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How is Globalisation Changing?

If you follow heated debates, there is probably not many with a hotter temperature than globalization.  The world – currently in the so-called third age of globalization – is set to potentially enter its fourth globalization age.  Known as Globalization 4.0, the next wave in globalization is still in its infancy, and thus subject to considerable debate about what it will actually look like.

The considerable disagreements over what Globalization 4.0 will look like does not hide the fact that every side agrees on a few things.  

One of those things is that Globalization 4.0 will have winners and losers.

On one side of the debate are politicians and businesses pushing for a more globally connected world, a world where labor competes globally.  In this type of scenario, production would generally shift to the cheapest places on the planet for jobs that can be done by cheap labor.

The other side of the debate is a bit more nuanced (there are actually many, many sides of this incredibly complex debate).  Proponents argue that national governments should put their own citizens’ employment as a higher priority than the way globalization puts foreign workers as the priority. Among the countries having this debate right now are the United Kingdom and its strife with the European Union or the United States and China.

In general, it appears most seem to think that the former is where the world is heading, regardless of what national governments try to do.

Recent measurements of global trade may make individuals with such views less confident.

A Little History
The debate leads itself to a little history lesson.

The following graphic is from the World Economic Forum.  Contained in the graphic are five periods, one of which is the pre-Globalization period.  The Age of Discovery, which began in the 15th century and lasted until the 18th century, captures the period following the scientific revolutions of the 15th to the 17th centuries.  Exports during this period were less than five percent of global GDP, and the leading exports were raw materials and basic goods.  European countries took the lead.

Fast forward to the 19th century, when the world really gets its first age of globalization, labeled Globalization 1.0.  The United Kingdom led the world in this first age of globalization by trading in textiles and industrial goods.  Exports as a percentage of world GDP went from six percent to as high as 14 percent.  The onset of World War I ended this age in 1914.

After the end of World War I and a hesitancy of the world’s businesses to work together, Globalization 2.0 came about, covering the period 1945 to 1989.  Over this time, exports as a percentage of world output grew from 5 percent to 15 percent.  Trucks and planes, among many other inventions, played critical roles in enabling Globalization 2.0.

The fall of the Berlin wall in 1989 ushered in Globalization 3.0.  This period, lasting until the busting of the global financial system in 2008, was driven by technological advancements in the U.S.  Exports as a percentage of global GDP increased from 15 percent to more than 20 percent.  

The world now stands on the cusp of a new economic era, but what will that era look like.

Briefly Speculating on the Next Age of Globalization
What lies ahead for globalization now given the spats between the United Kingdom and the European Union or the United States and China?  The answer, of course, is that no one knows.

In mindset, the revolution brought about by cloud computing combined with artificial intelligence and machine learning could make the world smaller than it has ever been.  But, such a situation is by no means a guarantee.  The winners from a more globally connected workplace could be China or India, or, if things go another direction, could be Europe and the United States.  

The entire debate about Globalization 4.0 has no simple answer, but lots of scary or fascinating scenarios.  Right now, exports say that Globalization 4.0 may be less global than what some presume.