and Narendra Modi in India- all championed nationalist policies, attacking immigration and railing against the existing global economy. Free trade went out of fashion, and protectionism was all the rage- this was the second assault on globalisation in a matter of years. The number of trade interventions, for example tariffs and subsidies, introduced by countries has been increasing year-on-year- with most being harmful to World trade. The global trade war between the World's two largest economies, the USA and China, has led to vastly increased tariffs imposed by both countries on goods entering their shores, seriously damaging the global pursuit of free, unrestricted trade.
The challenges presented by Covid-19
The Covid-19 pandemic has been the third large disruption to Globalisation in the last 12 years. 'Slowbalisation' has accelerated, with the IMF estimating a fall of 4.9% in global GDP growth- 50x the estimated global GDP downturn from the 2008/09 financial crisis. Consequently, the post-Covid world is likely to be a more regionalised and fractious one.
This will entail an increased emphasis on Nationalisation and Localisation across the globe, potentially leading to 'Deglobalisation'. There is much discussion within the Business world now of how to be 'less global, more local'. Many MNCs have witnessed how vulnerable their supply chains are to unanticipated natural disruption, and now Boardrooms across the world are looking at how to ensure against Supply chain risk going forward.
"The Covid-19 pandemic shows us that global connectedness is not a problem, but a solution that can benefit us all".
- John Pearson, CEO of DHL Express and Deutsche Post DHL.
How do we respond?
Successful fashion retailer Zara are a shining example, as their shorter, more localised supply chains have helped them weather the Covid storm rather well. Having their stock closer to home allows them to avoid unnecessary stockpile inventory and vulnerability to border and travel disruptions, while also enabling them to respond quickly to changing consumer trends. Many other industries are moving in this direction, and the on-demand economy is allowing us to express our tastes through social commerce, one of the many opportunities created by the ever-burgeoning internet economy. There are challenges however to this evolution, as the data wars over software, hardware and technology between the US and China has accelerated in recent years over platforms like TikTok and WeChat, and firms like Huawei.
Aside from Covid, the unpicking of Globalisation may accelerate on several fronts, and as we move to a post-Industrial global economy, this may damagingly leave emerging, developing countries like India behind. Moreover, in wealthier, developed nations like the US and the UK, those most in favour of 'Deglobalisation' may suffer the most from this movement. Policies of Economic Nationalism, like trying to bring the factories back, will sadly prove that while you can bring the factories back, you cannot bring the jobs back, as these factories will almost certainly be more highly automated than those in China. Big winners from Globalisation like Facebook, Netflix and Google, will continue to grow larger, and businesses and companies following the 'Amazon model' of fast, direct delivery online, will also do well. Those businesses able to adapt their business models and innovate will thrive, and sadly those who don't will not. Aspects of Globalisation affected by the pandemic may shift back, like global travel, as the world is much too intertwined for this to stop.
Covid will not kill Globalisation, although it will deepen its cracks. Yet, this may actually be positive news, allowing us the opportunity to learn the right lessons that we need to make our societies more robust and resilient, and to ensure we don't resort to simple, unworkable solutions like 'shut down the supply chain', 'build a wall', 'keep the immigrants out'. These are failed strategies that never have, and never will, work. The broad, long-term solution for all of us is to make interdependence work in tandem with resilience, which is also the major challenge that global business and political leaders face today.
Hence, we at Gear Geek are proud to be championing the more integrated and resilient, online, business model. We are closely monitoring the actions our peers take going forward to combat the challenges we all face, and learn from them in our drive for success. Crucially, we have strategically reviewed our supply chains to ensure they are streamlined, robust and resilient, and that we have a strong and reliable communication link to the source of our products- with suppliers that are fully committed to helping our business thrive. Thus, we feel totally confident that we can continue our business mission- to provide the latest, in-demand tech gadgets at the most affordable prices. and guarantee our customers a seamless and enjoyable shopping experience. After all, our customers are at the heart of everything we do.
Stay tuned for more useful and varied Gear Geek resources in the coming weeks and months, including guides on our new and exciting products coming your way soon.
Thank you!