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The State of Globalization in 2022

• Steven A. Altman
• Caroline R. Bastian

Its collapse has been vastly overstated, according to an analysis of international flows of trade, capital, information, and people.

As companies contemplate adjustments to their global strategies, it is important to recognize how much continuity there still is even in a period of wrenching change. The idea of a world where economic efficiency alone drives patterns of international flows was always a myth. Globalization has always been an uneven process, with cross-country differences and international conflicts significantly dampening international flows. That’s a big part of why — even before the present crisis in Ukraine — only about 20% of global economic output ended up in a different country from where it was produced. As the landscape shifts, global strategies must be updated, but managers should avoid the costly overreactions that tend to follow major shocks to globalization.

Russia’s invasion of Ukraine has led to a new round of predictions that the end of globalization is nigh , much like we saw at the beginning of the Covid-19 pandemic . However, global cross-border flows have rebounded strongly since the early part of the pandemic. In our view, the war will likely reduce many types of international business activity and cause some shifts in their geography, but it will not lead to a collapse of international flows.

• Steven A. Altman is a senior research scholar, adjunct assistant professor, and director of the DHL Initiative on Globalization at the NYU Stern Center for the Future of Management .
• CB Caroline R. Bastian is a research scholar at the DHL Initiative on Globalization.

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Part 1: The end of globalization?

Globalization is an ongoing process in which the world appears to be converging economically due to the greater interdependence that the movements of capital, goods, services and people across borders create between the world economies. It’s a process through which geographic, cultural, economic and institutional distance between countries seems to shrink. It is characterized by a systemic interconnectedness where what happens in one country influences all the others in the system.

Connecting current events around the world and looking at the underlying forces, business leaders need to ask themselves if globalization is unravelling. We are living in a transition time where we have not recovered from the 2008 financial crisis and its imbalances.

We can draw multiple parallels with our current situation and previous episodes of deglobalization, such as what happened almost 100 years ago in the wake of World War I: rising geopolitical tensions, financial imbalances, rising inequalities, ecological concerns and growing populism. History has shown globalization is not linear and can reverse. The troubling thing is that the outcome is invariably correlated with wars and poverty.

Examining aggregated world data, we can conclude that globalization seems, at best, to be on pause. FDI has not recovered from its pre-financial crisis level and world trade, although still rising, is not growing as it did before 2008. A real concern is the rise of inequality in the Western World, and the rise of protectionist measures around the planet. For example, from January to August 2016, G20 countries alone introduced more than 350 discriminatory measures against foreign interests versus 100 to liberalize trade. Regarding FDI, G20 countries have introduced more than 10 times as many restricting measures against FDI flows as liberalizing measures.

The problem with these measures is that they are harming growth, and low growth fuels a vicious cycle of further disenchantment among citizens around the world. Even if the CETA was signed in Brussels recently, there is still a long and hazardous way ahead to secure the long-term viability of this new commercial agreement. Thirty eight national and regional parliaments of the EU will have to formally ratify it: with French elections looming and in the current political context, anything can happen.

While the appetite for more globalization seems to be unravelling in the West, in emerging markets and China it is growing.

The main problem in Western economies is the perception that globalization has impoverished the middle classes whose jobs and income have been pushed downward by both migrants working for cheaper and multinationals offshoring many activities to lower cost countries. With the departure of the UK, EU’s second largest economy, and the persistent imbalances the Euro accentuates between European economies, the political, financial and budgetary stability of the EU is at stake. There is now a real risk of the disintegration of the world’s largest trading block.

In emerging markets generally, and in China in particular, there are no real second thoughts about globalization since hundreds of millions gone from poverty to middle class since the 1990s. The Chinese will push globalization as far as they can go, for example by buying more and more assets in Europe and by dominating Africa and Asia, and will continue to play on the current economic weakness of the West and on the rivalry between Europe, the US and Russia. But they are likely to face growing resistance to their buying-spree as the recent veto by Germany to a strategic acquisition shows. Germany justified the move on the grounds of national security and the lack of reciprocity to Western firms in China.

Globalization could be at best on a pause but we may be soon reaching a point where it could unravel altogether. Potential tipping points, or black swans, include:

• The refugee crisis in Europe combined with Islamist fears that accelerate crises of national identities
• A debt hangover that may abruptly take down the Chinese economy and drive bankruptcies and a surge of unemployment around the world
• Effects of persistent low interest rates and unbalances between supply and offer of money with the distorting effect of quantitative easing
• The medium-run impact of robotics and artificial intelligence on employment
• A nuclear attack by North Korea
• Unplanned climate change disasters

Slower growth, major economic imbalances, the rise of China and the rising inequalities that free-trade entails, if not handled properly at the policy level, could lead Western voters to elect governments that will enforce radically protectionist agendas. This is how globalization could go further into reverse.

There were strong signals of growing economic and geopolitical rivalry in the period leading to World War I but it was only after 1931, over 20 years later, that things started to implode. If we take the 2008 financial crisis as the inflection point, it may still take a long time for things to unravel. While this might not happen, if globalization does unravel there would be significant costs for businesses. In Part 2 we explore what businesses can start doing today to influence the evolution of globalization.

Stéphane J. G. Girod is Professor of Strategy and International Business at IMD. He discusses globalization on IMD’s Wednesday Webcast part 1 and part 2 .

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Is This the End of Globalization?

Blackrock CEO Larry Fink thinks the war in Ukraine is accelerating an end to the globalization that has shaped the new world order for the past 30 years. Oaktree Capital Management co-founder Howard Marks has said the war is forcing the pendulum of international affairs to swing away from globalization as companies and governments rethink their interdependence.

Wharton associate management professor Exequiel “Zeke” Hernandez disagrees. He said it will take much more than a conflict between two countries to destroy the economic fundamentals of international trade. “I believe that there could be some short-term disruption, but I don’t believe that globalization in the medium-to-long run is going to be completely obliterated, which I think is the spirit of a lot of these predictions,” he said during an interview with Wharton Business Daily on SiriusXM.

Simply put, companies and countries need each other. Reaching beyond borders is how they secure their supply chains, grow their customer bases, find labor, and provide their populations with all the goods and services they demand.

“For most reasonably sized businesses, the home market is just not large enough of a market, so they need to serve foreign markets,” Hernandez said. “That will mean having more global or, more commonly, regional supply chains.”

The professor pointed out that doomsday predictions about the end of globalization have been made before, usually during times of crisis. At the beginning of the COVID-19 pandemic, the Economist ran a cover story about it, and similar declarations were made during the Great Recession. But he said crises create only “temporary blips” in economic activity, like the sharp drops induced by sudden pandemic lockdowns.

“It happens all the time,” Hernandez said about the negative predictions. “I think we have to distinguish between short-term disruption and structural changes in the economy.”

Hernandez has maintained his stance on globalization for years, writing in a 2020 blog post that while his position may be “boring” compared to those of naysayers, it’s based in truth. “I believe that an approach based on basic facts — even if boring — may help calm down some of the anxiety about the future of globalization,” he wrote. His thoughts in Wharton Magazine ’s “ Wharton Does the Future Hold? ,” published in the early months of the pandemic, also go against “alarmist views” about global business.

Hernandez said one reason why declarations about globalization’s demise are overblown is that the world’s economy isn’t as entangled as people think. Foreign direct investment, for example, accounts for just four percent of the global economy.

Authoritarian regimes often cut themselves off from the global market for a host of reasons; Russia’s Vladimir Putin is just one example. But firms often respond by shifting their activities elsewhere in the world. That’s why Hernandez thinks it will take world war on a larger scale to create the kind of disruption that would halt globalization.

“Unless you have authoritarianism and protectionism rise to a level where every country wants to be economically self-sufficient, you’re not going to make a big dent,” he said. “The only thing that will happen is you might shift which countries are more involved in trading and doing business with each other.”

Published as “Is This the End of Globalization?” in the Fall/Winter 2022 issue of  Wharton Magazine.

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The End of Globalization?

What russia’s war in ukraine means for the world economy, by adam s. posen.

Over the last three weeks, the Russian economy has been overwhelmed by sanctions . Soon after the Kremlin invaded Ukraine, the West began seizing the assets of the wealthiest individuals close to Russian President Vladimir Putin, prohibited Russian flights in its airspace, and restricted the Russian economy’s access to imported technology. Most dramatically, the United States and its allies froze the reserve assets of Russia’s central bank and cut Russia out of not just the SWIFT financial payments system, but of the basic institutions of international finance, including all foreign banks and the International Monetary Fund. As a result of the West’s actions, the value of the ruble has crashed, shortages have cropped up throughout the Russian economy, and the government appears to be close to defaulting on its foreign currency debt. Public opinion—and the fear of being hit by sanctions—has compelled Western businesses to flee the country en masse. Soon, Russia will be unable to produce necessities either for defense or for consumers because it will lack critical components.

The democratic world’s response to Moscow’s aggression and war crimes is right, both ethically and on national security grounds. This is more important than economic efficiency. But these actions do have negative economic consequences that will go far beyond Russia’s financial collapse, that will persist, and that are not pretty. Over the last 20 years, two trends have already been corroding globalization in the face of its supposedly relentless onward march. First, populists and nationalists have erected barriers to free trade, investment, immigration, and the spread of ideas—especially in the United States . Second, Beijing’s challenge to the rules-based international economic system and to longstanding security arrangements in Asia has encouraged the West to erect barriers to Chinese economic integration. The Russian invasion and resulting sanctions will now make this corrosion even worse.

There are several reasons why. First, China is attempting to navigate a nonconfrontational response to the Russian invasion. Both its financial system and its real economy are observing the sanctions because of the potential economic retaliation if they finance or supply Russia, let alone bail Moscow out. But anything short of fully joining the blockade will feed anti-Chinese policies in the West, reducing the country’s economic integration. Second, countries fear being subject to the whims of Washington’s economic might, now that it is re-enamored with its apparent power. Right now, the United States’ economic actions may be just, and there may be little risk of countries not invading Ukraine ending up on the wrong side of U.S. policies. But the next time, the United States may be more selfish or capricious.

Finally, the damage sanctions are doing to the Russian economy and the substantial costs to central Europe if Russia cuts off its access to natural gas and oil in response may make governments pursue self-reliance and disentangle themselves from economic connections. Ironically, this will be self-defeating. Russia’s current sharp economic contraction shows just how difficult it is for states to thrive without economic interdependence, even when they try to minimize their perceived vulnerability. In addition, Russia’s attempts to make itself economically independent actually made it more likely to be subject to sanctions, because the West did not have to risk as much to impose them. But that will not stop many governments from trying to retreat into separate corners, looking to protect themselves by withdrawing from the global economy.

Pundits, of course, have cried wolf about such divisions for years, and the smaller countries that attempt to self-isolate will be unable to succeed. But it now seems likely that the world economy really will split into blocs —one oriented around China and one around the United States, with the European Union mostly but not wholly in the latter camp—each attempting to insulate itself from and then diminish the influence of the other . The economic consequences for the world will be immense, and policymakers need to recognize and then offset them as much as possible.

THE DOLLAR ENDURES

For all the talk about the “weaponization of finance,” the sanctions employed against Russia have been effective only because the international alliance imposing them has been broad and committed. Freezing the Russian Central Bank’s reserves, for instance, works only if the majority of the world’s financial system is on board with doing so. It is the alliance, not the finance, that has mattered. Since the anti-Russian alliance contains all the major financial institutions except the Chinese banks—and since Chinese banks do not want to be shut out of that system—the financial sanctions will not lead to any fundamental changes in the world’s monetary or financial order.

Economies that feel threatened by Washington do now have an incentive to shift their reserves out of holdings in the United States. In theory, this has always been a check on Washington’s overuse of financial power; if the country sanctions too frequently, it might induce other states to come up with better alternatives to the dollar and to the payments system around it. And over the very long term, a divided world economy under the threat of sanction will bend in that direction. But in the meantime, what Russia demonstrates is that diversifying into euros, yuan, and even gold will not help states if other market participants are themselves afraid of being shut out of the dollar system, because there will be no other party for them to sell their reserves to. Cryptocurrencies are going to have to decide whether they will observe sanctions and thus lose some of their users (who treat the currencies as a refuge) or whether they will facilitate attempts to elude sanctions, in which case governments are likely to shut down or marginalize them.

The Chinese yuan will struggle to become a major alternative to the dollar, even for economies in Beijing’s bloc. As long as China prevents people from freely taking assets out of its domestic financial system, investors and even central banks that adopt it would just be trading Washington’s sanction threats for Beijing’s. Beijing could work around this problem by making the yuan freely convertible, rather than tightly controlled. But if that happened, the value of the yuan would likely decline sharply for an extended period, as it did from 2015 to 2016, when China temporarily opened its capital account, because billions of people who hold their savings in China are desperate to diversify their portfolios by moving their assets elsewhere in pursuit of higher returns. China could, of course, become the reserve currency for the small economies it dominates and for pariah states—countries with no real alternative. But this would do little to diversify or create preferential returns for Chinese savings, and it could backfire by entangling China’s financial system in other states’ financial instability.

That does not mean nothing will change financially. The more that economic divisions are amplified by hard-power divisions, the more that governments will align their financial systems with their primary military protector. Exchange-rate pegs tend to follow military alliances (as I established in 2008). The world saw this throughout Africa, Latin America, and South Asia during the Cold War, as governments switched the focus of their exchange-rate targets or currency pegs when realigning between the Soviet Union and the United States. But although that may mean some countries move in and out of the de facto dollar zone, it will not create an alternative currency that is attractive on its own terms.

COME UNDONE

The invasion and sanctions, then, will not result in enormous financial changes to the global economy. But they will speed up the corrosion of globalization already underway , a process that will have broad impacts. With less economic interconnectedness, the world will see lower trend growth and less innovation. Domestic incumbent companies and industries will have more power to demand special protections. Altogether, the real returns on investments made by households and corporations will go down.

To see why this is, consider what may happen to supply chains. Currently, most industrial companies and retailers source each key input or step in their production processes from a single or handful of separate places. There was a powerful economic logic to setting up global supply chains this way, with relatively few redundancies: not only did they save on costs by encouraging firms and factories to specialize, they also increased the scale of production and provided local marketing and information advantages. But given the current geopolitical and pandemic realities, these global value chains may no longer be worth the risk of relying on specific choke points, particularly if those points are in politically unstable or undependable countries. Multinational companies, with government encouragement, will rationally insure against problems by building redundant supply chains in safer locations. Like any form of insurance, this will protect against some downside risk, but it will be a direct cost that yields no immediate economic returns.

Meanwhile, if Chinese and U.S. companies no longer face competition from each other (or from companies outside their economic bloc), they are more likely to be inefficient, and consumers are less likely to get as much variety and reliability as they currently do. When that consumer is the government, protected domestic firms are even more likely to engage in waste and fraud, because there will be less competition for government procurement contracts. Throw in nationalism and fears of national security threats, and it will be easy for such companies to cloak themselves in patriotism and take it all the way to the bank, knowing that they are politically too big to fail. There is a reason why closed economies are more likely to experience corruption.

