GLOBALIZATION , DEGLOBALIZATION AND TODAY'S ECONOMY

For much of the past 50 years politicians, business leaders and academics alike have talked about the world shrinking, as advances in telecommunications, the growth in world trade and ever more efficient and affordable air travel create stronger and stronger linkages between places far distant from each other.

Recently there has been some evidence to suggest this trend is slowing, or perhaps even reversing. The trade war between the USA and China has had consequences for the entire global economy, the (still pending) withdrawal of Britain from Europe is largely driven by concerns around the mobility of workers, and politicians in a diverse range of countries are increasingly making policies that appear to be in favour of trade and other barriers.

So is it likely that globalization is about to be replaced by deglobalization? Will we see a 180-degree turn in the direction of economic policy over the coming decades? Such a change, of course, would have an enormous impact on local economies, reshaping the ways in which cities, communities and regions grow. It would affect planning, infrastructure requirements and thinking around the acquisition of skills. Perhaps most importantly, it would reshape the future of existing businesses, with some expanding and others faced with recessionary conditions or closure.

While the potential impact of a move to a more ‘bordered’ and ‘fractured’ world economy would be substantial, the likelihood that this would occur is very low. There are five reasons why:

·         First, the world has been interconnected at the global scale for more than four decades, and these linkages span the worldwide networks that produce many of the consumer items – such as Smartphones – and services (think the role of tourism in many parts of the world) that dominate local and national economies. Unpacking such complexity would be neither straightforward or speedy;

·         Second, other nations will continue to embrace globalisation and will prosper in consequence. Protectionist policies are difficult to sustain in the long term as other nations embrace trade and enjoy the benefits of economic growth and, most importantly, productivity growth. Protectionist nations face a real risk of being left behind;

·         Third, nations following the rhetoric of economic protectionism are unlikely to sustain such policies once their full impacts become apparent, and what I refer to here are the political costs of closed borders. While some regions are adversely affected by competition from places in other nations, others grow and prosper on the back of access to the best quality and best priced inputs for their own products. Places whose growth is impeded by tariff and other trade barriers won’t support such impediments for long;

·         Fourth, global trade is as much about the trade in services as goods. To date, services have been largely unaffected by dissatisfaction with the impacts of globalization and therefore remain an integrating force within the global economy;  

·         Fifth, while the world focuses on the economic standoff between China and the US, other parts of the global economy continue to sign trade agreements and establish free trade zones.  Recently the leaders of the 15 Asia-Pacific nations have agreed to the Regional Comprehensive Economic Partnership, and this agreement – which represents 29% of the global economy – includes the ASEAN nations, Australia, South Korea, China, Japan and New Zealand. There is also the potential for India to join, and this would elevate the RCEP to 32% of the global economy.

We can only conclude that the future is global. And for many regions, cities and communities a key platform for any economic development strategy must remain the focus on engaging more closely with global markets. Selling services, manufactured goods and commodities to the world at large enables communities to boost incomes, raise productivity and enjoy a better quality of life.