Most striking, there appears to be a structural delinking of trade measured as the total imports and exports of goods and services , which is regarded as a hallmark of globalization, and GDP growth: from to , the trade-to-GDP ratio grew by 35 percentage points; over the past five years, it has grown by only 0. Experts from academia, the private sector, think tanks, and the media point to these indicators as evidence of the end of globalization.
They also point to factors such as growing trade protectionism on one hand and the increasing cost of labor in emerging markets, which is leading to the reshoring of manufacturing, on the other. We, however, take a different view. We think that rather than signaling the death of globalization, the decline in the traditional metrics signals the birth of a radical new phase of globalization—one that rebalances geopolitics with geoeconomics.
To succeed in this new era, companies need to think about globalization in a different way, using different metrics, and devise a new framework to develop winning strategies. We will localize. In the future, sustainable growth will require a local capability inside a global footprint. If we look at the growth of globalization in the modern era, beginning with the Industrial Revolution, we see that it has not been smooth but has instead progressed in distinct phases. The first one started in the early s, triggered by the invention of the steam engine, which was followed by mass electrification across Western Europe.
This phase was abruptly halted by the First World War.
The next phase began in the s, with the introduction of mass manufacturing and the building of export supply chains into new markets, led by companies based in the United States. The oil crisis in the mids ended this phase.
Regional and National Consequences of Globalizing Industries of the Pacific Rim
In the late s, the third phase of globalization emerged as the internet allowed the outsourcing of low-cost manufacturing and services and the development of globally integrated supply chains. It ended with the onset of the financial crisis in Although each phase was different from the previous one, all were based on the same model of globalization. This model consisted of three forces:. Together, these forces established a virtuous cycle of economic growth and greater global integration, thus ensuring that global economics continued to take precedence over local politics.
We are now at the start of the fourth phase of globalization.
Feminist Perspectives on Globalization
To understand this, it is necessary to understand the new forces shaping the global economy. The growth of digital is transforming global trade. Digital technologies are shaping global trade in three significant ways. First, they are altering productivity and competitiveness. This means that companies will need to reconsider the decisions they made during the third phase of globalization about the location and design of their plants and supply chains.
Adidas is already responding to these shifts: it recently announced that it is moving some of its production from China back to Germany because advances in robotics make it cost-effective to do so. In the medium term, Adidas plans to use this digital advantage to build factories in all major markets, thereby enabling faster delivery to customers. As other companies follow suit, the shift will have a major effect on the trade of global goods—especially between developed economies and emerging markets, which was a hallmark of the third phase of globalization.
Second, while the trade in goods which drove the earlier phases of globalization is stagnating, the trade in global services—especially digitally enabled services—is growing. This shift reflects the growing value of services in many industries, driven by the growth of digital technologies, which are blurring the boundary between products and services, as the leader of a global durables company told us. In aeronautics, the detection of problems in aircraft engines by remote digital sensing technology is transforming the economics of aircraft maintenance, reducing the need to station large teams of mechanics in all the airports a given aircraft visits.
Finally, the rapid growth of digital platforms has started to make national borders and traditional country-based business models redundant. In effect, these global market platforms and their associated supply and delivery systems are replacing the complex supply chains that were a common feature of the first three phases of globalization, making it much easier for even small companies to compete in a global market.
For example, a Chinese mobile-phone company entered India by leveraging one such platform, and it did so more quickly and with much less investment than one of its competitors did just a few years earlier. The future could well include a proposal from Jack Ma, the founder of Alibaba, for a global e-commerce platform that would enable small and midsize enterprises to reach out to customers and source from suppliers all over the world, thereby eliminating the need to set up independent supply chains.
The impact of digital technologies means that the fourth phase of globalization will not look the same as the earlier phases. For a start, there will be no new economic pole, because digital technologies are not dominated by one country or a few countries that can leverage their benefits. Whatever happens in the next few years, it is already clear that the decade marked an epochal shift in the balance of economic power. But by , I and others had begun to discern a changing of the guard. Behind the scenes, North American and European leaders were debating whether it was time to create a new premier forum for economic cooperation that would include emerging economies.
These debates were often heated. To this day, the results of those earlier negotiations are not fully understood. Nonetheless, even that de facto G24 did not fully reflect how fast the world was changing. When the original IMF Articles of Agreement were being negotiated in , there was some disagreement over whether the new body should be headquartered in Europe or the US.
This means that, within a decade or two, China could demand that the IMF be headquartered in Beijing. But the point remains, the world is experiencing an epochal rebalancing that is not just economic, but also geopolitical. Unless the West can find a way to uphold multilateralism in an increasingly multipolar world, China will continue to develop alternative financial and governance institutions, as it has with the establishment of the Asian Infrastructure Investment Bank AIIB and the Shanghai Cooperation Organization.
The current trade conflict between the US and China is symptomatic of a larger transition in global financial power. While Trump at least detects the growing threat to US supremacy, he has ignored the most obvious strategy for responding to it: Namely, a united front with US allies and partners around the world. Instead, Trump has asserted a prerogative to act unilaterally, as if America still rules over a unipolar world.
As a result, a trail of geopolitical ruin already lies in his wake. There is a deep irony here. When America actually did preside over a unipolar world, it generally preferred to act through multilateral institutions. But now that the world is becoming more multipolar, the Trump administration is going it alone.
The Globalization of Markets
The question is whether this effort to reclaim an undiluted form of nineteenth century sovereignty could ever work. But they are also affecting imported inputs for US exports, which will not be spared from the damaging effects of higher trade barriers. Making matters worse, the current wave of protectionism may be creating new fiscal pressures, as US manufacturing workers and struggling farmers demand compensation through subsidies or tax relief.
For an even starker illustration of the dangers posed by protectionism and expansionary US fiscal policies, consider what would happen in the event of another global economic downturn. If, in discussing their future, the generally privileged citizens of our region wish to take the viewpoints of other countries and continents into account, they will have to deepen the European Union along federative lines so as to create, as citizens of the world, the requisite conditions for a global domestic politics.
The international economic system, in which states draw the borderline between the domestic economy and foreign trade relations, is being metamorphosed into a transnational economy in the wake of the globalization of markets. Especially relevant here are the acceleration of world-wide capital flows and the imperative assessment of national economic conditions by globally interlinked capital markets.
These factors explain why states no longer constitute nodes endowing the worldwide network of commercial relations with the structure of inter-state or international relations. Email required. Password required. Create an account Forgot your password?