The world will see lower growth and less innovation.

Analysts can already see this at work in seemingly patriotic commitments by President Joe Biden and former President Donald Trump about “onshoring” manufacturing—relocating the supply chains that make U.S. goods so they take place in the United States. They are using national security and pride to justify policies that shortchange both national defense and the 85-plus percent of U.S. workers not employed in heavy industry. The fetishizing of domestic manufacturing over advancing cross-border trade in services and networks is especially ironic, given that the latter sectors are what has truly advantaged the West over Russia in implementing effective sanctions, and what has deterred Chinese businesses from bailing Russia out.

Similarly, the corrosion of globalization will have negative consequences for technology. Innovation is faster and more common when the global pool of scientific talent is engaged and can exchange ideas and share proof, or disproof, of concepts. But there is a politically compelling reason for states to try to make sure that only allies have access to their technology, even if restrictions are of dubious military relevance (in a world of cyberespionage, it is easy to acquire technological designs). The likely result will be a decline in innovation, as U.S. and other Western research institutions deprive themselves of many talented Chinese and Russian students and scientists.

The intensified corrosion of globalization will further diminish the return on capital in the world economy, and it will do so on every side of the economic divide. There will be new limits on where people can invest their savings, driving down the range of diversification and average returns. Fear and nationalism will likely increase people’s desire for safe investments at home, in government or publicly backed securities. Governments will also combine national security arguments with fiscal and financial stability measures designed to strongly encourage investment in their own public debt, as they do during wars.

THE CONTINENTAL CONNECTION

There is one beneficial economic side effect to the increasing global divisions: the European Union is being galvanized to unify more of its economic policies. The bloc is putting up joint resources to share the financial burden of the massive Ukrainian refugee inflow coming into Poland and other eastern members. European bonds are being issued to pay for these measures, rather than individual member state debts.

The European Union or eurozone may issue more European public debt in the future, which would further help the global economy. The Russian invasion reinforces the fact that this is a world of low returns, and many investors have a high desire for safety. By creating more safe assets for them, the EU and eurozone can absorb some risk-averse savings, improving financial stability.

Stronger EU unity will also create new opportunities for growth. Led by Germany’s Chancellor Olaf Scholz , almost every EU member has made a multiyear commitment to increased defense spending and a greater public investment in rapidly reducing the continent’s dependence on Russian fossil fuels. Both of these investments will go a long way toward ending Europe’s free-riding on the United States and China for growth; giving the global economy another engine will help balance out the ups and downs of the business cycle, stabilizing the world against recessions. It will also prevent the faster-growing economies from running up foreign debt as they have when Germany and other European surplus economies exported products but failed to consume.

These initiatives will, in particular, help the eurozone itself. One of the primary causes of the euro crisis a decade ago were the imbalances among euro economies caused by German austerity. By increasing German domestic demand, southern members of the eurozone will be able to work off some of their debt through increased exports rather than having to cut back wages and imports to make their payments. This should strengthen the long-term viability of the euro, as well as increase its attractiveness to potential new members in eastern Europe and reserve managers around the world. A euro that is less subject to internal tensions and worries will also be of higher, more stable value, which in turn will reduce trade tensions with the United States.

AN INCONVENIENT TRUTH

Unfortunately, the Russian invasion will prove to be far less kind to the developing world. Food and energy price hikes are already hurting the citizens of poorer states, and the economic impact of corroding globalization will be even worse. If lower-income countries are forced to choose sides when deciding where they get their aid and foreign direct investment, the opportunities for their private sectors will narrow. Companies within these countries will grow more dependent on government gatekeepers at home and abroad. And as the United States and other countries increase their use of sanctions, firms will be less likely be less likely to invest in these economies. Anxious multinational companies want to avoid U.S. opprobrium, and so they will forego investing in places that they see as having undependable transparency.

The saddest part of this is that it comes on top of the world’s unequal response to COVID-19, in which high-income countries did not provide enough vaccines and medical supplies to the developing world. This political disregard for the well-being of low-income populations globally materially changes the economic conditions on the ground. That in turn provides a commercial justification for the private sector not to invest in those economies. The only way out of this cycle is through public investment and enforced, fair treatment. Division among the major economies, however, is likely to make such investment in the developing world insufficient, unreliable, and arbitrarily disbursed.

Helping poor economies is not the only long-term, development goal that Russia’s invasion puts at risk. To survive, societies around the world will need to mitigate and adapt to climate change, but the pivotal role of Russia and Ukraine in global energy supplies sends out contradictory forces that will make the energy transition more challenging. Simultaneously, Western politicians are calling for moving away from greenhouse gasses and advocating increased fossil fuel exploration outside Russia. States want to prevent price gouging, cut energy taxes, and compensate households for higher gas prices, but they also want to increase incentives to expand greener energy production and decrease consumption, which require higher prices. The tradeoffs extend beyond climate change. Democracies want to build alliances around liberal values and freer markets, but to cut energy costs, they are going to autocratic governments such as Saudi Arabia and Venezuela, offering to legitimize their regimes in exchange for increased oil supply.

Underlying all this is an inconvenient reality: to slow rising temperatures, the world needs international collective action, including from China. The alliance of democracies cannot do it alone. The Chinese and the U.S. governments have, at times, been able to make joint progress on climate initiatives even while being in conflict on other issues, and both Chinese President Xi Jinping and Biden have said they want to do so again. But it will get harder as each country retreats into a separate bloc. Meanwhile, as the corrosion of globalization reduces the pace of innovation by restricting research collaboration, it will also become more challenging for scientists to come up with a deus ex machina that can save the planet.

PICKING UP THE PIECES

Stopping the corrosion of globalization was already difficult, and the Russian invasion of Ukraine makes it harder. As politicians in the United States and elsewhere spin false narratives about how economic openness is bad for workers, the Russian invasion and the resulting sanctions push China and the United States further apart.

But policymakers are not helpless. The financial sanctions on Russia were so powerful because they were imposed by a strong alliance of higher income democracies. If Australia, Japan, South Korea, the United Kingdom, the United States, the European Union, and other important market economies can channel the same might they used to punish Russia toward helping the economy, they can repair the erosion—perhaps encouraging China to stay connected as well.

To do so, officials must pursue a wide range of policies. They can start by making a common market among democracies that is as broad and deep as possible—including for goods, services, and even labor opportunities. They must create common standards for screening cross-border private investment for national security and human rights reasons. They should create a relatively even playing field among allies that can foster healthy competition, which would diminish the worst side effects of economic nationalism: corruption, the entrenchment of incumbents, and waste. Policymakers must also set up a sustained, multiyear public investment front across the Western alliance, which would reduce imbalances between economies and raise overall returns on investment.

The world’s democracies cannot reverse every corrosive division in the global economy caused by Russian aggression and China’s tacit approval. They should not want to; some forms of violence must be met with economic isolation. But they can make up for many of the losses, steadying the planet in the process.

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• ADAM POSEN is President of the Peterson Institute for International Economics.
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Knowledge at Wharton Podcast

Is this the end of globalization, april 18, 2022 • 10 min listen updated: april 25, 2024.

The war in Ukraine has sparked doomsday predictions about the end of globalization, but Wharton’s Exequiel (Zeke) Hernandez says the dependencies countries have on each other are here to stay.

• Markets & The Economy

Wharton’s Exequiel (Zeke) Hernandez speaks with Wharton Business Daily on SiriusXM about the future of globalization.

BlackRock CEO Larry Fink thinks the war in Ukraine is accelerating the end of globalization that has shaped the new world order for the last 30 years.

Oaktree Capital Management founder Howard Marks said the war is forcing the pendulum of international affairs to swing away from globalization as companies and governments rethink their interdependence.

Wharton management professor Exequiel (Zeke) Hernandez disagrees. He said it will take much more than a conflict between two countries to destroy the economic fundamentals of international trade.

“I believe that there could be some short-term disruption, but I don’t believe that globalization in the medium to long run is going to be completely obliterated, which I think is the spirit of a lot of these predictions,” he said during an interview with Wharton Business Daily on SiriusXM .

Simply put, companies and countries need each other. Reaching beyond borders is how they secure their supply chains, grow their customer base, find skilled and unskilled labor, and provide the population with all the goods and services they demand.

“For most reasonably sized businesses, the home market is just not large enough of a market, so they need to serve foreign markets,” Hernandez said. “That will mean having more global or, more commonly, regional supply chains.”

Is Globalization Ending?

The professor pointed out that doomsday predictions about the end of globalization have been made before, usually during times of crisis. At the beginning of the COVID-19 pandemic, The Economist ran a cover story about it, and similar declarations were made during the Great Recession of 2008. But he said crises create only “temporary blips” in economic activity, like the sharp drops induced by sudden pandemic lockdowns.

“I don’t believe that globalization in the medium to long run is going to be completely obliterated.”  –Zeke Hernandez

“It happens all the time,” Hernandez said about the negative predictions. “I think we have to distinguish between short-term disruption and structural changes in the economy.”

Hernandez has maintained his stance on globalization for years, writing in a 2020 blog post that while his position may be “boring” compared with the naysayers, it’s based on facts.

“I believe that an approach based on basic facts — even if boring — may help calm down some of the anxiety about the future of globalization,” he wrote.

Hernandez said one reason why the declarations about globalization’s demise are overblown is that the world’s economy isn’t really as entangled as people think it is. Foreign direct investment, for example, accounts for just 4% of the global economy. And South Korean multinational firms such as Samsung and Hyundai conduct only 10% to 15% of their business outside their geographic region, with the bulk of it inside Southeast Asia.

To be sure, authoritarian regimes often cut themselves off from the global market for a host of reasons — Russia’s Vladimir Putin is just one example. But firms often respond by shifting their activities elsewhere in the world. That’s why Hernandez thinks it will take world war on a larger scale to create the kind of disruption that would halt globalization.

“Unless you have authoritarianism and protectionism rise to a level where every country wants to be economically self-sufficient, you’re not going to make a big dent,” he said. “The only thing that will happen is you might shift which countries are more involved in trading and doing business with each other.”

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The end of globalisation? A reflection on the effects of the COVID-19 crisis using the Elcano Global Presence Index

The health, economic, social and political crisis created by  the COVID-19  pandemic will also reconfigure international relations and globalisation.

Similar to the 2008 crisis, the current pandemic and its consequences could precipitate a slowdown in globalisation or even result in a process of deglobalisation. This study seeks to envisage and understand the possible forms of any such reconfiguration of relations, identifying three specific scenarios based on the Elcano Global Presence Index.

In the first scenario, we assume the structural effects on globalisation will be similar to the crisis at the end of the 2000s, both in terms of volumes and nature, allowing the features of globalisation –in all its dimensions, economic, military and soft– to remain intact.

In the second, we assume a deeper impact, comparable to the more significant reductions in each variable during the previous crisis, with a deeper fall in global exchanges, in all areas. Under this scenario, the world will experience an episode of deglobalisation, with a 10% reduction in the soft dimension and a 9% reduction in the economic dimension.

The third and final scenario seeks to account for the specific features compared to the previous one. Here, globalisation will remain intact, particularly in the soft dimension, largely due to the information, technology and science variables.

Introduction

The current globalisation process, which dates back to the 1970s, includes phases of growth, contraction and mutation. Many of these correspond to structural changes in the global economic and geopolitical order, including the rise of emerging powers in Asia and the associated shift of the epicentre of global activity from the Atlantic to the Pacific.

The Great Recession at the end of the 2000s and the start of the 2010s has largely resulted in the acceleration and consolidation of these changes, a trend reflected in  the Elcano Global Presence Index . The health, economic, political and social crisis currently facing the world will also leave its mark on international relations and the process of globalisation itself.

While it is still too early to predict the impact, we are already seeing some of the consequences of the crisis, such as interruptions in production and consumption (and thus trade). It is also possible to anticipate some of the effects from the dramatic reduction in the international flows of people. Multilateral organisations, the media and research institutes are trying to identify and study many of these short-, medium- and long-term effects.

This paper builds on previous research at the Elcano Royal Institute, reflecting on the consequences of the current crisis for the process of globalisation (Ortega, 2020; Fanjul, 2020). The first section uses the Elcano Global Presence Index to characterise the reconfiguration of globalisation in the crisis at the end of the 2000s. The second section then uses past research to outline the main effects to be expected in the economic, military and soft dimensions of globalisation. Finally, the third details three medium-term scenarios in which the transformational effects of the current crisis are similar, deeper or different to its predecessor.

(1) The interval between the Great Recession and the coronavirus: continued globalisation but slower and softer

The policies of economic liberalisation implemented throughout much of the world in the last three decades of the 20th century resulted in a rapid increase in international economic exchanges. The various waves of economic globalisation have always been accompanied by other forms of internationalisation (military or soft) involving the international movement of people (troop deployments, migrants, tourists, students, sports players in international competitions and international development workers) and ideas (the exchange of information, culture, science, technology and education). While the academic conceptualisation of globalisation has always recognised these other non-economic aspects, analysis of the process of internationalisation has tended to focus on the economic dimension. One of the reasons for this phenomenon is the availability of statistics in this area (Held  et al ., 1999; Rosenau, 1997; Keohane and Nye, 2000; Conley, 2002; Scholte, 2004; Lee, 2004; Marber, 2005; Caselli, 2008; Figge and Martens, 2014).

This focus on the economic dimension was partly responsible for various analysts predicting globalisation would slow down, end or even enter a period of  ‘secular stagnation ’ during  the financial crisis of 2008  and the Great Recession that followed (Altman, 2009; Summers, 2014; Postelnicu, Dinu & Dabija, 2015). Yet while there was a slowdown –and even a reversion in certain variables and in certain years– in economic internationalisation, particularly for specific trade flows and foreign direct investment, the Elcano Global Presence Index shows that, despite slowing down significantly and mutating towards softer forms of internationalisation, globalisation did not go into reverse (Olivié & Gracia, 2020).

The Elcano Global Presence Index (Figure 1)  was developed  for the two-fold objective of providing a tool for exploring the international projection of countries, calculated in terms of both volumes and nature, and of observing global trends in internationalisation processes. Given the large number of countries for which it is currently calculated (120) and its representativeness in terms of the global population and GDP, it is also a useful tool for studying the process of globalisation itself (Olivié  et al ., 2017, 2018).

Globalisation since 1990 can be divided into three phases: (a) an initial phase of deglobalisation between 1990 and 1995, coinciding with the geopolitical reconfiguration of Europe, when the aggregate global presence fell by an annual average of -0.7%; (b) a second period of sustained globalisation between 1995 and 2011, with a cumulative increase of 43%, equivalent to an annual average of 2.7%; and (c) the current phase, with moderate increases and decreases and annual averages of just under 1% (Figure 2).

