Is globalization in retreat?
That’s the fear I hear from U.S. business leaders these days, as Donald Trump competes with Democratic candidates in his opposition to trade agreements, and keeps adding footage to his “great” wall on the southern border. (See last night’s debate highlights here.) British business leaders have their own version of this in Boris Johnson, who is leading the charge for an exit from the European Union. Meanwhile, in Shanghai yesterday, Bank of England Governor Mark Carney warned G20 finance ministers and central bankers that global monetary policies and negative interest rates risk creating a “beggar thy neighbor” environment of competitive currency devaluations that “simply move scarce demand from one country to another.” The end result of all of this, warn top economists at Citigroup, could well be a recession this year or next.
Global trade in goods has flattened since 2008, and global capital flows have declined. The surge global flows of people has had largely negative consequences in the short run, creating numerous political crises around the world. But there is one area where globalization is storming ahead in a positive way: data. A report from the McKinsey Global Institute this week finds the usage of cross-border bandwidth has grown 45 times larger than it was in 2005, and become more important to global GDP growth than trade in goods. Moreover, the flows of data have included emerging markets in a way that flows of goods and capital never did.
“The world has never been more connected,” says James Manyika, author of the report, “but the nature of those connections has changed in a fundamental way… As digital platforms create global markets and user bases, they are changing the economics of doing business across borders, who is participating, how rapidly competition moves, and where the benefits are flowing.” You can read the full report here.
Unfortunate that our politics are stuck in the past when the future is coming so quickly.
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