During the past thirty years, globalisation has been a strong and steady megatrend. Most people expect this trend to continue in the coming decades. In fact, globalisation is taken for granted, almost seen as a fact of life. But continued globalisation is not the only possible future scenario. A number of forces are pushing the world towards increased nationalism, protectionism and isolationism. And one of the key aspects of globalisation – the global value chains – could even cease to exist in less than fifteen years due to technological developments. Three scenarios for the future of globalisation are possible, and nations as well as international companies had better prepare for more than one of them.
In short, globalisation describes the process of a world growing closer and closer together, in terms of culture, economy, business and politics. Globalisation has taken place as natural and man-made barriers have been reduced or eliminated. In the perfectly globalised world, there is no difference between doing business with or living in Boston, Barcelona, Beijing or Buenos Aires. When presented this way, it is clear that even if the world has become much more globalised over the course of the past twenty-five years – and it certainly has – there are still lots of barriers.
Globalisation is one of fourteen megatrends identified by the Copenhagen Institute for Futures Studies, and together with technological development, one the most powerful, as its consequences have been experienced by every country, every company and every person. But what shape will globalisation take towards the year 2030? What is the future of globalisation?
Globalisation at a crossroads
There are, and have been, many benefits from globalisation, such as lower prices on goods and services and a fast-growing middle class in emerging economies. But critics will point to just as many problems caused by globalisation; from social dumping and environmental damage, to lost jobs within manufacturing, and powerful financial institutions capable of throwing the global economy into recession. The criticism is coming from both the political left and the right, mainly in Europe and the US. And many politicians have changed their perception, from seeing globalisation as a powerful and uncontrollable force, to believing and convincing their voters that globalisation can be stopped or even reversed. The result of the UK referendum on membership of the European Union – the Brexit – was a testament to this trend. The British people voted to take back power from the EU to Britain and thus unwind integration. Similar views have been represented in the recent American presidential elections, from Bernie Sanders on the left to Donald Trump and Ted Cruz on the right, and are supported by many people, perhaps even the majority of the US population.
But there are several other forces at play: Actions by authoritarian leaders like Vladimir Putin and Recep Tayyip Erdoğan – who are often aiming to strengthen their power domestically – are de facto pulling their countries politically and economically into isolation. Non-state actors like terrorist organisations have different goals and means, but are nevertheless a force that could end up reversing globalisation by limiting the free movement of goods, services, money and people.
The free movement of people, be it tourists, migrant workers, students or refugees is a key element in globalisation. When some of these groups are prevented from moving – as is increasingly the case – globalisation is de facto being reversed. Africa plays an insignificant role in the global economy, but by 2050 there will be two billion Africans – many eager to move north in search of jobs and prosperity.
In Asia, the anti-globalsation trends are much less pronounced, even if anti-globalisation movements do exist and China is playing a semi-protectionist game. But there is another trend which is challenging the present world order, and that is the rising ambitions and self-confidence of China, India and Indonesia, respectively. These populous nations with high economic growth will not accept international rules dictated by the West. China showed its force when it pushed through the creation of the Asian Infrastructure Development Bank against the interests of Japan and the US.
A new world order, with a dominant Asia and increased nationalism in the West, could decrease the power and effectiveness of the global institutions. Most supporters, and especially critics of globalisation, would agree that globalisation should go hand in hand with global governance. Post World War II institutions like the UN, World Bank, IMF, the WTO and more Western oriented institutions like the European Union, NATO and the OECD, are the closest we have come to such global governance. But there is a real chance that these organisations could either cease to exist or – more likely – gradually lose their power.
Technology is a double-edged sword when it comes to drivers and disablers of further globalisation. On the one hand, the increased global connectivity will increase globalisation. In 1995, only 1 percent of the world was connected to the internet. Today, 3.3 billion people, equaling 40 percent, are connected. In 10 years, almost 6 billion people or 80 percent of the planet are expected to be connected. This will be a major driver of continued globalisation. Technology is also enabling new high speed trains, connecting cities and people in Asia and all over the world. And technology will soon enable simultaneous machine interpretation which could eliminate all language barriers for good. But on the other hand, certain technologies like robots, 3D printing, artificial intelligence and virtual reality will reduce the need for travel and trade, and technological progress in solar and wind power will reduce the need for transporting energy sources like coal and oil around the world.
Just like technology, multinational organisations are adding to both sides of the equation. They are pushing hard for global market access, are favoured by the global consumer, and they are the creators of global value chains. However, their behaviour is creating opposition among interest groups, labour unions, politicians and workers.
Can globalisation be stopped at all?
Is globalisation like a tsunami which no wall or fence can hold back, or is it in fact stoppable? It depends on what aspects we are looking at, but in most cases globalisation could be reversed, and in principle brought to an end, even if this is not that likely. If major countries should decide that it serves their national interests to disconnect from global interaction, there are means to do this: From high toll barriers to limits on travel, from restrictions on capital movement to limiting access to the internet. Let us look at the possible scenarios for the future of globalisation, where scenarios 1 and 3 represent polarities and scenario 2 is close to the status quo.
Scenario 1: The End of Globalisation
In this scenario, anti-globalisation accelerates. The European Union falls apart. NAFTA is dissolved. The WTO agreements are not respected, and WTO loses its power. Border control is strengthened within Europe and between Europe, the US and the rest of the world. Russia and Turkey continue their de facto isolationism. In China and other Asian countries, similar decisions are made, perhaps for different reasons but with the same result. Technology, including robots and 3D printing, reduces the need for imports of industrial products and energy, while some raw materials that are not evenly distributed will still be traded at high prices. Thus, the end of globalisation is not the same as the end of internationalisation and regionalisation. But if the EU falls apart, the US and China become increasingly isolationistic, and Russia and Turkey continue their present policies, it would be the end of globalisation as we know it.
Scenario 2: Two Steps Forward and One Step Backward
This scenario is, to some extent, the-world-as-now scenario, since what we are witnessing at the moment is both the reversal and the acceleration of globalisation, at the same time. The world is seeing an increasing number of protectionist measures – more than 700 in 2015, up from 200 just a few years ago. The big Trans-Pacific trade agreement TPP has been agreed upon, but has difficulties going through the US Congress. The Trans-Atlantic partnership TTIP is even less reachable. Borders are closing in Europe. But at the same time technology and connectivity – including social media – are increasing globalisation by breaking down barriers. In this scenario, globalisation will continue to be a rising trend and take on new forms due to technology. However, the speed will be slower than we have seen in the last 25 years because of set-backs in other areas.
Scenario 3: Accelerated Globalisation
History has shown that it can be dangerous to predict the future on the basis of current events. How strong and long-lasting is the anti-globalisation trend? What if the UK dives into years of recession, and Brexit is deemed a great failure? What if the young generation pushes for an even more globalised world? What if technology continues to take quantum leaps, enabling the seamless movement of all services imaginable across borders? Then the decade from 2020 to 2030 could be a new period of increased globalisation. This does not mean that globalisation, in this scenario, would be unaffected by some of trends that have been mentioned earlier, like reduction in international value chains due to automation. But in this scenario, we would indeed see a world moving closer together at a fast pace through the elimination of all kinds of barriers.
Scenario 2 is the base scenario, i.e. the most likely one. But it would be dangerous to rule out the other two, or any combination of the three.