It is important to stress that the Elcano Global Presence Index captures structural trends, meaning transient financial turbulence or political changes are seldom reflected in its results. There is also a lag of around two years before changes in the dimensions and variables are reflected by the index. The effects of the 2008-09 crisis are not reflected by the index until 2011 and the effects of the COVID-19 pandemic are not expected to register in the values of the index until 2021 or 2022. With these caveats in mind, the value of the index for the last year for which data is available (2018) shows an unprecedented rise in globalisation since the start of the crisis at the end of the 2000s, with the aggregate value of 12,646 for the 120 countries currently included in the calculation, compared to 12,199 for the previous year.

These figures suggest that the world has not yet experienced a process of deglobalisation. While this trend may have slowed down since the start of the decade, except for two falls (-0.7% in 2014 and -1.4% in 2015), the process has not contracted and was recovering prior to the current crisis.

The different variables and dimensions (economic, military and soft) have also contributed in different ways to the speed of globalisation in recent years. Between 1990 and 2005, the main vector of globalisation was the economic dimension, whose rate of growth was between 3.5% and 6%. The soft dimension made a positive albeit modest contribution to the process during this period, with growth of 0.7%-2.2%. Finally, the military dimension shows a certain deglobalisation, with negative rates for most of the period (Figure 3).

However, these trends change significantly in the 2000s, when the soft dimension begins to lead the process of globalisation, with average annual growth of 3.6%-5.0%. At the same time, the economic dimension becomes much less dynamic, with low and even negative interannual growth (2016 and 2017), together with a slight recovery in the military dimension, which grew in 2015 and 2016.

In short, during this period of slow globalisation, the nature of the process also changed, with the soft dimension replacing the economic dimension as the main vector. Similarly, the structural contraction of the military dimension during the first two decades was replaced by a modest but sustained recovery.

(2) The effects of the coronavirus on global exchanges

There are a number of points to consider before reflecting on the potential impact of the current health crisis and the subsequent outlook for the process of globalisation, both as a whole and in its various dimensions and indicators.

First, there is the dimension of time. We must distinguish between analyses of the short-term effect of the health emergency itself, together with the measures to contain it, and the medium- and long-term effects. In macroeconomic terms, the debate, which is still in its early stages, is focused on the shock itself, to supply and/or demand and its effects (Camaduro & Papadia, 2020; Carlsson-Szlezak, Reeves & Swartz, 2020; Fornaro & Wolf, 2020), alongside the political responses required based on the different diagnostics (McKibbin & Fernando, 2020; OECD, 2020b). However, the consequences of the shock and the scale of the response will also depend on how long the health emergency and the confinement measures persist. There is no doubt that the severity of the situation requires a reactivation of major State policy intervention (Bénassy-Quéré  et al ., 2020; Krugman, 2020; Saez & Zucman, 2020; de Grauwe, 2020; Gali, 2020; Wolf, 2020).

Analysts agree that the crisis we are facing will have a major economic impact on all dimensions of international exchange (OECD, 2020b, 2020a) and that both its duration and the different responses will affect the rhythm and nature of globalisation in different ways (IMF, 2020).

Secondly, despite numerous comparisons with the economic situation during the Second World War and the years that followed, there are significant differences, such as the absence of the need for the large-scale reconstruction of major infrastructure, which would have countered the supply shock. Above all, however, we are living in different times (Hernández, 2020). We are in a context in which integration processes are going into reverse and national identities are strengthening, while the spread of the health crisis and its effects are global in nature. Even before the outbreak of the pandemic, we were witnessing a  trade war between the US and China , largely driven by a technology race, now intensified by the response to the health crisis and the scramble to find a vaccine (Campbell & Doshi, 2020). However, we do not know how the pandemic will impact this geopolitical rivalry, particularly in terms of the effects on China and its growth, internal cohesion and international image (Esteban, 2020). Similarly, at the time of writing, the health emergency is still in its early stages in the US.

The crisis has hit at a time in which part of the international community is questioning the pillars of the world order put in place after the Second World War, especially multilateral governance and the meaning and even existence of the EU. All this means that a health crisis that is undeniably global in nature is occurring in a context in which national identities are being reasserted.

(2.1) Economic dimension

There is unanimous consensus on the negative economic impact of the current crisis on the global economy, both in the short and medium term. In the energy and commodities markets, the crisis is framed by the drop in oil prices as a result of the conflict between Russia and Saudi Arabia, which has dragged down the prices of other primary goods (Escribano, 2020).

In terms of trade and investment, the pandemic has struck at a moment at which production and investment are highly transnational in nature, with fragmented manufacturing processes distributed across global production chains (Molina, 2020).

The current situation is laying bare the vulnerability of current models of production, characterised by their flexibility (short production lines, the minimisation of stock and just-in-time supply chains) compared with supplier countries (Treceño, 2020; Haren & Simchi-Levi, 2020). As Fanjul (2020) notes, the crisis has highlighted the risk of geographic dependence on China, which could either result in strategies to diversify the location of suppliers, without negatively impacting aggregate trade, or trigger a wave of relocalisation, with the associated drop in trade volumes.

In terms of service exports, while they have been increasing in recent years, most notably in line with the transnationalisation of production, a significant fall in service flows is expected as a result of  the impact on the global tourism sector . Economies like Spain, with a large service sector and a heavy emphasis on tourism, will see a significant impact from the pandemic as a result of the fall in visitors.

The impact of the external shock to foreign direct investment (the fifth indicator in the economic dimension of the Elcano Global Presence Index) will depend on the reconfiguration of transnational production and the impact on international financial markets in the medium term (Álvarez-Pickman, 2020).

(2.2) Military dimension

We may not immediately expect to see a direct link between the coronavirus and the military dimension of the Elcano Global Presence Index. While the armed forces have played  a significant role in managing the health crisis  in practically all countries, at present their role is limited to national territories. Nonetheless, we cannot rule out future international missions to respond to specific health emergencies in specific countries, especially developing ones.

(2.3) Soft dimension

As explained in the first section, the soft dimension has been the main vector of globalisation since the crisis at the end of the 2000s. However, in contrast to this crisis, this time round there are reasons to expect a significant but uneven impact on a number of areas. The main variables that will be affected are those that imply the movement of people, such as tourism, migration, education and sports (Molina, 2020). In this respect, we have already seen the cancellation of international sporting events  like the Olympic Games .

Nonetheless, other soft variables could be strengthened by the coronavirus crisis. In terms of information, there is nothing surprising about the current increase in international news. Similarly, confinement and the rise in people working from home mean improvements to the physical infrastructure of the Internet. The variable of science may also behave in a similar way, given the increase in scientific research (vaccines and treatments, pandemics and climate change) and the important role of the social sciences (analysis of the impact and exploring the economic, political and social dimensions of responses).

There are also other indicators in the soft dimension where different factors with opposite effects mean the overall impact of the crisis could be positive or negative. The indicator for the variable technology, for example, reflects foreign patents, which is linked to trade and may thus fall, although it is equally possible that there could be an increase in this variable, since, similar to the variable science, there may be a rise in patents due to the need for new technology, which could in turn drive investment in research and development.

The situation for the culture variable, measured by exchanges of audio-visual services, is similar: the retreat of economies inside national boundaries and falling global trade over the coming years could exert downward pressure on such exchanges, although digital exchanges could escape from this dynamic, especially if we take into account the increased consumption of films, television series and music during confinement.

Finally, when it comes to development cooperation, certain governments may choose to increase development aid to help preserve global public goods, particularly in the area of health, although we could also see cuts to spending in a context of strengthening national identities and the reduction of forums for multilateral cooperation (Olivié, 2020).

(3) How will this affect the globalisation process?

One way to measure the response is by calibrating its impact on the aggregate of the Elcano Global Presence Index (with all the necessary caveats and reservations). This can be done by examining the transformational effect during the previous crisis in 2008 (section 1 of this paper) and forecasting the impact of the current pandemic on the different variables and dimensions of the index (section 2).

(3.1) Scenario A: a crisis like 2008

Generally speaking, structural changes have a two-year lag before they are reflected in the Elcano Global Presence Index. The 2018 index, which was published in 2019, includes the data for the 16 variables available as of 31 December 2018. In general, the data refer to 2017 or in some cases 2016. This means that the structural effects of the crisis that began with the collapse of Lehman Brothers in autumn 2008 are first reflected by our index in 2010 and extend into the second half of the decade.

If the current health emergency and its economic, political and social consequences are on a similar scale to the crisis last decade, we would expect the change in the aggregate of the Elcano Global Presence Index to be similar to the period 2010-15, for all the variables and dimensions (Figure 4).

(3.2) Scenario B: a crisis worse than 2008

Some analysts argue that the economic, political and social consequences will be more devastating and deeper than those of the 2008 crisis. In such a scenario, the figures for the various components of the index would, perhaps from 2022, register the worst possible decline for each of the indicators during the period 2010-18 (Figure 4).

(3.3) Scenario C: a different crisis to 2008

Finally, the particular features of this crisis and the differences with respect to 2008 may mean that variables behave differently, as mentioned in the previous section.

Energy is a good example: energy prices are at historic lows and policies linked to climate change are expected to continue, especially the process of replacing fossil fuels. The behaviour of this variable is expected to be similar to previous years (Escribano & Lázaro, 2020), which will translate into similar behaviour for the primary goods variable. If this is the case, the average annual variation for the coming years could be around -2.6%, which is the average value for the period 2015-18 (Figure 5).

Also in the economic dimension, the outlook for manufacturing is similar, since it has already shown a cooling down of international trade. In the military dimension, the troops and military equipment variables should also behave in a similar manner, since, at least in principle, there should not be a significant reaction to the current crisis. In terms of the soft dimension, the culture variable is expected to follow a similar course, since it could be significantly affected by a fall in international trade or increased consumption of services linked to culture. Similarly, the evolution of the development cooperation variable will depend on the tension between increased pressure to reduce public spending and the demand for increased protection of global public goods.

In terms of services, the tourism industry could see a significant impact, perhaps comparable to the worst years of 2010-18 (and thus of a similar magnitude to scenario B), alongside other variables that involve the flow of people (migration, tourism, sport and education).

There is also a third group of variables that could behave similarly to the aftermath of the Great Recession (and thus similar to scenario A) in the short term. Investment is a good example, given the potential for the relocalisation of production and the sensitivity of this variable to the behaviour of international financial markets. In the soft dimension, there are a number of variables that could follow this pattern: information, due to increased consumption and the foreseeable increase in installed capacity, and technology and science, in which major powers that did not suffer the crisis like many European economies have invested.Figure 4. Three scenarios for globalisation after COVID-19 (%)

Just one of the three scenarios (scenario B) results in effective deglobalisation, which would affect all the dimensions, especially the economy, with the total economic presence of the 120 countries for which the index is calculated falling by 630 points (9%) with respect to the most recent value for 2018. The reduction in the soft dimension would be approximately half (10%) and the military dimension would fall by 100 points (Figures 6 and 7). The net result would be a fall of 1,065 points (8.5%) in the aggregate global presence of the 120 countries included in the calculation of the index with respect to the 2018 figure, resulting in a return to the post-crisis levels of globalisation.

However, if the transformational effects are similar to the previous crisis (scenario A), we could expect continuity in the process of globalisation, with cumulative increases, particularly in the soft dimension (over 200 points or 6%) and, to a lesser extent, the economic dimension (just under 150 points or slightly over 2%). The combined effect would be an increase of 391 points (3.1%) in the aggregate global presence, just 0.7 of a percentage point less than the change between 2017 and 2018.

Finally, the scenario based on different transformational effects from the previous crisis, would see a near standstill in globalisation, with the aggregate global presence increasing by just 88 points (0.7%). This would be the result of a more dynamic soft dimension, whose 120-point increase (3.6%) would be offset by a slight fall in the economic dimension (-0.5%), with the military dimension practically unchanged.

Conclusions

Similar to the crisis at the end of the 2000s, the current crisis will have an impact on international relations. We can expect to see an acceleration in the structural changes that we have already been seeing in the process of globalisation.

Under all three scenarios identified, the soft dimension will lead globalisation, as was the case in the aftermath of the 2008 crisis, despite the potential for restrictions on the movement of people (which will affect the variables of education, tourism and migration). Above all, this can be explained by the expected dynamism of the variables information, technology and science, sectors that are set to grow, consolidating the technology gap between countries and regions, as well as how this increasingly shapes the roles of different countries and blocks (eg, China, the US and Europe) on the international stage.

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The world is temporarily closed. Photo: Edwin Hooper (@edwinhooper)

How our interconnected world is changing

Globalization isn’t going away, but it is changing, according to recent research  from the McKinsey Global Institute (MGI). In this episode of The McKinsey Podcast , MGI director Olivia White speaks with global editorial director Lucia Rahilly about the flows of goods, knowledge, and labor that drive global integration—and about what reshaping these flows might mean for our interconnected future.

After, global brewer AB InBev has flourished in the throes of what its CFO Fernando Tennenbaum describes as the recent “twists and turns.” Find out how in this excerpt from “ How to thrive in a downturn: A CFO perspective ,” recorded in December 2022 as part of our McKinsey Live series. 1 Please note that market conditions may have changed since this interview was conducted in December 2022.

The McKinsey Podcast is cohosted by Roberta Fusaro and Lucia Rahilly.

This transcript has been edited for clarity and length.

Globalization is here to stay

Lucia Rahilly: Pundits and other public figures have wrongly predicted the demise of globalization for what seems like years. Now, given the war in Ukraine and other disruptions, many are once again sounding its death knell. What does this new MGI research  tell us about the fate of globalization? Is it really in retreat?

Olivia White: The flows of goods, the real tangible stuff, have leveled off after nearly 20-plus years of growing at twice the rate of GDP. But the flows of goods kept pace with GDP and even rose a little bit, surprisingly, in the past couple of years. Since GDP has been growing, that means actual ties have gotten stronger.

One of the most striking findings from this research was that flows representing knowledge and know-how, such as IP and data, and flows of services and international students have accelerated and are now growing faster than the flow of goods. Flows of data grew by more than 40 percent per annum over the past ten years.

Lucia Rahilly: Goods are a smaller share of total flows, a smaller share of economic output, than in the past. That doesn’t necessarily sound like a bad thing. Could it be a sign of progress?

Olivia White: The fact that certain goods are growing less quickly than other types of flows shows this shift in our economy and what’s most important to the way the economy functions. It comes on the back of a long history of different factors that influence growth and shifts in the way patterns work. What’s happening, in part, is that a variety of countries are producing more domestically—first and foremost China. That has been driving a lot of the flow down, if you take the longitudinal view, over the past ten years versus before.

The world remains interdependent

Lucia Rahilly: How interdependent would you say we are at this stage? Could you give us some examples of the ways we’re interconnected?

Olivia White: The top line is, every region in the world depends on another significant region for at least 25 percent of a flow it values most.

