Saturday, April 23, 2011

35/100: The Unfinished Globalization

I say, on my Linkedin profile, that I wish to work to build a great organization ready for Globalization 3.0. Indeed, there is some justification in the labeling - I saw the resolution (seemingly) of Capitalism/ Socialism debate and the globalization of technologies (Internet) as the first wave and the globalization of skills and people, mainly through cheap air travel and cheap phone calls, as the Second. Indeed, there are other people who would think that this is quite a narrow generalization, globalization was indeed a process that started with Italian merchants; and there are others who would say that globalization was always there - in fact, it was nations which are a later invention.

This is a truly many-sided debate. The most high-pitched battles are indeed fought between the 'World is Flat' people, who believe that the global corporations are making national boundaries irrelevant, and the 'Shock Doctrine' people, who believe in exactly the same thing, but think that's necessarily bad. However, there is a school of thought that the world is less global than one thinks, and the global prosperity remains stunted under the divisions still. Pankaj Ghemawat, who made the point before in his Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter, has written a new book, eerily named World 3.0, making the case why we haven't seen true globalization yet.

Some of the statistic he presents is self-explanatory:

1. Only 3% of the people live outside their country of birth
2. Only 2% of the students are at universities outside their home countries
3. Only 7% of the Rice traded across borders
4. Only 7% of the directors in S&P 500 companies are foreign born
5. Less than 1% of all American companies have foreign operations
6. Exports are equivalent to only 20% of global GDP
7. Air Travel is still restricted by bilateral treaties
8. Ocean shipping is dominated by global cartels
9. Foreign Direct Investment accounts for only 9% of fixed investments
10. Less than 20% of venture capital is deployed outside the fund's home country
11. Less than 20% of shares traded in stock markets are owned by foreign investors
12. Less than 20% of Internet traffic crosses national borders

(Examples as cited by The Economist, April 23rd)

This is not the death of distance, but a reassertion of the love of the familiar and the local. By this standard, David Cameron's recent concern that local communities are falling apart with people arriving with strange dialects is not out of place. Professor Ghemawat cites more data (again I have drawn on The Economist's review of the book): Two otherwise identical countries will engage in 42% more trade if they share a common language than if they don't, 47% more if they belong to a common trading block, 114% more if they have a common currency and 188% more if they have a common colonial past (which may mean they also share a common language).

This indeed blows my ideas of globalization of people and skills out of water. Today less people, as a percentage of population, cross national borders. A century ago, 14% of Irish-born people and 10% of native Norwegians emigrated. There were no visas and passports, as opposed to today's $88 billion a year spend on visa processing. Professor Ghemawat points to the fact that in some countries, a passport costs more than a tenth of a person's average annual income.

In fact, the local is alive and well. The march of the extreme right across Europe and the Tea Party-goers in America, the adolescent national sensibilities in Asia, the roll-back of various national union projects (including the precarious state of the EU, where the French has now closed the borders with Italy effectively), all point to this direction. The FDI fell from $2 trillion in 2007 to $1 trillion in 2009, and nearly a quarter of North American and European companies shortened their supply chain in 2008. 'Near-shore' is becoming as much a common term as 'Offshore'. It actually seems globalization is in full retreat.

The point here is the difference between the rhetoric of globalization and the state of the phenomenon. It is possible to see all of this as a huge global opportunity, of unlocking the potential of connections and co-working. I am very much the 'nationality as an invented identity' school, though I shall agree that this was a convenient identity at a time in history. I am firmly of the belief that the time for national divisions are over and a global generation is beginning to emerge. Professor Ghemawat is right in pointing to the unfinished globalization; I shall sign off with a realization of how much is left to be done.

1 comment:

Supriyo Chaudhuri said...

More on shortening the supply chain

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