A Look At Deglobalization

Here is a look at some data points related to the trend of “deglobalization”

Graphic courtesy of economist.com

From the Economist:

THE economic meltdown has popularised a new term: deglobalisation. The process of the global integration of goods, capital and jobs is in trouble. The IMF predicts global growth of 0.5% this year, the worst in 60 years. World trade has plunged. Foreign direct investment, a common route to transfer skills and technology from rich to poor countries, fell by 21% in 2008 to $1.4 trillion and will contract by another 12-15% this year. Unemployment is expected to rise by 30m from 2007 levels by the end of this year. A poll taken in the last two months of 2008 by Edelman for the World Economic Forum found that 62% of respondents in 20 countries said they trusted companies less, with a majority keen on more state regulation.

I found it ironic that many of the countries that are going to suffer the most from reduced foreign investment are the same ones whose citizens want more protectionist policies. It would make sense for politicians and business leaders in these countries to put some effort behind explaining the benefits globalization brings. Especially when it’s very likely that there are people calling for protectionism whose homes are full of goods produced in foreign countries.

All that being said there is simply less money available for investment right now, so some aspects of globalization are going to be rolled back no matter what.

I think the key on a go-forward basis is to help people understand the benefits of globalization, so that no one shoots themselves in the foot via misguided attempts to protect their own economy.

One other thing to consider is that investments into emerging market countries are often a stabilizing influence, and a decline in foreign investment on top of  a worsening economy could lead to some potential sociopolitical unrest.

Source:

Economist.com: “A backwards march” — February 20, 2009

Disclosure: at the time of publishing the author didn’t own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn’t be viewed as financial or investment advice.

Subscribe by RSS Subscribe by Email