In general, regions that are manufacturing regions—Europe, Asia–Pacific, and China, if we look at it on its own because it’s such a large economy—depend very strongly on the rest of the world for resources: food to some degree, but really energy and minerals of different sorts. I’ll give you a few examples.

In general, regions that are manufacturing regions depend very strongly on the rest of the world for resources: food to some degree, but really energy and minerals. Olivia White

China imports over 25 percent of its minerals, from places as far-flung as Brazil, Chile, and South Africa. China imports energy, particularly in the form of oil from the Middle East and Russia. Europe is emblematic of these forms of dependency on energy. It was dependent on Russia for over 50 percent of its energy, but now that has drastically changed.

In some other regions in the world—places that are resource rich, like the Middle East, sub-Saharan Africa, and Latin America—those places are highly dependent on the rest of the world for their manufactured goods. Well over half the world’s population lives in those places. They import well over 50 percent of their electronics and similar amounts of their pharmaceuticals. They are highly dependent on other parts of the world for things that are really quite critical to development and for modern life.

North America is somewhat of a different story. We don’t have any single spot of quite as great a dependency, at least at the broad category level. We import close to 25 percent of what we use in net value terms across the spectrum, both of resources and of manufactured goods.

This doesn’t yet speak of data and IP, where, for example, the US and Europe are fairly significant producers/exporters. A country like China is a very large consumer of IP.

Lucia Rahilly: How interdependent are we in terms of the global workforce?

Olivia White: This is quite striking. We asked how many workers in regions outside North America serve North American demand. And we asked the same question for Europe. It turns out that 60 million people in regions outside North America serve North American demand, and in Europe the corresponding number is 50 million.

These numbers are very substantial versus the working populations in those countries. So when you consider how much of what North Americans or Europeans are consuming could be produced onshore, by onshore labor, the answer is not even remotely close to those sorts of numbers—at least given the means of production or the way services are delivered today and the role people play in that.

Lucia Rahilly: Let’s turn to some of the categories of flows that have increased in recent years. What’s driving growth in global flows now that the trade in goods has stabilized?

Olivia White: Flows linked to knowledge and know-how. Knowledge services that have historically grown more slowly than manufactured goods and resources, with increased global connection over time, have flipped over the past ten years.

Professional services, such as engineering services, are among those more traditional trade flows that have been growing fastest, at about 6 percent a year, versus resources, which have slowed to just around two percent. Anything that involves real know-how—engineering, but also providing, say, call center support—is in that category.

The flows of IP are growing even faster. Now, IP is tricky because accounting for it is a very tricky thing to do. But it roughly looks at flows of the fun stuff. In the report we talk about Squid Game , but IP also includes movies, streaming platforms, music, and any sort of cultural elements that we consume.

It’s also important to consider flows of patents and ideas and the way countries or companies will use ideas or know-how developed in one country to help what they do broadly across the world. Those flows have been growing at roughly 6 percent per year as well.

There are data flows—the flows of packets of data. For example, if we were in different countries while conducting this interview there would be the flows between us. There are also flows linked to our ever-expanding use of cloud and data localization. Data transfer is happening more and more quickly.

The flows of international students have also been rising. That was mightily interrupted by the pandemic, for reasons I don’t need to belabor, but these flows seem to be rebounding. It’s important to consider the degree to which those will jump back on their accelerated growth trajectory.

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How covid-19 has affected global flows.

Lucia Rahilly: You mentioned flows of international students dropping off during COVID, for the obvious reasons. Did other flows generally drop off during the pandemic? Or were there examples of flows that were particularly resilient throughout that period?

Olivia White: There’s some variation, but many flows were remarkably resilient—resilient in a way that’s a bit counter to the general narrative about what happened during the pandemic.

The flows of resources and manufactured goods jumped reasonably significantly in 2020 and 2021, both to levels of about 6 percent per year on an annualized basis. To some degree, what was happening is that cross-border flows stepped in to replace interrupted domestic production. Flows from Asia came in, for example, to the US or to Europe. We’ve seen some flows go in reverse directions. There was a bunch of interruption in domestic production, which was quite surprising.

Flows of capital also jumped quite a lot as people needed to shift the way they were financing themselves. Multinationals needed to shift the way they were financing themselves. Some were moving liquidity to different parts of the world under times of financial stress. But those jumped to levels of growth in the tens of digits from what had actually been reversed growth for the past ten years. All those things jumped. IP jumped a little bit; data remained high. So these flows have been remarkably resilient.

The good and bad news about resource concentration

Lucia Rahilly: You invoked concentration a bit when you talked about Europe being dependent on Russia for 50 percent of its energy. Can you say a bit more about what concentration means in this context and how it affects the dynamics of the way we’re connected globally?

Olivia White: From the global perspective, there are some products that truly originate in only a few places in the world, and all of us across the globe are dependent on those few places for our supply. Iron ore is quite concentrated, and cobalt is concentrated in the DRC [Democratic Republic of the Congo].

The second type of concentration is viewed from the standpoint of an individual country. Lucia, you talked about Europe and gas dependency.

For example, Germany was getting gas from only a very concentrated set of sources. These are places where, for a variety of reasons, countries have built up dependencies on just a small number of other countries.

Why has this happened? Why are we in this position? Cost is one reason. People have made decisions based on economic factors. Another reason is regional preference. Not all goods are created equal, even if they fall in the same category.

The third reason is preferential trade agreements between different countries or other forms of tariffs or taxes that shape the way flows occur. We’re in a world in which suddenly people are realizing they have to contemplate the consequences associated with concentration—not of suppliers, but of the country of origin from which they’re buying things.

Lucia Rahilly: It sounds like concentration also increases efficiency in some cases where those disruptions don’t occur. Is concentration always a bad thing? If we rethink concentration, can we expect to see some loss of efficiency in the interim?

Olivia White: No, it’s not always a bad thing. But there are a lot of considerations to make that involve costs, involve geopolitical relationships, involve the role that various countries want to play themselves, how they’re thinking about development, how they’re thinking about their workforces. All those things have to be part of the mix.

Imagine three or four different countries, each with three trading partners, and they’re largely different trading partners. Swapping off who’s supplied by whom is a huge problem of coordination.

How global chains will evolve

Lucia Rahilly: Geopolitical risks  have obviously trained a policy spotlight on reimagining these global value chains, whether for security reasons or to strengthen resilience more generally. Accepting that the world remains interdependent, how do we see trade flows continuing to evolve in coming years?

Olivia White: Broadly speaking, there are four categories of potential evolution. Semiconductors are most prominent in public discussion. Electronics, more broadly, is one of the fastest-moving value chains since 1995, with 21 percentage points of share movement per decade. Pharmaceuticals and the mining of critical minerals are other examples. And they will be part of what shifts the way that flows crisscross the globe.

Second category: textiles and apparel. This category is not as sensitive in a geopolitical sense as some of the things I was talking about before. This category is one where you actually do have new hub creation right now. Consumer electronics, other forms of electric equipment that aren’t particularly sensitive, possibly fall in that category too.

Third category: IT services and financial intermediation or professional services. That will reconfigure the ways in which services flow.

Fourth and finally, there’s the stuff that’s just going to be steady—food and beverages, paper and printing. There’s no particular reason to expect that there are strong forcing mechanisms that will change the way those things are flowing across the world right now. They’re things that have remained relatively steady for the past ten or more years.

Global flows are necessary for a net-zero transition

Lucia Rahilly: Do we have a view on whether the evolving state of global flows is helping or hindering the net-zero transition ?

Olivia White: The way I’d put it is, there is no way we move quickly toward a net-zero transition without global flows. There are certainly things about global flows that are tricky from a net-zero perspective. It costs carbon to ship things and move things a long way. But in order for net zero to be attainable, we need to make sure that energy-generating technologies and fuels are able to flow across the world.

Energy-generating technologies include both the minerals that underpin construction of those technologies and the actual manufacturing. So, in the first category, think nickel and lithium. In the second category, think about the actual manufacturing of solar panels. The minerals themselves are processed in only a few countries around the world. So people are going to have to move them from one place to another. Maybe the world could have broader diversification of such things, but on average, the timeline from discovering a mineral to being able to produce it at scale is well in excess of 16 years. If we want to move fast, we have the luxury to move things across the world. Meeting cost curves for manufacturing at scale and in locations where you have at least some established presence is going to be important.

The final element that’s crucial with respect to net zero is cross-border capital flows. It’s really important that developing countries are able to finance shifts in the way that energy is produced and consumed in their countries, which means they may have to both spend more, at least as a ratio of GDP, and have less ability to spend, given other forms of development imperative.

Multinationals and global resilience

Lucia Rahilly: What’s the role of major multinational companies as we look ahead toward reimagining the future of our global connectedness?

Olivia White: The first thing that needs to be recognized is that major multinational corporations play an outsize role in global flows today. Multinationals are responsible for about 30 percent of trade. They’re responsible for 60 percent of exports and 82 percent of exports of knowledge-intensive goods. So they disproportionately drive flows, especially the ones associated with knowledge. And therefore, they’re going to be the center of managing for their own resilience, but also in a collective sense, for the resilience of the world.

The future of global flows

Lucia Rahilly: The media tends to focus on what some see as globalization’s imminent demise. Accepting that global ties continue to bind and connect us across the world, it’s also natural for folks to have pretty strong reactions to these intense and ongoing global disruptions that we’ve experienced in recent years. How would you sum up the way we think about the future of globalization at a high level?

Olivia White: The world we live in right now is highly dependent on flows. Will those flows reconfigure and shift? Yes, absolutely. They have in the past, and they will in the future.

Lucia Rahilly: Do we see anything in the research to indicate that the world is actually moving toward decoupling, which is also very much part of the media narrative?

Olivia White: If you look along regional lines, individual regions can’t be independent. If you just start to play with what sorts of decoupling of regions would be possible, you see very quickly that it’s not something you can do.

Now, is it possible that you would get groups of countries that become more strongly interconnected among themselves and less strongly connected with others? Absolutely. It’s possible to move in that direction. The question becomes, is there an actual decoupling, or do you just have a shift in degree? As with most things in the world, the answer tends toward the shift in degree rather than an abrupt or sharp true change or decoupling.

Lucia Rahilly: Does greater regionalization improve resilience?

Olivia White: To some degree you can say, “Look, if I’m self-sufficient, I’m more resilient.” On the other hand, all of a sudden you depend on yourself for everything, and that’s a point of vulnerability in the same way that getting it only from one other person would be a problem.

There are a whole host of reasons some degree of regionalization might help. You’ve got things closer to you. But dependency just on a few sets of people, whether or not they’re in your region, means you’ve got dependency on just a few points of potential weaknesses rather than a broad web, which in general is a more resilient and robust structure.

Lucia Rahilly: Thanks so much, Olivia. That was such an interesting discussion.

Olivia White: A real pleasure, Lucia. Thank you.

Roberta Fusaro: One example of resilience is AB InBev. Here to talk about how it’s prospering in the face of worldwide disruption is its CFO, Fernando Tennenbaum. This excerpt, “ How to thrive in a downturn: A CFO perspective ,” from our McKinsey Live series, was recorded in December 2022.

Lucia Rahilly: Fernando, we’re confronting an unusual constellation of disruptions: inflation, high interest rates driving up the cost of capital, geopolitical turbulence unexpectedly upending supply chains and sending energy prices spiking—it’s genuinely a volatile moment. Tell us, how is AB InBev faring in the current context?

Fernando Tennenbaum: We’re fortunate to be in a resilient category. Despite these twists and turns in different parts of the world, beer sales have been quite strong. That said, inflation has turned out to be much higher than expected. 2 Market conditions may have changed since this interview was conducted. We need to ensure our operations are in sync with the market, to meet this unique moment. We need to understand the state of the consumer and adjust our operations accordingly.

In emerging markets like Latin America and Africa, inflation is not new news. There are different levels of inflation, but inflation has been a part of these economies for a very long time. Consumers are more used to it, companies are more used to it—and it’s probably a more straightforward discussion.

Lucia Rahilly: You’ve spent much of your career in Latin America where, as you said, inflation has historically been much higher and more volatile than in the US or in Western Europe. Walk us through some of the lessons that we in the US, for example, could learn from.

Fernando Tennenbaum: Make sure that you’re always looking at your customers, and that you’re always keeping up with inflation. You should avoid lagging too much, and you should avoid overpricing compared with inflation. If you do too little or too much, you start disturbing the health of the consumer. If you get it right, it’s probably a good thing for the business. You have to make sure you navigate the rising cost environment while ensuring that the consumer is in a good place, your product is in a good place, and the category is a healthy one. It’s a balancing act.

You should avoid lagging too much, and you should avoid overpricing compared with inflation. If you do too little or too much, you start disturbing the health of the consumer. Fernando Tennenbaum

Lucia Rahilly: AB InBev has a diverse portfolio of brands. Volumes are good. Are customers trading up or down, during this period, between your premium and mass-market brands?

Fernando Tennenbaum: Premiumization continues to be a trend, and consumers continue to trade up to premium brands. Over the course of this year, people often asked whether consumers were trading down—and we see no evidence of trading down. That is true for the US, that is true for Africa, and that is true for Latin America—which is quite unique.

I don’t know if the future will be different; the world is changing so fast. But if you were to ask me ten years from now, I’d expect premium to be even bigger than it is today.

Lucia Rahilly: Let’s talk about uncertainty. The economy could play out in many different ways. How do you manage for that?

Fernando Tennenbaum: Let’s take our debt portfolio. Now is the moment that interest rates are going up. Inflation and borrowing are going up. Overall, this tends to be bad news—but for us, it’s quite the opposite because we don’t have any debt maturing in the next three years. We prepared for this when we saw the world going to a very different place at the beginning of 2020.

We ended up raising some long-term debt and repaying all our short-term debt. Now we’re left with a debt portfolio that has an average maturity of 16 years and no meaningful amount of debt maturing in the next three years—all at a fixed rate. Since we don’t need to refinance, we’re actually buying back our debt. Rising interest rates can be good when you can buy back debt cheaper than it cost to issue.

Lucia Rahilly: You became CFO at AB InBev in 2020, when pandemic uncertainty was at its peak. Talk to us about how you navigated that period.

Fernando Tennenbaum: The first thing we did in 2020 was pump up our cash position. Not that we needed it, but I felt it would give operations peace of mind. To be prepared, we started borrowing a lot of money. And we started taking care of our people. We needed to make sure our people were safe—that was priority number one.

Once we made sure our employees were safe, our operations were safe, then we looked at opportunities and started to fast-forward. I remember we looked at May, for example, and started to see a lot of markets doing well in terms of volume. We had a lot of cash. We started buying back some debt, especially near-term debt, to create even more optionality for the future.

We also accelerated our digital transformation. The moment was uniquely suited for it. Digital was a much better way to reach customers at a time when everybody was afraid to meet in person. In hindsight, the company ended up in a much better place today than it was three years ago—in terms of our portfolio, our digital transformation, and even financially—because we acted very quickly and created a lot of optionality during the first few months of the pandemic.

