Globalization\u200a\u2014\u200ain particular, international trade\u200a\u2014\u200ais under attack on so many fronts that its future viability is being called into question. At the World Economic Forum\u2019s annual meeting<\/a> in May 2022 in Davos, Switzerland\u200a\u2014\u200aperhaps the most well-known cheerleading platform for global trade\u200a\u2014\u200athe term \u201c(de-)globalization\u201d was high on the\u00a0agenda.<\/p>\n Is globalization in terminal decline, or will it survive or even thrive in some other\u00a0form?<\/p>\n A key rationale for supporting globalization is that it lifts all economic boats. The basic hypothesis was argued by Adam Smith who introduced the concept of absolute advantage in 1776, and David Ricardo who added the concept of comparative advantage in 1817. Steadily declining poverty levels worldwide over the past 50 years or so demonstrate that global trade did raise standards of living around the world. Also, as I argue in my book The New (Ab) Normal: Reshaping Business and Supply Chain Strategy Beyond Covid-19<\/em><\/a> (MIT CTL Media, 2020), free trade, when done right, can bring both peace and corporate dividends.<\/p>\n However, the version of globalization that has transformed the economic fortunes of many people and countries is not perfect. While it lifted most economic boats, it did not lift all of them. Some workers lost jobs that were outsourced and so globalization also increased inequality within many countries, and notably in the US. The US income distribution Gini-coefficient (a common measure of inequality among populations) grew from 0.43 in 1990 to 0.49 in\u00a02020<\/a>.<\/p>\n Such inequalities have fueled the rise of populism and economic nationalism. These forces promote divisions between groups of people, fueled by those who view themselves as the \u201closers\u201d of the process, smothering many of the benefits of free trade. A populist backlash has been throttling globalization over the last decade or\u00a0so.<\/p>\n Many companies are struggling to navigate this volatile mix of nationalism and economic disruption. Responding to criticism that certain countries derive a cost advantage from lax environmental and labor laws, some companies are trying to limit their procurement spending and operations in countries with stringent laws. This movement gained steam when geopolitical differences and resentment over the limited sharing of medical supplies during the pandemic created tensions between countries.<\/p>\n As a result, the term \u201cfriend-shoring\u201d<\/a> has emerged, which refers to attempts by countries to confine their trading activity to a select circle of friendly trading partners that share the same values. The net effect is to constrain globalization.<\/p>\n Not surprisingly, this climate of mistrust is taking its toll on the free movement of goods and the prospects for international growth. The International Monetary Fund<\/a> projects global growth to slow from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023. Beyond 2023, the IMF expects growth to fall to about 3.3% over the medium\u00a0term.<\/p>\n Still, there are good reasons to keep the faith. Companies are still driven by the need to pursue growth opportunities, and global markets remain a top prospect in this regard. And enterprises will not simply abandon the huge investments they have already made in overseas markets. These include investments in supplier networks that are often difficult\u200a\u2014\u200aif not impossible\u200a\u2014\u200ato replicate domestically. Moreover, many countries will not allow foreign companies to sell products within their borders if some level of local manufacturing is not involved.<\/p>\n Beyond the arguments of Smith and Ricardo, restricting international trade limits citizens\u2019 access to the innovations, new products, and best prices available from around the world. Such impediments to trade also hinder domestic companies\u2019 access to global customers and therefore their ability to operate at scale, increasing their\u00a0costs.<\/p>\n The challenge is how to develop a version of globalization that mitigates the inequalities within countries that give rise to trade barriers and both intra- and inter-nation tensions. One of the obvious avenues to achieving this goal is a fundamental upgrade of the US education system to refocus it on reading, writing, and arithmetic. With the widespread availability of online courses, K-to-12 education should focus on basic skills so workers can keep learning and upgrading their skills as job market requirements change due to outsourcing, automation, or other factors. Other ideas for rethinking globalization are\u00a0welcome.<\/p>\n We have no time to lose in the campaign to prevent global trade from becoming a spent force. As Bloomberg columnist Matthew Yglesias writes<\/a>: \u201cWe\u2019re going to miss globalization when it\u2019s gone, and it\u2019s not too soon to start thinking about what could take its\u00a0place.\u201d<\/p>\n Can Globalization Be Rejuvenated?<\/a> was originally published in MITSupplyChain<\/a> on Medium, where people are continuing the conversation by highlighting and responding to this story.<\/p>","protected":false},"excerpt":{"rendered":" Is globalization in terminal decline, or will it survive or even thrive in some other\u00a0form?…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[1],"tags":[],"class_list":["post-74","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"jetpack_publicize_connections":[],"yoast_head":"\nThe price of inequality<\/strong><\/h4>\n
New approaches needed<\/strong><\/h4>\n