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A Shifting Landscape: Whatever Happened to Globalisation?

The notion of globalization, once a seemingly unstoppable force, is undergoing a transformation. While some may prematurely proclaim its demise, the reality is more nuanced. The World Economic Forum in Davos concluded with a mix of optimism and caution, reflecting the complex state of the global economy.


The not-so-great aspects of the current global scenario include the delicate balancing act central banks must perform to avoid recession or inflation spikes. Additionally, geopolitical tensions, exemplified by the Washington-Beijing economic struggle and widening disparities between the global North and South, cast a shadow over the future. The fractured state of the global economy, evident at Davos, signals that challenges lie ahead.


However, amidst these challenges, the death of globalization is not as imminent as some might suggest. Multinational companies and banks, still actively participating in forums like Davos, exemplify the enduring reach of globalization. The rapid growth of artificial intelligence (AI), a cross-border technological revolution, further solidifies the global interconnectedness that persists.


The narrative of "peak globalization" reached around the 2008 global financial crisis, but subsequent shocks since 2020 have reshaped the dynamics. The aftermath of the Covid pandemic has accelerated a paradigm shift, often referred to as "glocalisation." This term, though unattractive, captures the essence of a new economic model that is neither purely global nor autarkic.


Glocalisation involves shorter supply chains, a focus on domestic manufacturing, and a more strategic role for governments. The days of solely prioritizing low-cost, frictionless supply chains from China to the developed world are giving way to a realization that security and resilience matter. The recent attacks on cargo vessels in the Red Sea underscore the vulnerability of lengthy supply chains, prompting a re-evaluation of priorities.


The roots of glocalisation can be traced to the strained relationship between the US and China. The escalating tension stems from concerns about China's rapid growth and its challenge to America's global dominance. Legislative acts like the US Chips Act and the Inflation Reduction Act demonstrate a commitment to rebuilding the industrial base through government intervention.


While onshoring production would likely have occurred regardless, recent events such as the pandemic, supply chain disruptions, inflation surges, and geopolitical conflicts have accelerated the shift. Industrial policy, once a taboo term in forums like Davos, is gaining acceptance as nations recognize the need for strategic self-sufficiency.


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