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When the CEO of the world’s largest asset manager announced The end of globalization, it’s time to pay attention.BlackRock founder Larry Fink recently shareholder letter War in Ukraine is over after pandemic-related supply chain shifts Globalization in the past three years. He expects more companies and governments to manufacture and source domestically and regionally rather than globally. The war marked “a turning point in world geopolitics, macroeconomic trends and the order of capital markets,” he wrote.
This shift has actually been going on for a decade or more. In a sense, the decoupling between the U.S. and China, the world’s largest economies, really began the day after Lehman Brothers collapsed, when China rolled out a massive fiscal stimulus package and began to rethink Anglo-American-style financial markets. liberalization.
Beijing is not alone. Many countries have decided that, over the past 40 years or so, global capital has been far ahead of the national economy, causing stress and inequality within many countries. These pressures sometimes lead to populist backlash against globalization, which is often defined as the ability of goods, people and capital to move to where they are most productive.
Globalization over the past few decades has created Unprecedented prosperity on a global scale. But in most countries, inequality has risen. Some of the grievances are about stagnant wages and job losses, especially for manual workers and the lower middle class in rich countries. Much of this has been attributed to technological disruption in the labor market, but some of it has been attributed to what academics such as David Autor say “China shock“, which means China’s accession to the World Trade Organization.
Beginning in 2000, Western capital flowed into a country with an unprecedentedly cheap labor market, hampering U.S. industrial wages and employment. It has contributed to a winner-take-all situation, in which the largest multinational corporations, China and other high-growth Asian countries account for most of the revenue growth. This is due to the lack of proper antitrust policy in the United States and the excessive deregulation of finance and business in the West.In fact, globalization was never complete because Beijing also fenced off its capital markets and protected strategic industries in the following ways no engagement and WTO rules.
Smaller developing countries have long complained that unchecked free trade would hurt them. Now, many rich countries are complaining about it too. The solution is not a beggar-thy-neighbor trade war, but a shift in domestic policy and international institutions to help save the best options for globalization, while helping to reconnect the global economy to domestic prosperity and making the voting public feel like their leaders are looking for their interests.
Financial crises, pandemics and wars have indeed focused businesses’ attention on how global supply chains can become vulnerable in times of stress. China’s circular economy plan could make a more bipolar world a fait accompli. Greater regionalization will be the future. Rising wages in Asia, rising energy prices and environmental and social standards make long supply chains more expensive. Regions differ in how they regulate data and the digital economy. More intense politics will also play a role.
The economic pendulum swings. This particular globalization cycle has been going on for 40 years. Hopefully things don’t swing too much in the opposite direction as we enter the new world order.
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