The Future Of Globalization In The Next 20 Years – HomeResearch and Knowledge Initial StrategyBack Globalization of Research and Knowledge after COVID-19: What’s in store?Back to Strategy

COVID-19 is the epitome of globalization in its blind disregard for borders, but it could cause the most significant reversal of globalization we’ve seen in decades.

The Future Of Globalization In The Next 20 Years

The Future Of Globalization In The Next 20 Years

COVID-19 has entered the scene at the end of a decade in which global integration has been continually challenged by the rise of economic nationalism and protectionism.

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The economic tailwind from COVID-19 is expected to be more devastating than that of the financial crisis. With the US unemployment rate taking two weeks to reach what it took 6 months during the 2008 crisis, there is no doubt that we are facing a global recession, with some predicting it could reach 10% of GDP or more. How quickly a V-shaped recovery can occur is still a matter of debate. But regardless of economic contraction, globalization in the form of flows of goods and services will have a negative impact.

The decline in global demand will be exacerbated by the effects of governments protecting their own and implementing policies to promote local employment at the expense of imports. Many incoming government aid programs are expected to contain internal conditions, as was the case with the Recovery Act after the 2008 crisis. Therefore, trade in products, as well as the services that support them such as shipping, is expected to suffer in the short and medium term, not only in terms of volume, but also in prices.

It should not be surprising, therefore, if we see further consolidation globally in certain industries. Among the sectors that will be particularly affected are the tourism and hospitality sectors and airlines. In their case and others involving the movement of people, it is not clear whether it will return to the previous state or not, because the acceptance and convenience of digital technologies may create a new balance. In contrast, consumer goods and durable goods are expected to see a faster recovery.

As with all forms of volatility, there are losers and winners, and the case of COVID-19 is no different. While globalization may have a negative impact on trade in goods and some services, such as travel, other sectors may increase demand. Remote working modes will encourage cross-border data flow and dispersed but easily exchanged professional services. Accordingly, not only the providers of these services, but also Zoom and broadband providers will be the beneficiaries.

The State Of Globalization In 2023

“Covid-19 adds to these pressures on supply chains that have been increasing since the start of the US-China trade war.”

Humanity is indeed finding new and innovative ways to connect and collaborate under COVID-19. These range from global hackathons to combat COVID-19 to people connecting on LinkedIn to collaborate on designing and 3D printing fan parts. In this sense, the world may be increasingly globalized in terms of the flow of ideas and solutions, if not necessarily products.

So these are the macro changes we’re seeing. But what about changes at the company level? As for the company’s operations, COVID-19 adds to these pressures on supply chains that have been increasing since the start of the US-China trade war, with companies reflecting on the need to avoid dependence on single-source supply chains. Furthermore, in terms of the health sector, governments are trying to ensure the domestic supply of critical products; thus, they can begin to be considered strategic goods, turning to local production companies in the future.

The Future Of Globalization In The Next 20 Years

Globally centralized supply chains in low labor cost countries are also being challenged by the increased use of robotics and automation, allowing companies to keep production in relatively expensive countries. COVID-19 has highlighted the importance of automation, as the threat to operations caused by “non-essential” business closures hinges on the need to keep people at home. Accordingly, operations that take advantage of robotics will have less impact. Ironically, the countries that have best dealt with this pandemic include many with high levels of robotics use, such as South Korea.

Globalization Isn’t Dead. But It’s Changing.

How will changes in supply chains affect the overall strategies of companies? While globally efficient centralized hubs have been the focus of many large multinationals, pressures from more fragmented supply chains, along with increased protectionism, will have a key impact on the decisions faced by global and local companies. We are likely to see greater dispersion not only of assets but also of decision-making to accommodate greater local demands.

On the positive side, the greater dispersion of supply chains could allow countries that have lost manufacturing capacity to China over the past 15 years to slowly regain some of it, and allow purely domestic enterprises to become more viable.

While trade flows and FDI have grown in recent decades, the same cannot be said for the authority of the global institutions that govern them. As Pankaj Ghemawat argues, we live in a semi-global world, where markets are global but regulatory institutions are still, for the most part, national. Given this, what impact will COVID-19 have on the sentiments and power of global cooperative organizations such as the WHO, UN and OECD? Will it be a repeat of the era of the First World War and the creation of weak institutions such as the League of Nations? Or, will it be accepted that global problems require global solutions with credible institutions to support them?

The reality is that the rise of populism in the last decade has led to the weakening of global cooperation institutions, driven by a national politics first approach. The direction we take will depend on the leadership styles shown by major powers around the world. Will such leaders reinforce nationalist and, in some cases, xenophobic tendencies, playing the blame game and labeling COVID-19 as a foreign virus?

China And Russia Ended Thriving Globalization

As UN Secretary General Antonio Guterres has stated, we have moved from a bipolar world to a unipolar world to a non-polar one, where global powers, whether traditional friends or enemies, are unable to work together. This lack of hegemony threatens any chance for a global solution today.

As a result of COVID-19, borders have been revived to keep foreigners out. So far they are  temporary, but will people prefer the new situation? Will governments continue to block exports of essential medical products? Or will we realize that global pandemics and other such challenges require global solutions and cooperation? Many questions remain.

A sign of optimism is the level of cross-border cooperation of the scientific community as it seeks solutions to the current crisis. At the community level, further examples of support and cooperation abound, even if government action is delayed. For example, in the UK, when the NHS asked for volunteers to help in the crisis, it expected to receive 250,000 responses, but received more than 500,000. international scope

The Future Of Globalization In The Next 20 Years

Today’s world finds itself at a crossroads. Our path towards globalization has far-reaching and lasting consequences, not only for business, but also for the way humanity faces future challenges.

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