Lucia Rahilly: Any mistakes to avoid?

Fernando Tennenbaum: Looking back, I wouldn’t have done anything massively different. If I had known the outcome, I might have done things differently. But without knowing the outcome, I felt that the way we managed and the optionality we created set us up well.

Lucia Rahilly: Brewing is such an agriculturally dependent business, and agriculture has been significantly disrupted, both because of the war in Ukraine and because of climate-related risk. As CFO, how do you think about sustainability in terms of longer-term value creation?

Fernando Tennenbaum: Sustainability cuts across the whole of our business. We have a lot of local suppliers—20,000 local farmers. Our brewing processes are natural. The more efficient we are there, the more sustainable we are and, actually, the more profitable we are. We have local operations, and we sell to the local community. And most of our customers are very small entrepreneurs. The more we help them, the better they can run their business. And we say beer is inclusive because we have two billion consumers.

Lucia Rahilly: Is packaging also part of the sustainability approach?

Fernando Tennenbaum: Definitely. For example, we have returnable glass bottles. That’s very efficient, very sustainable, and from an economic standpoint, that’s probably the most profitable packaging we have. It’s also the most affordable for consumers. So it’s good for us, good for the environment, and good for the consumers.

Lucia Rahilly: You said beer is inclusive in part because so many of us drink it. How else do you approach inclusion at AB InBev?

Fernando Tennenbaum: Our two billion consumers are very different from one another. We need to make sure that, as a company, we reflect our consumers. Whenever we look at our colleagues, we need to make sure they reflect the societies where we operate—and we operate in very different societies.

A diverse and inclusive team is going to be a better team. That also applies to our suppliers. For example, if you think about suppliers in Africa, some are very poor. They manage to get access to technology, which means we can track whether they’re receiving the funds we pay them. We can track where agricultural commodities are being sourced. So how we financially empower them is also a very important part of our sustainability strategy.

Lucia Rahilly: Looking ahead, how are you thinking about innovation and investment in technology, in order to enable growth?

Fernando Tennenbaum: Innovation is a key component of beer, and there are two sides to that. One is innovation in products. The other is packaging. In Mexico, for example, we have different pack sizes for different consumption occasions and consumer needs.

Beyond that, there’s also technological innovation. Take our B2B platform, which we started piloting in 2019. Now, three or four years later, we have around $30 billion of GMV [gross merchandise value] in our e-commerce platform, which is accessible in more than 19 countries. That’s the optimal portfolio to improve customer engagement at their point of sale. Before we launched our B2B platform, we used to spend seven minutes per week interacting with our customers. Today, with our B2B platform, we interact with them 30 minutes per week. We increased the number of points of sales. For example, in Brazil, we used to have 700,000 customers, and now we have more than a million customers. Previously, they were buying our products from a distributor. Now we can reach them directly with the B2B system in place.

This connection with our customers means we can do a lot of other things, like our online marketplace, where third-party products generated an annualized GMV of $850 million, up from zero four years ago. That marketplace now continues to grow and to deliver a lot of value for our customers and for ourselves.

Lucia Rahilly: One more question: If you could give one piece of advice to a brand-new CFO of a large, multinational corporation, what would it be in this market?

Fernando Tennenbaum: Make sure you plan for different scenarios. The world is moving very fast, and you can’t expect it to unfold in a certain way. But if you have options, are agile in making decisions, and have a very engaged team, then regardless of the twists and turns, you are able to meet the moment. And you are definitely able to deliver on your objectives.

Lucia Rahilly: I lied. I’m going to ask you one more. How do you see, for these new CFOs, the relationship between sustainability and inclusivity and growth? Do you see those in tension?

Fernando Tennenbaum: There is this myth that you are either sustainable or profitable. At least at AB InBev, we’re sure they go hand in hand. The more sustainable you are, the more profitable you are, and the more value you create for your different stakeholders.

Fernando Tennenbaum is the CFO of Anheuser-Busch InBev. Olivia White is a director of the McKinsey Global Institute and a senior partner in McKinsey’s Bay Area office. Roberta Fusaro is an editorial director in the Waltham, Massachusetts, office, and Lucia Rahilly is global editorial director and deputy publisher of McKinsey Global Publishing and is based in the New York office.

Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of McKinsey & Company or have its endorsement.

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Advantages and Disadvantages of Globalization Essay

• To find inspiration for your paper and overcome writer’s block
• As a source of information (ensure proper referencing)
• As a template for you assignment

When discussing the drawbacks and benefits of globalization, essays tend to be on the longer side. The example below is a brief exploration of this complex subject. Learn more in this concise globalization pros and cons essay.

Introduction

• Benefits and Disadvantages of Globalization

Reducing Negative Effects

In today’s world, globalization is a process that affects all aspects of people’s lives. It also has a crucial impact on businesses and governments as it provides opportunities for development while causing significant challenges. This paper discusses the advantages and disadvantages of globalization using evidence from academic sources. The report also suggests how governments and companies may implement to reduce the negative impact of the process.

Benefits and Drawbacks of Globalization

Globalization is a complex concept that can be defined by the process of interaction between organizations, businesses, and people on an international scale, which is driven by international trade. Some people may associate it with uniformity, while others can perceive it as the cause of diversification. The reason for such a difference in public opinion is that globalization has both advantages and disadvantages that should be analyzed.

The most significant positive aspects of globalization include global economic growth, the elimination of barriers between nations, and the establishment of competition between countries, which can potentially lead to a decrease in prices. Globalization supports free trade, creates jobs, and helps societies to become more tolerant towards each other. In addition, this process may increase the speed of financial and commercial operations, as well as reduce the isolation of poor populations (Burlacu, Gutu, & Matei, 2018; Amavilah, Asongu, & Andrés, 2017).

The disadvantages of globalization are that it causes the transfer of jobs from developed to lower-cost countries, a decrease in the national intellectual potential, the exploitation of labor, and a security deficit. Moreover, globalization leads to ecological deficiency (Ramsfield, Bentz, Faccoli, Jactel, & Brockerhoff, 2016). In addition, this process may result in multinational corporations influencing political decisions and offering unfair working conditions to their employees.

Firms and governments can work on eliminating the negative effects of globalization in the following ways. For example, countries should work on microeconomic policies, such as enhancing opportunities for education and career training and establishing less rigid labor markets. In addition, governments can build the necessary institutional infrastructure to initiate economic growth. To solve the problem of poor working conditions, it is vital to establish strict policies regarding minimum wages and the working environment for employees. A decrease in the national intellectual potential may be addressed by offering a broad range of career opportunities with competitive salaries, as well as educating future professionals on how their skills can solve problems on the local level.

Companies, in their turn, may invest in technologies that may lead to more flexible energy infrastructure, lower production costs, and decrease carbon emissions. They can also establish strong corporate cultures to support their workers and provide them with an opportunity to share their ideas and concerns. Such an approach may eliminate employees’ migration to foreign organizations and increase their loyalty to local organizations. It is vital for companies to develop policies aimed at reducing a negative impact on the environment as well by using less destructive manufacturing alternatives and educating their employees on ecology-related issues.

Globalization has a significant impact on companies, governments, and the population. It can be considered beneficial because it helps to eliminate barriers between nations, causes competition between countries, and initiates economic growth. At the same time, globalization may result in a decrease in the national intellectual potential, the exploitation of labor, and ecology deficiency. To address these problems, organizations and governments can develop policies to enhance the population’s education, improve working conditions, and reduce carbon emissions.

Amavilah, V., Asongu, S. A., & Andrés, A. R. (2017). Effects of globalization on peace and stability: Implications for governance and the knowledge economy of African countries. Technological Forecasting and Social Change , 122 (C), 91-103.

Burlacu, S., Gutu, C., & Matei, F. O. (2018). Globalization – Pros and cons. Calitatea , 19 (S1), 122-125.

Ramsfield, T. D., Bentz, B. J., Faccoli, M., Jactel, H., & Brockerhoff, E. G. (2016). Forest health in a changing world: Effects of globalization and climate change on forest insect and pathogen impacts. Forestry , 89 (3), 245-252.

• Globalization of Bollywood and Its Effects on the UAE
• Globalization and Its Impact on the 21st Century Global Marketplace
• Disease Ecology Definition
• How Does Iron Deficiency Affect Pregnancy?
• Ecology: Definition & Ecological Fallacy
• Multinational Corporations Economic Implications
• Globalisation and Labour Market
• Impact of Globalisation on Labour
• The Origins of the Modern World
• Containerized Shipping Influence on World Economies
• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2021, June 9). Advantages and Disadvantages of Globalization Essay. https://ivypanda.com/essays/advantages-and-disadvantages-of-globalization/

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IvyPanda . (2021) 'Advantages and Disadvantages of Globalization Essay'. 9 June.

IvyPanda . 2021. "Advantages and Disadvantages of Globalization Essay." June 9, 2021. https://ivypanda.com/essays/advantages-and-disadvantages-of-globalization/.

1. IvyPanda . "Advantages and Disadvantages of Globalization Essay." June 9, 2021. https://ivypanda.com/essays/advantages-and-disadvantages-of-globalization/.

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IvyPanda . "Advantages and Disadvantages of Globalization Essay." June 9, 2021. https://ivypanda.com/essays/advantages-and-disadvantages-of-globalization/.

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The end of globalisation as we know it

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Robert Armstrong and Ethan Wu

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Good morning. Today is the second of three Unhedged x Chartbook collaborations with Adam Tooze. Adam is on the cover of New York magazine this week, which means Ethan and I are famous by proxy.

The topic this week is “The End of Globalisation As We Know It”. There has been a loose nexus of arguments cutting across geopolitics, finance and economics in recent years, which suggests that the status quo of the past 30 or 40 years is changing. Old: liberal democracy and free trade rising, low interest rates, low inflation and high equity valuations, especially for technology. New: populism, trade barriers, higher rates and inflation and valuations under pressure.

Are we in a true moment of transition? Below, Adam expresses scepticism about the conventional wisdom, most recently expressed in Larry Fink’s annual letter to BlackRock shareholders. Over on Chartbook , Ethan and I argue that there are good reasons to think that tectonic plates are shifting beneath markets and the economy. The changes may be nascent and it is impossible to predict just where they will lead, but all the same, the ground is rumbling.

Email us: [email protected] and [email protected] .

Adam Tooze: Deglobalisation may be more talk than substance

Larry Fink’s annual letter to BlackRock shareholders stirred a flurry of debate last week about Vladimir Putin’s invasion of Ukraine, the future of globalisation, supply chains, inflation and the implications for investors. It is a sign of the times. Fink’s previous letters had been more famous for focusing on the climate crisis and ESG.

Now, like the rest of us, Fink and the asset manager feel compelled to react to Russia’s war on Ukraine.

The letter diagnoses what I called the “polycrisis” of our times in my book Shutdown (borrowing the phrase from former European Commission president Jean-Claude Juncker).

“The ramifications of this war are not limited to eastern Europe,” Fink opines. “They are layered on top of a pandemic that has already had profound effects on political, economic and social trends. The impact will reverberate for decades to come in ways we can’t yet predict.”

For Fink, Putin’s aggression puts in question the history that has framed his company’s entire development:

In the early 1990s, as the world emerged from the Cold War, Russia was welcomed into the global financial system and given access to global capital markets . . . The world benefited from a global peace dividend and the expansion of globalisation. These were powerful trends that accelerated international trade, expanded global capital markets, increased economic growth and helped to dramatically reduce poverty in nations around the world. It was during this time that we started, 34 years ago, to build BlackRock. We saw the rise of globalisation and growth of the capital markets fuelling a need for the kind of technology-driven asset management that we believed we could bring to our clients.

BlackRock launched an initial public offering in 1999, months after the 1998 financial crisis in Russia that helped to bring Putin to power.

Now, Fink declares, Russia’s attack on Ukraine “has put an end to the globalisation we have experienced over the last three decades. We had already seen connectivity between nations, companies and even people strained by two years of the pandemic. It has left many communities and people feeling isolated and looking inward. I believe this has exacerbated the polarisation and extremist behaviour we are seeing across society today.”

Fink has championed the responsibility of investors to counter these ominous trends through a long-term approach to ESG issues. In reaction to Putin’s aggression, he now advocates something far more radical: a deliberately orchestrated global capital strike.

“The invasion has catalysed nations and governments to come together to sever financial and business ties with Russia,” Fink declares. “United in their steadfast commitment to support the Ukrainian people, they launched an ‘economic war’ against Russia . . . These actions taken by the private sector demonstrate the power of the capital markets: how the markets can provide capital to those who constructively work within the system and how quickly they can deny it to those who operate outside of it . . . This ‘economic war’ shows what we can achieve when companies, supported by their stakeholders, come together in the face of violence and aggression.”

It is a remarkable call to arms but Fink does not linger over the awesome responsibility it implies. After all, if you call for an economic war against Putin’s regime, why stop there?

Instead, he steers us back to more familiar and less edgy territory:

Russia’s aggression in Ukraine and its subsequent decoupling from the global economy is going to prompt companies and governments worldwide to re-evaluate their dependencies and reanalyse their manufacturing and assembly footprints — something that Covid had already spurred many to start doing. And while dependence on Russian energy is in the spotlight, companies and governments will also be looking more broadly at their dependencies on other nations.

Which “other nations” Fink has in mind is left unspoken. But he goes on to argue that “Mexico, Brazil, the United States, or manufacturing hubs in south-east Asia”, all of which are presumably safe bets, may stand to benefit from the relocation of production.

“This decoupling will inevitably create challenges for companies, including higher costs and margin pressures,” Fink warns. This will be “inherently” inflationary.

As Fink notes, inflation in the US is at levels not seen in 40 years, which puts huge pressure on lower-wage workers in particular. This leaves central banks facing a “dilemma they haven’t faced in decades. Central banks must choose whether to live with higher inflation or slow economic activity and employment to lower inflation quickly.”

Over at Chartbook this morning, Robert Armstrong and Ethan Wu pick up where Fink leaves off. They provide a powerful summary of the forces that promise an end to globalisation as we know it and to accelerate inflation.

But, contrasting Unhedged’s data-rich take with Fink’s hand-waving, I was left wondering whether Fink’s vagueness was not actually the point. What if we read the BlackRock letter less as a piece of analysis than as an exercise in corporate diplomacy, which in its evasions signals the opposite of what the headlines suggest?

Do we really believe that BlackRock is giving up on globalisation as we know it? After all, Putin with his blatant aggression and angry tirades makes an all-too-convenient hook on which to hang a narrative of the crisis of globalisation.

Russia’s actions may be outrageous. But its economic weight is limited. As Fink is only too happy to remind his shareholders, BlackRock has very little money at stake there. From the global point of view, how much is really at stake in an economic war against Russia?

