The 1990s catchphrase of globalization and the immense possibilities surrounding the new technological age initially seemed like something of a Trojan horse in retrospect. Almost as quickly as it arrived, the dot com bubble stymied this momentum, a telling warning that new paradigms must still pay heed to market and economic truths.
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However, after the dot com bubble burst and the first, false dawn of technology subsided, stronger technology driven business models rose from the ashes. Over the next few years the dream of economic and technological globalization was being realized. China and India, the once sleeping giants of 2 billion people, awoke.
Small countries with limited natural resources but strong comparative advantages (like low wages), could now take advantage of the opportunities beyond its shores. There were new terms like BRIC, Silicon Valley and the startup nation that became part of the lexicon, to say nothing of tech behemoths like Facebook and Google.
The double-edge sword of globalization
It was a brave new world. But many, if not more people were displaced by these types of paradigm shifts, than those who benefited. All of a sudden, long-protected infrastructure and jobs, the bricks and mortar of the non-digital world, started to show cracks. Technological efficiency was designed to reduce consumption of human manpower and provide technological solutions where man was once the solution.
Outsourcing, the new global management fad, began a movement towards lower cost employees staffed in remote, low cost locations, designed to undertake the same work as the once great workforce. Tensions began between the economic demands of globalization and the worker, the desire for protectionism with the needs for free trade and its positive trickle down effects.
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Ultimately, for a while, as growth began to accelerate, it was the economic needs that came out on top, with money flowing from everywhere, driving business interests and swelling tax revenue toward deregulation and free trade in a way that created a new normal and broke down many of the old borders. In time however, the cut and thrust of comparative advantage began to generate political pressure for governments to create jobs and compete in the global marketplace.
New world economics
In some ways this was the reason behind the creation of the eurozone, to amalgamate enough human capital to compete as an economy in this new world. It was a sign of how far the world had come, with only the perspective of human history seemingly surprised at the coming together of the greatest collection of warring countries the world had ever seen as one big, happy economic step family.
And then the interconnectedness created by globalization turned around and reminded us that families must share both the good and the bad. Bad credit defaults in the US, in the past the kind of local issue that would be a blip on the world stage, infected everyone, precisely because of the new borderless, interconnected monetary activities of the world. Suddenly everyone owned a part of the poisoned fruit and everyone had to deal with the outcome.
Other examples in quick succession showed how dangerous globalization had made the economic world. The eurozone crisis, the defaults by eurozone slacker cousin Greece and subsequent bailout dramas, and ultimately Brexit, all followed in quick succession. By now, banks had long begun to scrutinize foreign investments and slow the money flow, with cross border banking claims going from $34.6 trillion in Q1 2008 to $27.9 trillion in Q2 2010.
Populism makes a comeback
Donald Trump was elected with his populist platform to “make America great again” by bringing back protectionism. This set in motion a serious movement away from globalization, in the face of political and human frustration at the dual personality displayed by globalization.
What was once seen as the saviour and future of world economics now looks to be heading for another adjustment. It will be an intriguing study to see how these radical moves away from globalization pan out.
This article was written by Adinah Brown of Leverate.