Pretty much any intellectually honest observer who has been keeping a close eye on geopolitical developments since at least 2016 can confirm that globalization hasn’t exactly been on a popularity increase spree. From let’s call them victories of isolationism such as the 2016 Brexit vote and the 2016 US elections to shocks such as the 2020 pandemic, a wide range of extremely potent forces seem to be manifesting themselves simultaneously, which begs the (more than obvious) question:
Is the end of globalization near?
Right off the bat, we want to make it clear that this article is firmly in the realm of speculation and merely reflects the opinion of the ChinaFund.com team. At the end of the day, nobody truly knows what the future has in store and those who claim they do are nothing but charlatans or, to use another term, snake oil salesmen.
In our view, the word “end” tends to be too harsh.
No, we do not believe that the end of globalization is nigh, for the simple reason that the current well-functioning of the worldwide economy depends on it to such a degree that it is just not feasible to assume we can simply erase it from the equation altogether. The logistics of it all make too little sense for us to consider using the word in question.
On the other hand, we do understand that there is a lot in the way of incentives to “combat” globalization in one way or another. Even well before 2020’s developments, frustration levels within Western nations were sky-high from the perspective of the average worker in general and especially blue-collar worker in particular. To put it differently, the lower-skilled a Western worker is, the less he has taken advantage of everything the modern-day economic system has to offer.
In stark contrast, higher-skilled employees who let’s say work in the service sector have done remarkably well. For example, a high-end IT professional, even if he went into debt so as to get a good college degree, can almost immediately find employment opportunities that put his professional life well on the path toward financial sustainability. It isn’t the least bit difficult to understand how, from the perspective of such a person, things seem to be going amazing: they have more than enough money coming in that they can spend (among other things) on cheap imported goods, what’s not to love about globalization?
The more time passes however, the more people enter the former category. Even among the previously mentioned IT professionals, there is a deep divide. A gap, if you will, between those who aren’t affected by globalization and those who are. For example, an average Western programmer who specializes in the most widely-used languages, let’s say a LAMP programmer (Linux – Apache – MySQL – PHP), will have severe difficulties competing with a similar programmer from a poorer nation and as such, will gradually develop resentment toward globalization much more so than an in-house Western employer who is ultra-specialized and feels more than secure financially. This much is certain: the number of frustrated Westerners has been growing continuously over the years and if anything, the year 2016 has proven that critical mass has been reached.
However, we would argue that this doesn’t mark the end of globalization altogether but rather… well, the end of globalization as we know it.
2020’s developments are a textbook example to this effect and will almost certainly generate short, mid as well as long-term changes with respect to supply chain complexity reduction for vital goods. For example, Western politicians will encourage let’s say those who sell protective medical gear far more aggressively to move as much as possible in the way of production back home so that repeats of the 2020 situation do not occur (with Western nations who were desperate for medical supplies so as to combat the COVID-19 pandemic experiencing major bottleneck issues due to being overly-dependent on China).
Furthermore, in light of the fact that a wide range of businesses have been affected to such a degree by the economic aftermath of the COVID-19 pandemic that they required government assistance, it shouldn’t come as a surprise that in some cases, assistance came with strings attached. Strings which oftentimes also revolve around, of course, moving production back home.
For these reasons and many more, a fair case can be made that it would be optimistic to the point of naïve to assume that globalization can find a way to survive “unharmed” after a perfect storm-type cataclysm such as the COVID-19 pandemic. On the other hand, it would be equally optimistic to the point of naïve for the proverbial other side to believe that autarky is anything but a utopic scenario or in other words, that globalization can and will be eliminated from the equation altogether. Whether we are referring to logistical reasons, geopolitical considerations or even business common sense, it should be obvious that moving away from globalization altogether is… well, pretty much impossible.
This, however, doesn’t mean there won’t be consequences for the proverbial spoiled children of globalization (as they are perceived by the West, at least) such as China. In some cases due to their own mistakes and in others as a result of exogenous shocks, nations such as China will have no choice but to adapt to the post-2020 realities and focus more on trends pertaining to unleashing their domestic consumption potential, a model China was already embracing well before the coronavirus became a threat. At the end of the day, as complex as the equation may seem, it all starts making sense once you meaningfully “get” China and understand the stage of economic development it is currently at. As always, if that is not yet the case as far as you and/or your organization are concerned, the ChinaFud.com team will gladly be of assistance and is only one quick message away.