Meanwhile, talking about Putin spares Fink the embarrassment of having to talk about the real faultline in the global economy: between China and the US. And if you are, in fact, interested in maintaining your business in China, as BlackRock surely is, the less said about that antagonism, the better.

In talking about supply chains, what does Putin’s war in Ukraine really have to do with it? The economic flows which the war put at risk are in commodities (wheat, corn, etc) and energy. As far as supply chains are concerned, the most dramatic disruption is to the provision of wiring harnesses from Ukrainian factories to German carmakers BMW and Mercedes. Important components, no doubt, but hardly the marker of a new era in economic history.

As Armstrong and Wu note, we are facing a significant threat to a truly essential supply chain, but in microelectronics, and the challenge is posed not by Russia, but by the US government, which has decided to make tech in to a battleground with China. Like its competitor Vanguard, BlackRock was forced by US sanctions into making painful asset disposals.

Much of the US business lobby, Armstrong and Wu point out, has turned against China. But that cannot be said for BlackRock or any other big player in American finance. George Soros may insist that BlackRock is making a strategic mistake in continuing its investment in China, but the asset manager has shown no sign of backing down . Perhaps, then, the talk of the end of globalisation in the wake of Ukraine is smoke and mirrors.

Unhedged finishes with a fascinating exchange with Larry Summers (a longstanding supporter of both Unhedged and Chartbook).

As Summers pointed out to Armstrong and Wu, however wise or dumb their (pessimistic) view of the future of globalisation and inflation may be, it is not shared by the big players in the markets:

Current prices strongly imply the current spike in inflation and rates will subside before very long, and the old world of “secular stagnation” will reassert itself. This is most easily visible in the Fed funds futures curve, which suggests rate increases will stop below 3 per cent some time next year, and that policy will weaken thereafter.

BlackRock, in its most recent macro outlook for the second quarter of 2022 , shares that common-market perspective.

It is a weird form of cognitive dissonance: to talk as though you recognise the headwinds and not price them in. Hoping, perhaps, that they will not, after all, materialise.

I would argue that something similar holds for globalisation more generally. There is a lot of talk about reshoring and rebuilding supply chains, but far less action on the substance. Apple, to cite the most prominent example, actually increased its reliance on China last year .

For now at least, feverish talk about Russia’s attack on Ukraine ending globalisation as we know it should be taken with a pinch of salt.

Imagine Fink championing an economic war against China! When that no longer seems “non-planetary”, we will know that we are really in a new world.

One good read

Don’t sleep on the US housing market . People looking to buy a home this year “are going to be facing the biggest payment shock that we’ve seen in the last 40-plus years”.

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globalization

globalization , integration of the world’s economies, politics, and cultures. German-born American economist Theodore Levitt has been credited with having coined the term globalization in a 1983 article titled “The Globalization of Markets.” The phenomenon is widely considered to have begun in the 19th century following the advent of the Industrial Revolution , but some scholars date it more specifically to about 1870, when exports became a much more significant share of some countries’ gross domestic product (GDP). Its continued escalation is largely attributable to the development of new technologies—particularly in the fields of communication and transportation—and to the adoption of liberal trade policies by countries around the world.

Social scientists have identified the central aspects of globalization as interconnection, intensification, time-space distanciation (conditions that allow time and space to be organized in a manner that connects presence and absence), supraterritoriality, time-space compression, action at a distance, and accelerating interdependence. Modern analysts also conceive of globalization as a long-term process of deterritorialization—that is, of social activities (economic, political, and cultural) occurring without regard for geographic location. Thus, globalization can be defined as the stretching of economic, political, and social relationships in space and time. A manufacturer assembling a product for a distant market , a country submitting to international law , and a language adopting a foreign loanword are all examples of globalization.

Of course history is filled with such occurrences: Chinese artisans once wove silk bound for the Roman Empire ( see Silk Road ); kingdoms in western Europe honoured dictates of the Roman Catholic Church ; and English adopted many Norman French words in the centuries after the Battle of Hastings . These interactions and others laid the groundwork for globalization and are now recognized by historians and economists as important predecessors of the modern phenomenon. Analysts have labeled the 15th to 18th century as a period of “proto-globalization,” when European explorers established maritime trade routes across the Atlantic and Pacific oceans and encountered new lands. Integration prior to this time has been characterized as “archaic globalization.”

What distinguishes the process of modern globalization from those forms of global integration that preceded it are its pace and extent. According to some academics, three distinct eras of modern globalization can be identified, each of them marked by points of sudden acceleration in international interaction. Under this scheme, the “first globalization” era refers to the period between approximately 1870 and 1914, during which new transportation and communication technology decreased or eliminated many of the drawbacks to distance. The “second globalization” era is said to have lasted from roughly 1944 to 1971, a period in which an international monetary system based on the value of the U.S. dollar facilitated a new level of trade between capitalist countries. And the “third globalization” era is thought to have begun with the revolutions of 1989–90, which opened the communist Eastern bloc to the flow of capital and coincided with the creation of the World Wide Web . Some scholars argue that a new period of globalization, the “fourth globalization,” is underway, but there is little consensus on when this era began or whether it is truly distinct enough to merit its own designation.

New levels of interconnectedness fostered by globalization are credited for numerous benefits to humanity. The spread of industrial technology and the resulting increase in productivity have contributed to a reduction in the percentage of the world’s population living in poverty. The sharing of medical knowledge has dramatically decreased the incidence of once-feared diseases and even eliminated smallpox. And economic interdependence among countries discourages war between them.

However, the implementation of globalization has been much criticized, leading to the development of the anti-globalization movement. Opponents of globalization—or at least, globalization in its present form ( see neoliberal globalization )—represent a variety of interests on both the political left and right. Labour unions disdain multinational companies’ ability to move their operations to countries with cheaper labour; Indigenous peoples rue the difficulty of maintaining their traditions; and leftists object to the neoliberal character of the new world economy, arguing that the capitalist logic on which they contend globalization is based leads to asymmetrical power relations (both internationally and domestically) and transforms every aspect of life into a commodity. Right-wing critics of globalization believe that it threatens both national economies and national identity. They advocate national control of a country’s economy and rigidly restricted immigration.

Globalization has also produced effects that are more universally worrisome. Expanded transportation networks facilitate not only increased trade but also the spread of diseases. Undesirable trade, such as human trafficking and poaching, has flourished alongside legitimate commerce. Moreover, the pollution generated by the world’s modernization has resulted in global warming and climate change , threatening Earth’s very habitability.

Whether globalization will adapt to these problems remains to be seen, but it is already changing again. For example, globalization began in the 19th century with an explosion in exports, but, even before the COVID-19 pandemic that swept through the world in 2020 resulted in global lockdowns, trade as a share of many countries’ GDP had fallen. It can be argued that the global supply chains today rely more on knowledge than on labour . And services now constitute a larger share of the global economy than goods. A “fourth globalization” might indeed be here—or at least on the way.

Home — Essay Samples — Sociology — Globalization

Essays on Globalization

Hook examples for globalization essays, "the global village" metaphor hook.

"In the age of globalization, our world has transformed into a 'global village.' Explore the implications of this metaphor and how it has reshaped our understanding of interconnectedness and cultural exchange."

The Impact of Digital Connectivity Hook

"In an era where a single tweet can reach millions, digital connectivity has revolutionized globalization. Delve into the profound impact of the internet, social media, and technology on global interactions."

The Paradox of Local vs. Global Hook

"Globalization blurs the lines between local and global identities. Analyze the paradox of preserving cultural heritage while embracing the globalized world and how this tension shapes our societies."

The Global Marketplace Hook

"Globalization has ushered in an era of unprecedented trade and economic interconnectedness. Explore the dynamics of the global marketplace, from multinational corporations to supply chains spanning continents."

Cultural Fusion and Identity Hook

"Globalization has led to a melting pot of cultures, but what happens to cultural identities in the process? Investigate how globalization impacts the preservation and evolution of cultural identities."

The Challenges of Globalization Hook

"While globalization offers numerous benefits, it also presents challenges. Examine issues such as income inequality, cultural homogenization, and environmental concerns that arise in a globalized world."

The Future of Globalization Hook

"As we stand on the brink of a globalized future, what can we expect? Join me in exploring the potential trajectories of globalization, from its impact on politics to the role of emerging technologies."

The Best Globalization Essay Topics

• The Impact of Globalization on Local Cultures: Integration or Erasure?
• The Impact of Globalization on Cultural Identity in Anthropological Studies
• Globalization and Economic Inequality: Bridging the Gap Between Rich and Poor
• The Role of Technology in Advancing Globalization and Its Social Implications
• Environmental Consequences of Globalization: Challenges and Sustainable Solutions
• Analyzing the Advantages and Disadvantages of Globalization
• The Influence of Globalization on Education and Cross-Cultural Exchanges
• Global Political Dynamics: How Globalization Affects Sovereignty and Governance
• Globalization and Health: The Spread of Diseases and Global Health Initiatives
• Consumer Culture and Globalization: The Homogenization of Global Markets

Globalization: a Double-edged Sword

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Globalization's Theories and Effects in The Modern World

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1. Halliday, T. C., & Osinsky, P. (2006). Globalization of law. Annu. Rev. Sociol., 32, 447-470. (https://www.annualreviews.org/doi/abs/10.1146/annurev.soc.32.061604.123136) 2. Fischer, S. (2003). Globalization and its challenges. American Economic Review, 93(2), 1-30. (https://www.aeaweb.org/articles?id=10.1257/000282803321946750) 3. Lang, M. (2006). Globalization and its history. The Journal of Modern History, 78(4), 899-931. (https://www.journals.uchicago.edu/doi/abs/10.1086/511251?journalCode=jmh) 4. Spring, J. (2008). Research on globalization and education. Review of educational research, 78(2), 330-363. (https://journals.sagepub.com/doi/abs/10.3102/0034654308317846?journalCode=rera) 5. Scott, A., & Storper, M. (2003). Regions, globalization, development. Regional studies, 37(6-7), 579-593. (https://www.tandfonline.com/doi/abs/10.1080/0034340032000108697a) 6. Jameson, F. (1998). Notes on globalization as a philosophical issue. In The cultures of globalization (pp. 54-78). Duke University Press. (https://www.degruyter.com/document/doi/10.1515/9780822378426-005/html?lang=de) 7. Frankel, J. A. (2003). The environment and globalization. (https://www.nber.org/papers/w10090) 8. Teeple, G. (2000). What is globalization?. Globalization and its discontents, 9-23. (https://link.springer.com/chapter/10.1057/9780333981610_2)

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How to Write an Essay on Globalization

Table of Contents

• How to start
• How to write body paragraphs
• How to conclude
• Outline sample

Theme Actuality

As a topic and concept, globalization has had tremendous on how the world runs today. Currently, people use products from manufacturers who are thousands of miles away, and this can be attributed to globalization. As a topic, it has earned its place in economics and business books. It is, therefore, ideal whenever teachers give students essays or test students on globalization. The tests not only help students to become better writers but also helps them understand how the world works. Therefore, it is necessary to include globalization as a topic in class.

How to Start an Essay on Globalization

Good essay writing is indeed challenging. Moreover, students often complain of the difficulty of introducing a topic. Starting an essay can be problematic, and this explains why a majority of students seek help with essay writing. Introductions are indeed the most important part of an essay because they not only reveal a writer’s focus but also determines whether the audience will read the entire article or not. Therefore, writers need to exercise caution and base their article or essay on research and facts.

Here are tips to help you start an essay on globalization:

• Conduct exhaustive research on the topic under study.
• Prepare an outline with all the points and arguments you wish to include in your essay.
• If definitions are necessary, include them at the beginning of the essay. For example, provide the definition of globalization. While there is no problem in providing the dictionary definition, it is advisable to provide yours.
• Narrow the scope of your topic or article. Avoid being general and providing vague information within your article.
• Formulate a clear and appropriate thesis statement before you begin the essay. This will help you come up with the other supporting arguments.
• Make the introduction of your essay brief and to the point. Do not include a lot of information within your introduction but provide enough information to keep your audience interested.

While it can be a challenge finding a decent starting point, it is not impossible. By following the above, writers can find or establish a suitable starting point.

How to Write Body Paragraphs for an Essay on Globalization

In the body section, writers are expected to include supporting arguments. These arguments build on the main argument or the thesis statement. Therefore, they should enrich or improve on what the writer chose or developed as their primary argument. In the body section, being detailed is highly advisable, and therefore, writers are encouraged to make their papers comprehensive. The purpose of research or the bulk of research work often helps to write or develop this section.

Here are tips to help you write an essay on globalization:

• Use topic sentences. Each paragraph should highlight a specific point.
• Be detailed and provide examples in your essay.

How to Conclude an Essay on Globalization

As an introduction, writing a conclusion can also be a challenge. Every conclusion should have or leave a lasting impression on the audience.

Writers should, therefore, consider the following tips to guide them in writing a conclusion for an essay on globalization:

• Restate the thesis statement or main argument.
• Provide a summary of the main arguments you provided in the body section.
• Emphasize the main idea or the specific thing or issue you need your audience to remember after reading your essay.

Outline Sample

Outlines are important because they make a writer’s work easier. Essay writing can be a daunting task, but writers often make it simple by creating an outline before they begin the writing process.

Below is a sample of an outline of an essay on globalization:

Describe the social as well as cultural indicators or manifestations of globalization

Introduction

• Definition of globalization.
• Brief background information on the topic.
• Thesis statement. For example, Globalization has indeed been at the forefront of social and cultural change. The world has seen significant shifts in how people communicate and pass information, the internationalization of some services, as well as the dramatic impact in popular culture.
• Expound on the shifts in communication mechanisms.
• Internationalization of services.
• The borrowing as well as spread of popular culture.
• Restate the thesis statement.
• Summarize the essay’s main points.
• Highlight the importance or the impact of globalization on the social and cultural platforms of society.

The End of the Globalization Debate: A Review Essay

A review of several recent books on the end of antiglobalization

• Robert Howse
• See full issue

CAPITAL RULES: THE CONSTRUCTION OF GLOBAL FINANCE. By Rawi Abdelal. Cambridge, Mass.: Harvard Univ. Press. 2007. Pp. xi, 304. $49.95.

IN DEFENSE OF GLOBALIZATION. By Jagdish Bhagwati. New York: Oxford Univ. Press. With new afterword, 2007. Pp. xiii, 330. $16.95.

TERRITORY, AUTHORITY, RIGHTS: FROM MEDIEVAL TO GLOBAL ASSEMBLAGES. By Saskia Sassen. Princeton, N.J.: Princeton Univ. Press. 2006. Pp. xiv, 493. $37.95.

