Globalisation, Deglobalisation and Your Business
On my Interlinks podcast show I always ask my interviewees, who include businesspeople, entrepreneurs, academics, and diplomats from all over the world, where they think we are headed with the process of globalisation. The most common answer I get is that globalisation is here to stay and is a process that, while it may change, it will not stop.
It is very difficult of course to predict the future, and in some ways, it is an unfair question on my part, but while we cannot see into the future, we can see where the trends are pointing and begin to anticipate what they might mean for what lies up ahead.
The most respected measure of globalisation is the Index ofGlobalisation produced by KOF, the Swiss Economic Institute. The KOF Index of Globalisation measures the three principal dimensions of globalisation, which are economic, social, and political globalization, and publishes the results on an annual basis using data from 2 to 3 years prior.
What does the KOF Index of Globalisation tell us?
From 1970 to 1990, globalisation, defined as the flow of people, information, ideas, capital, and goods across borders, grew steadily but quite gradually.
After the fall of the Berlin Wall and the breakup of the Soviet Union, globalisation went into overdrive and grew very rapidly over the next twenty years, until in about 2010 the rate of growth began to taper off sharply.
Thereafter, from 2015 to 2019 globalisation flatlined at what looks like it might be a plateau of peak globalisation. The likelihood is that the impact of COVID and the war in Ukraine over the last two years, not yet included in the latest published figures, will have put us into a period of declining globalisation for the first time ever in our working lives. In effect, we are now in uncharted territory.
This means we cannot carry on with business as usual and the implications of this reality will have major effects on the strategies and policies of all businesses large and small, no matter where they are located.
Big challenges ahead.
Added to the uncertainty of the war in Ukraine and the pandemic, we have the challenge of climate change that can only be tackled with a radical transformation of our production, energy, and transport systems over the next twenty years.
We have demographic and social change that is leading to labour and skills shortages in developed economies, and we have the promise of a digitalisation revolution that will transform the way we live and work.
In my opinion, this set of circumstances will drive a shift to more localised and regional supply chain configurations that will benefit some regions and locations to the detriment of others. Those locations and countries that are well connected and proximate to large markets, belong to trading blocs such as NAFTA, the EU and ASEAN and have strong governance, IP protection, and rule-of-law track records will be the winners.
There will be a much greater premium attached to proximity, to trust, to reputation, and the quality of business relationships, as well as to technological competence. This transformation will happen very quickly and already we are seeing the evidence in the field.
What are companies doing about it?
By way of example, over the last year in my consultancy work with manufacturing, distribution, and logistics services companies around the world, I have seen manufacturers switch supply of essential parts, materials, and ingredients from suppliers located far away to alternatives located closer to home. I have seen importers leave behind spot market rates for shipping containers in preference of long-term contracts with freight forwarders and carriers. I have seen distribution companies invest in automation for warehouses and distribution centres and implement digital integration at an increasing pace and frequency.
The good news is that there does appear to be an increased belief on the part of the most successful companies that change is necessary and can be implemented successfully and a willingness to take the decisions needed to make it happen.
Perhaps this confidence is one positive after effect of what was achieved by many organisations as they adapted successfully during the forced changes of the emergency phase of the COVID pandemic in 2020 and 2021.
If you would like to discuss how I can help you adapt your business strategy to this new phase of globalisation, you can contact me directly on +353 86 811 6030 or firstname.lastname@example.org, wherever you are in the world, to start the conversation.
You can check out my Interlinks podcast here Patrick Daly Interlinks Podcast (albalogistics.com) or subscribe on Apple Podcasts,, Spotify and most other podcast platforms.