MAKING GLOBALIZATION WORK. By Joseph E. Stiglitz. New York: W.W. Norton & Co. 2006. Pp. xxv, 358. $16.95

Already by the end of the Cold War, the old struggle between right and left over the governance of the economy and the redistribution of wealth within the advanced liberal democracies had yielded to a new pro-market consensus. The center-left embraced many of the center-right critiques of the postwar regulatory and welfare state as inefficient, wasteful, and dependency- inducing, and sought to pursue traditional progressive values through a more economically liberal (in the sense of pro—free market) approach to governance of the economy. The discontents with these tendencies, mostly from the traditional left but not entirely, coalesced as a new counterculture, the antiglobalization movement. And there thus arose a great and intense debate about whether globalization was good or bad, inevitable or resistible, in relation to the ideal of the sovereign, progressive, democratic nation-state.

This debate, I argue, is over, above all because the antiglobalizers have themselves gone global. In various sites of global law and policymaking, including those at the interstices of the global and local, they actually have found processes and institutions through which, unlike the case with the state in many instances, they can air their criticisms and express their values as global values. There is no longer an antiglobalization “side” in the debate, coherently representing the position that the territorial nation-state should remain the locus of control over economic activity and should retain a monopoly on legitimate governance. Today the protesters who march against globalization are not marching in favor of the state. Instead, they are mostly advocating a set of values and causes that transcend state boundaries and that require global action.

Each of the works under review here contributes in a distinctive and significant way to understanding the end of the globalization debate. Jagdish Bhagwati, in In Defense of Globalization , displays a number of aspects in which the globalization debate has ended. While explicitly framing his argument as a defense of globalization, Bhagwati ends up arguing forcefully against several crucial elements of globalization, including the liberalization of short-term capital controls and the harmonization of intellectual property rights in the WTO. At the same time, he defends equally forcefully other elements, especially trade liberalization. Ultimately, Bhagwati’s analysis reveals that the real debate has shifted to the complex effects of different aspects of globalization.

Joseph Stiglitz and Saskia Sassen are theorists who decisively move our understanding beyond that of the old globalization debate. While Bhagwati usually displays an optimistic faith that political and economic rationality can ensure the achievement of “globalization with a human face,” Stiglitz is mindful of the puzzles and limits of rationality in economics and policy, and thus sees a need for innovative solutions that may challenge conventional economic wisdom. The very title of Stiglitz’s book, Making Globalization Work , takes us beyond the usual framing of the debate as globalization versus antiglobalization. Stiglitz illustrates how many of the problems with global economic liberalism identified by the antiglobalizers – such as environmental commons issues, the democratic deficit, and weak and corrupt states – require solutions at the global level through innovative mechanisms of global governance.

Sassen, in Territory, Authority, Rights , explains how the state itself has been transformed, in part by globalization itself, such that it is intrinsically more hospitable to pro-globalization forces. In this sense, one can no longer conceive of the state as the adversary of globalization or the repository of a legitimate counter-perspective. At the same time, Sassen also shows how activists representing values often understood as “antiglobalization” move between the local and the global, often operating through global networks and interpenetrating global sites of power, decision, and deliberation.

Rawi Abdelal supplies a valuable historical perspective. He explains that the liberalization of capital markets emerged not from a conspiracy of global financiers or the hegemony of Wall Street, but from a turn towards liberal economics by the French Socialists under Franí§ois Mitterrand. The shift was based in part on the view that resisting global markets was impossible or too costly – one could not effectively operate the progressive social democratic state against the forces of globalization.

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Essay on Globalisation

List of essays on globalisation, essay on globalisation – definition, existence and impact (essay 1 – 250 words), essay on globalisation (essay 2 – 250 words), essay on globalisation – in india (essay 3 – 400 words), essay on globalisation – objectives, advantages, disadvantages and conclusion (essay 4 – 500 words), essay on globalisation – for school students (class 6,7,8,9 and 10) (essay 5 – 600 words), essay on globalisation (essay 6 – 750 words), essay on globalisation – for college and university students (essay 7 – 1000 words), essay on globalisation – for ias, civil services, ips, upsc and other competitive exams (essay 8 – 1500 words).

The worldwide integration of people, services and interests is what globalisation is all about. Since the last decade, there has been a tremendous focus on globalisation with everyone trying to have a reach at even the remotest locations of the world. This has probably been possible due to the advancement in technology and communication.

Audience: The below given essays are especially written for school, college and university students. Furthermore, those students preparing for IAS, IPS, UPSC, Civil Services and other competitive exams can also increase their knowledge by studying these essays.

The word ‘Globalization’ is often heard in the business world, in corporate meetings, in trade markets, at international conferences, in schools, colleges and many other places. So what does globalization symbolize? Is it a new concept or did it exist earlier? Let’s see.

Definition:

Globalization refers to the integration of the world nations by means of its people, goods, and services. The statement – ‘ globalization has made the world a small village ’ is very true.

Countries inviting foreign investment, free trade and relaxation in the visa rules to allow seamless movement of people from one country to another are all part of globalization.

In a nutshell, globalization has reduced the distance between nations and its people.

Many among us refer to the current period that we live in as ‘The Era of Globalization’ and think that the process of globalization has started only recently. But the real fact is that globalization is not a new phenomenon . The world was moving towards globalization from a very long time. The term globalization was in existence since mid-1980s. But it was only from the early 21 st century that globalization picked up momentum due to the advancements in technology and communication.

Impact of Globalization:

Globalization has more positive outcomes than the negative ones. The impact of globalization on the developing countries such as India, China and some African countries are overwhelming. Foreign investments have created a lot of employment opportunities in the developing countries and have boosted their economy. Globalization has also enabled people to interchange their knowledge and culture.

Conclusion:

Although the world is not completely globalized, we can very well say that globalization is the best way to achieve equality among nations.

In simple words, globalization means the spreading of a business, culture, or any technology on an international level. When the boundaries of countries and continents matter no more, and the whole world becomes one global village in itself. Globalization is an effort to reduce the geographical and political barriers for the smooth functioning of any business.

There are four main factors that form the four pillars of globalization. These are the free flow of goods, capitals, technology, and labors, all across the world. Although, many of the experts that support globalization clearly refuse to acknowledge the free flow of labor as their work culture.

The international phenomenon of global culture presents many implications and requires a specific environment to flourish. For instance, it needs the other countries to come to a mutual agreement in terms of political, cultural, and economic policies. There is greater sharing of ideas and knowledge and liberalization has gained a huge importance.

Undoubtedly, globalization helps in improving the economic growth rate of the developing countries . The advanced global policies also inspire businesses to work in a cost-effective way. As a result, the production quality is enhanced and employment opportunities are also rising in the domestic countries.

However, there are still some negative consequences of globalization that are yet to be dealt with. It leads to greater economic and socio-cultural disparities between the developed and the developing countries. Due to the MNC culture, the small-scale industries are losing their place in the market.

Exchanges and integration of social aspect of people along with their cultural and economic prospects is what we term as Globalization. It is considered as a relatively new term, which has been in discussion since the nineties.

Initial Steps towards Globalization:

India has been an exporter of various goods to other countries since the earlier times. Hence Globalization, for India, is not something new. However, it was only around in the early nineties that India opened up its economy for the world as it faced a major crisis of severe crunch of foreign exchange. Since then, there has been a major shift in the government’s strategies while dealing with the PSUs along with a reduction in the monopoly of the government organisations perfectly blended with the introduction of the private companies so as to achieve a sustainable growth and recognition across the world.

The Measurement of Success:

The success of such measures can be measured in the form of the GDP of India which hovered around 5.6% during the year 1990-91 and has been now around 8.9% during the first quarter of 2018-19. In fact, in the year 1996-97, it was said to have peaked up to as high as 77.8%. India’s global position is improved tremendously due to the steady growth in the GDP thus furthering the impact of globalization on India. As on date, India is ranked as the sixth biggest economy in the world. This globalization leading to the integration and trade has been instrumental in reducing the poverty rate as well.

However, given the fact that India is the second most populated country of the world, after China, this growth cannot be considered as sufficient enough as other countries such as China have increased their growth rates at much faster pace than India. For instance, the average flow of FDI in India, over the past few years has been around 0.5% of the GDP while for countries such as China it has been around 5% and Brazil has had a flow of around 5.5%. In fact, India is considered among the least globalized economy among the major countries.

Summarily, there has been a tremendous increase in the competition and interdependence that India faces due to Globalization, but a lot is yet to be done. It is not possible for a country to ignore the developments and globalization occurring in the rest of the world and one need to keep the pace of growth at a steady rate or else you may be left far behind.

The twentieth century witnessed a revolutionary global policy aiming to turn the entire globe into a single market. The motive of globalization can broadly define to bring substantial improvement in the living condition of people all around the world, education, and shelter to everybody, elimination of poverty, equal justice without any race or gender consideration, etc. Globalization also aims to lessen government involvement in various development activities, allowing more direct investors/peoples’ participation cutting across border restrictions thus expected to reap reasonable prosperity to human beings.

Main Objectives of Globalization:

The four main aspects of globalization are; Capital and Investment movements, Trade and Transactions, Education and Spread of knowledge, along with Migration and Unrestricted Movement of People.

In simpler terms, globalization visualizes that one can purchase and sell goods from any part of the world, communicate and interact with anyone, anywhere in the world and also enables cultural exchange among the global population. It is operational at three levels namely, economic globalization, cultural globalization, and political globalization. Right from its inception, the impact of globalization has both advantages and disadvantages worldwide.

Advantages of Globalization:

As the word itself suggests, this policy involves all the nations across the globe. The lifting of trade barriers can have a huge impact especially in developing countries. It augments the flow of technology, education, medicines, etc., to these countries which are a real blessing.

Globalization expects to create ample job opportunities as more and more companies can extend their presence to different parts of the world. Multinational companies can establish their presence in developing countries. Globalization gives educational aspirants from developing and underdeveloped countries more quality learning opportunities. It leads not only to the pursuit of best higher education but also to cultural and language exchanges.

Globalization also enhances a faster flow of information and quick transportation of goods and services. Moreover one can order any item from anywhere merely sitting at home. Another plus point of globalization is the diminishing cultural barriers between nations as it offers free access and cultural interactions . Also, it has been observed that there is a considerable reduction of poverty worldwide due to globalization . In addition to this, it also enables the effective use of resources.

Disadvantages of Globalization:

Globalization turned out to be a significant threat to the cottage and small-scale industries as they have to compete with the products of multi-national companies. Another dangerous effect of globalization is the condition of weak sections of the society, as they are getting poorer and the rich are getting richer. The situation leads to the domination of economically rich countries over emerging countries and the increase of disparity.

The actions of multi-national companies are deplorable and always facing criticism from various social, government and world bodies as they are incompetent in offering decent working conditions for the workers. Irrational tapping of natural resources which are instrumental in causing ecological imbalance is another major accusation against multi-national companies.

Globalization is also blamed to have paved the way for human trafficking, labor exploitation and spread of infectious diseases too. In addition to all these, if any economic disaster hit a country and if they subsequently suffer from economic depression, its ripples are felt deeply in other countries as well.

Despite all its disadvantages, globalization has transformed the entire globe into a single market irrespective of its region, religion, language, culture, and diversity differences. It also leads to an increase in demand for goods, which in turn calls for more production and industrialization. Our focus should be to minimize the risks and maximize the positive outcome of global policy, which in turn can help for a sustainable long-standing development for people all around the world.

Introduction:

Globalization is the procedure of global political, economic, as well as cultural incorporation of countries . It lets the producers and manufacturers of the goods or products to trade their goods internationally without any constraint.

The businessman fetches huge profit as they easily get low price workforce in developing nations with the concept of globalization. It offers a big prospect to the firms who wish to deal with the global market. Globalization assists any nation to contribute, set up or amalgamate businesses, capitalize on shares or equity, vending of services or products in any country.

How does the Globalization Work?

Globalization benefits the international market to the entire deliberate world like a solitary marketplace. Merchants are spreading their extents of trade by aiming world as a worldwide community. In the 1990s, there was a limit of importing some goods that were already mass-produced in India such as engineering goods, agricultural products, toiletries, food items, etc.

But, in the 1990s the rich countries pressurize the WTO (World Trade Organization), World Bank (affianced in improvement financing activities), and IMF (International Monetary Fund) to let other nations spread their trades by introducing market and trade in the deprived and emerging countries. The process of liberalization and globalization in India began in the year 1991 below the Union Finance Minister Mr. Manmohan Singh.

After numerous years, globalization has fetched major uprising inside the Indian marketplace when international brands arrived in India such as KFC, PepsiCo, Mc. Donald, Nokia, IBM, Aiwa, Ericsson, etc., and began the delivery of an extensive variety of quality goods at low-cost rates.

The entire leading brands presented actual uprising of globalization at this time as a marvellous improvement to the economy of an industrial sector. Rates of the quality goods were also getting low owing to the cut-throat war happening in the marketplace.

Liberalization and globalization of the businesses in the Indian marketplace is submerging the quality of imported goods but influencing the local Indian businesses badly in large part causing the job loss of illiterate and poor labors. Globalization has remained a goldmine for the customers, but it is also a burial ground for the small-scale manufacturers in India.

Positive Influences of Globalisation:

Globalization has influenced the education sectors and students of India predominantly by making accessible the education material and enormous info on the internet. Association of Indian universities with the overseas universities has fetched a massive modification in the education business.

The health industries are too influenced enormously by the globalization of health observing electronic apparatuses, conventional drugs, etc. The trade globalization in the agricultural sector has provided a range of high-quality seeds possessing disease-fighting property. But, it is not beneficial for the underprivileged Indian agriculturalists owing to the reason of expensive seeds as well as agricultural equipment.

Globalization has given an enormous rebellion to the occupation sector by increasing the growth of trades related to the handloom , cottage, artisans and carving, carpet, jewellery, ceramics, and glassware, etc.

Globalization is definitely required by the people and nation to progress and turn into an established society and country. It benefits in expanding our visualization and thoughts. It also aids in endorsing the philosophy that we fit in a huge crowd of persons, i.e., the humankind. Once the two nations congregate, they flourish by sharing their beliefs, thoughts, opinions, customs, and behaviors. People come to know new things and also acquire a chance to discover and get acquainted with other values.

Globalization has provided many reasonably priced valued goods and complete economic welfares to the emerging nations in addition to the employment. But, it has also given growth to the crime, competition, terrorism, anti-national activities, etc. Thus, along with the pleasure it has supplied some grief too.

Globalization is a term that we hear about every now and then. Question is; do we really know what it is all about? Globalization is defined as the process of integration and interaction among people, cultures and nations who come together in order to get things done easily through contact. Globalization began with the migration of people from Africa to different parts of the world. Global developments have been achieved in various sectors through the different types of globalization. The effects of globalization have been felt in every part of the world and more people continue to embrace it. Globalization has some of its core elements that help in the process.

Types of Globalization:

Globalization does not just transform a sector unless the strategies are related to that specific sector. The first type of globalization is financial and economic globalization whereby interaction takes place in the financial and economic sectors especially through stock market exchange and international trade. The other type is technological globalization which involves the integration and connection of different nations through technological methods like the internet. Political globalization transforms the politics of a nation through interactions with adoption of policies and government that cut across other nations. Cultural globalization is basically the interaction of people from different cultures and sharing. Ecological globalization is the viewing of the earth as one ecosystem and sociological globalization is on equality for all people.

Elements of Globalization:

Globalization works with characteristic elements. Trade agreements is one of the components that significantly benefits the economic and financial globalization. These trade agreements have been designed to promote and sustain globalization by preventing barriers that inhibit trade among nations or regions. Another element is capital flow that is concerned with the measures of either a decline or a rise in domestic or foreign assets. Migration patterns is a socio-economical and cultural element that monitors the impacts of immigration and emigration actively. The element of information transfer involves communications and maintains the functioning of the markets and economies. Spread of technology is an element of globalization that facilitates service exchanges. Without these elements, globalization would have faced many challenges, which would even stagnate the process of globalization.

Impacts of Globalization:

The impact of globalization is felt differently among individuals but the end result will be either positive or negative. Globalization has impacts on the lives of individuals, on the aspects of culture, religions and education. The positive impacts of globalization include the simplification of business management through efficiency. In business, the quality of goods and services has increased due to global competition. Foreign investment has been facilitated by globalization and the global market has been able to expand. Cultural growth has been experienced through intermingling and accommodation. Interdependence among nations has developed and more people have been exposed to the exchange program between nations. Improvement of human rights and legal matters has improved through media and technology sharing. Poverty has been alleviated in developing countries due to globalization and also employment opportunities are provided. Through technology, developments have been positively influenced in most parts of the world.

Although globalization has positive impacts, the negative impacts will remain constant unless solutions are sought. One of the negative effects of globalization is job insecurity for some people. Through globalization, more innovations are achieved, for e.g., technology causes automation and therefore people get replaced and they lack jobs. Another negative impact is the frequent fluctuation of prices of commodities that arises from global competitions. On the cultural side, the fast food sector has become wide spread globally, which is an unhealthy lifestyle that was adopted due to globalization. Also, Culture has been negatively affected for people in Africa because they tend to focus more on adopting the western culture and ignore their cultural practices.

Possible Solutions to the Negative Impacts of Globalization:

Globalization has impacted the society negatively and some of the solutions might help to mitigate the impacts. When adopting cultures from other people, it is important to be keen on the effects of the culture on the people and the existing culture being practiced. For example, Africans should not focus more of the western culture such that they ignore their own culture.

In conclusion, it is evident that globalization results in both negative and positive consequences. The society should embrace the positive and mitigate the negative impacts. Globalisation is a dynamic process which involves change, so flexibility among people is a must.

The buzzword befitted to describe the growth of Modern Indian economy is ‘Globalization’. But what exactly is Globalization? Globalization can be defined as integrating the economy of a country with the rest of the countries of the world. From the Indian perspective, this implies encouraging free trade policies, opening up our economy to foreign direct investment, removing constraints and obstacles to the entry of multinational corporations in India, also allowing Indian companies to set up joint ventures abroad, eliminating import restrictions, in-short encouraging Free Trade policies.

India opened its markets to Global Trade majorly during the early Nineties after a major economic crisis hit the country. New economic reforms were introduced in 1991 by then Prime Minister Shri. P V. Narasimha Rao and Finance Minister at the time, Dr. Manmohan Singh. In many ways, the new economic policies positively contributed to the implementation of the concept of Globalization in India.

It’s Impact:

1. Economic Impact :

Globalization in India targets to attract Multinational Companies and Institutions to approach Indian markets. India has a demography with a large workforce of young citizens who  are in need of jobs. Globalization has indeed left a major impact in the jobs sector. Indian companies are also expanding their business all over the world. They are driving funds from the bigwigs of the Global economy.

The Best example in today’s time is OYO Rooms, a budding Indian company in the hospitality sector. OYO Rooms recently made headlines when it declared to raise a fund close to $1 Billion from Japan’s Soft Bank Vision Fund. Globalization has also led the Indian Consumer market on the boom. The Giant of FMCG (fast-moving consumer goods) sector WALMART is also enthusiastic and actively investing in the India market.

2. Socio-Cultural impact on the Indian Society:

The world has become a smaller place, thanks to the social networking platforms blooming of the internet. India is a beautiful country which takes immense pride in “Unity in Diversity” as it is home to many different cultures and traditions. Globalization in India has left a lasting impression on the socio-cultural aspect of Indian society.

Food chains like McDonald’s are finding its way to the dining tables. With every passing day, Indians are indulging more and more in the Western culture and lifestyle. But Globalization in India has also provided a vibrant World platform for Indian Art, Music, Clothing, and Cuisine.

The psychological impact on a common Indian Man: The educated youth in India is developing a pictorial identity where they are integrating themselves with the fast-paced, technology-driven world and at the same time they are nurturing the deep roots of Indian Culture. Indians are fostering their Global identity through social media platforms and are actively interacting with the World community. They are more aware of burning issues like Climate Change, Net neutrality, and LGBT rights.

Advantages:

India has taken the Centre Stage amongst the Developing Nations because of its growing economy on the World Map. Globalization in India has brought tremendous change in the way India builds its National and International policies. It has created tremendous employment opportunities with increased compensations.

A large number of people are hired for Special Economic Zones (SEZs), Export Processing Zones (EPZs), etc., are set up across the country in which hundreds of people are hired. Developed western countries like USA and UK outsource their work to Indian companies as the cost of labour is cheap in India. This, in turn, creates more employment. This has resulted in a better standard of living across the demographic of young educated Indians. The Indian youth is definitely empowered in a big way.

Young lads below the age of 20 are now aspiring to become part of global organizations. Indian culture and morals are always strengthening their roots in modern world History as the world is now celebrating ‘International Yoga Day’ on 21st June every year. Globalization in India has led to a tremendous cash flow from Developed Nations in the Indian market. As a positive effect, India is witnessing the speedy completion of Metro projects across the country. Another spectacular example of newly constructed High-end Infrastructure in the country is the remarkable and thrilling ‘Chenani-Nashri Tunnel’, Longest Tunnel in India constructed in the State of Jammu and Kashmir. Globalization has greatly contributed in numerous ways to the development of Modern India.

Disadvantages:

As there are so many pros we cannot turn a blind eye to the cons of Globalization which are quite evident with the Indian perspective. The worst impact is seen in the environment across Indian cities due to heavy industrialization. Delhi, the capital of India has made headlines for the worst ever air pollution, which is increasing at an alarming rate.

India takes pride in calling itself an Agriculture oriented nation, but now Agriculture contributes to fragile 17% of the GDP. Globalization in India has been a major reason for the vulnerable condition of Indian Farmers and shrinking Agriculture sector. The intrusion of world players and import of food grains by the Indian Government has left minimal space for Indian farmers to trade their produce.

The impact of westernization has deeply kindled individualism and ‘Me factor’ and as a result, the look of an average Indian family has changed drastically where a Nuclear family is preferred over a traditional Joint family. The pervasive media and social networking platforms have deeply impacted the value system of our country where bigotry and homophobia are becoming an obvious threat.

One cannot clearly state that the impact of Globalization in India has been good or bad as both are quite evident. From the economic standpoint, Globalization has indeed brought a breath of fresh air to the aspirations of the Indian market. However, it is indeed a matter of deep concern when the Indian traditions and value system are at stake. India is one of the oldest civilizations and World trade has been the keystone of its History. Globalization must be practiced as a way towards development without compromising the Indian value system.

Globalisation can simply be defined as the process of integration and interaction between different people, corporations and also governments worldwide. Technology advancement which has in turn advanced means of communication and transportation has helped in the growth of globalisation. Globalisation has brought along with it an increase in international trade, culture and exchange of ideas. Globalisation is basically an economic process that involves integration and interaction that deals also with cultural and social aspects. Important features of globalisation, both modern and historically are diplomacy and conflicts.

In term of economy, globalisation involves services and goods, and the resources of technology, capital and data. The steamship, steam locomotive, container ship and jet engine are a few of the many technological advances in transportation while the inception of the telegraph and its babies, mobile phones and the internet portray technological advances in communications. These advancements have been contributing factors in the world of globalisation and they have led to interdependence of cultural and economic activities all over the world.

There are many theories regarding the origin of globalisation, some posit that the origin is in modern times while others say that it goes way back through history before adventures to the new world and the European discovery age. Some have even taken it further back to the third millennium. Globalisation on a large-scale began around the 1820s. Globalisation in its current meaning only started taking shape in the 1970s. There are four primary parts of globalisation, they are: transactions and trade, investments and capital movement, movement and migration of people and the circulation of knowledge and information. Globalization is subdivided into three: economic globalisation, political globalisation and cultural globalisation.

There are two primary forms of globalisation: Archaic and Modern Globalisations. Archaic globalisation is a period in the globalisation history from the period of the first civilisations until around the 1600s. Archaic globalisation is the interaction between states and communities and also how they were incepted by the spread by geography of social norms and ideas at different levels.

Archaic globalisation had three major requirements. First is the Eastern Origin idea, the second is distance, the third is all about regularity, stability and inter-dependency. The Silk Road and trade on it was a very important factor in archaic globalisation through the development of various civilisations from Persia, China, Arabia, Indian subcontinent and Europe birthing long distance economic and political relationships between them. Silk was the major item from China along the Silk Road; other goods such as sugar and salt were also traded.

Philosophies, different religious beliefs and varying technologies and also diseases also moved along the Silk Road route. Apart from economic trade, the Silk Road also was a means of cultural exchange among the various civilisations along its route. The cultural exchange was as a result of people’s movement including missionaries, refugees, craftsmen, robbers, artists and envoys, resulting in religions, languages, art and new technologies being exchanged.

Modern globalisation can be sub-divided into early modern and Modern. Early modern globalisation spans about 200 years of globalisation between 1600 and 1800. It is the period of cultural exchange and trade links increasing just before the modern globalisation of the late 19 th century. Early modern globalisation was characterised by Europeans empires’ maritime of the 16 th and 17 th centuries. The Spanish and Portuguese Empires were the first and then we had the British and Dutch Empires. The establishment of chartered companies (British East India Company and the Dutch East India Company) further developed world trade.

Modern Globalisation of the 19 th century was as a result of the famed Industrial Revolution. Railroads and steamships made both local and international transportation easier and a lot less expensive which helped improve economic exchange and movement of people all over the world, the transportation revolution happened between 1820 and 1850. A lot more nations have embraced global trade. Globalisation has been shaped decisively by the imperialism in Africa and in Asia around the 19 th century. Also, the ingenious invention in 1956 of the shipping container has really helped to quicken the advancement of globalisation.

The Bretton Woods conference agreement after the Second World War helped lay the groundwork for finance, international monetary policy and commerce and also the conception of many institutions that are supposed to help economic growth through lowering barriers to trade. From the 1970s, there has been a drop in the affordability of aviation to middle class people in countries that are developed. Also, around the 1990s, the cost of communication networks also drastically dropped thus lowering the cost of communicating between various countries. Communication has been a blessing such that much work can be done on a computer in different countries and the internet and other advanced means of communications has helped remove the boundary of distance and cost of having to travel and move from place to place just to get business done.

One other thing that became popular after the Second World War is student exchange programmes which help the involved students learn about, understand and tolerate another culture totally different from theirs, it also helps improve their language skills and also improve their social skills. Surveys have shown that the number of exchange students have increased by about nine times between 1963 and 2006.

Economic globalisation is differentiated from modern globalisation by the information exchange level, the method of handling global trade and expansionism.

Economic Globalisation:

Economic globalisation is just the ever increasing interdependence of economies of nations worldwide caused by the hike in movement across borders of goods, services, capital and technology. Economic globalisation is basically the means of increasing economic relationships between countries, giving rise to the birth of a single or global market. Based on the worldview, Economic globalisation can be seen as either a negative or positive thing.

Economic globalisation includes: Globalisation of production; which is getting services and goods from a source from very different locations all over the world to gain from the difference in quality and cost. There is globalisation of markets; which is the coming together of separate and different markets into one global market. Economic globalisation includes technology, industries, competition and corporations.

Globalisation today is all about less developed countries and economies receiving FDI (Foreign Direct Investment) from the more developed countries and economies, reduction in barriers to trade and to particular extent immigration.

Political Globalisation:

Political globalisation is going to on-the-long-run drop the need for separate nation or states. Institutions like the International Criminal court and WTO are beginning to replace individual nations in their functions and this could eventually lead to a union of all the nations of the world in a European Union style.

Non-governmental organisations have also helped in political globalisation by influencing laws and policies across borders and in different countries, including developmental efforts and humanitarian aid.

Political globalisation isn’t all good as some countries have chosen to embrace policies of isolation as a reactionary measure to globalisation. A typical example is the government of North Korea which makes it extremely difficult and hard for foreigners to even enter their country and monitor all of the activities of foreigners strictly if they allow them in. Citizens are not allowed to leave the country freely and aid workers are put under serious scrutiny and are not allowed in regions and places where the government does not want them to enter.

Intergovernmentalism is the treatment of national governments and states as the major basic factors for integration. Multi-level governance is the concept that there are many structures of authority interacting in the gradual emergence of political globalisation.

Cultural Globalisation:

Cultural globalisation is the transmission of values, ideas and meanings all over the world in a way that intensify and extend social relations. Cultural globalisation is known by the consumption of different cultures that have been propagated on the internet, international travel and culture media. The propagation of cultures helps individuals to engage in social relations which break regional boundaries. Cultural globalisation also includes the start of shared knowledge and norm which people can identify their cultures collectively; it helps foster relationships between different cultures and populations.

It can be argued that cultural globalisation distorts and harms cultural diversity. As one country’s culture is inputted into another country by the means of globalisation, the new culture becomes a threat to the cultural diversity of the receiving country.

Globalisation has made the world into one very small community where we all interact and relate, learn about other cultures and civilisations different from ours. Globalisation has helped improve the ease of doing business all around the world and has made the production of goods and services quite easy and affordable. Globalisation isn’t all good and rosy as it can be argued that Globalisation is just westernisation as most cultures and beliefs are being influenced by the western culture and belief and this harms cultural diversity. Nevertheless, the good of globalisation outweighs the bad so globalisation is actually a very good thing and has helped shape the world as we know it.

Economics , Globalisation

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Home / Essay Samples / Social Issues / Globalization / The Effects of Globalization: A Comprehensive Analysis

The Effects of Globalization: A Comprehensive Analysis

• Category: Economics , Social Issues
• Topic: Globalization , Indian Economy

Pages: 3 (1463 words)

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History of Globalization

Features of globalization.

• It leads to greater interaction between different populations in social terms.
• Culturally, globalization represents the exchange of ideas, values and artistic expression between cultures and even a trend towards the development of a single world culture.
• Globalization has paid political attention to intergovernmental organizations such as the United Nations and the World Trade Organization.
• Legally, globalization has changed the creation and enforcement of international law.

Factors That Led to Globalization

Globalization on the example of indian economy.

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