Winds are changing: How the world is shifting from globalisation to slowbalisation

With the advent of the new decade, the world economy is seeing a shift from the all-embracing globalisation to a more restrained slowbalisation

In a reflection of the times that we are living in, tensions between nationalism and globalisation will be one of the most defining trends as we step into the next decade, believes Indian billionaire industrialist and chairman of the Aditya Birla Group, Kumaramangalam Birla. In his article titled, titled '2020: My Reflections, My Learnings,' Birla has written that the world is no longer flat and that the emerging pattern of trend is more regional, as globalisation gives way to ‘slowbalisation.’

Referring to economist Thomas Friedman’s book titled the ‘World Is Flat’, Birla mentioned how the world was a very different place when he coined the word. “Back then he opined that technology and geopolitics were reshaping our lives while we were sleeping. Now that we are wide awake, I see a very different world dealing with the consequences of globalization and its discontent," Birla noted in his statement on LinkedIn. He also added that in this environment, communities and people will find themselves on either side of a stark divide between the winners and losers.

To illustrate his point, Birla took the example of two of the Group’s companies, Novelis and Birla Carbon which has a large presence across multiple countries. According to Birla, the companies have been able to exist, while many of their competitors have not survived, because they have focused on serving customers primarily at the regional level.

The move towards slowbalisation

The past four decades saw ideas, products, money and people moving freely across borders as globalisation soared. However, this has also resulted in a rise of income inequalities, with the concentration of wealth mainly in the hands of a few billionaires. This pace of integration, however, has slowed down over the past few years with the shift towards going inwards or local starting in the 20th century itself, with the advent of the Slow Movement.

The Slow Food Movement began in 1986 when a group of Italians, led by Carlo Petrini protested against the opening of a McDonald’s in Piazza di Spagna, Rome. Since then, the Movement has spread, working to prevent the disappearance of local food cultures and traditions. It counters global fast-food chains such as McDonald’s and the fast pace of life and focuses on reviving local food and produce and cutting down on the food miles that food would travel from one place to another. This need to go slow and local has now spread to other aspects of life, such as tourism, with slow travel, slow fashion, slow consumption, slow gaming and even slow education.

A similar scenario is being played out in global trade. In a January 2019 article, The Economist wrote about how the world went through the golden age of globalisation between 1990-2010, where commerce soared and the cost of transporting goods by ships and planes fell, phone calls got cheaper and the financial system liberalised. However, as the first decade of the millennium came to an end, globalisation, which was spreading at a fast pace till then, slowed down to a snail’s pace.

With the end of the decade, as the cost of shipping goods has stopped falling, globalisation has given way to an era of sluggishness, or ‘slowbalisation,’ a term coined by Dutch writer and trend watcher, Adjiedj Bakas in 2015. As per the Economist, trade has fallen from 61 per cent of the GDP in 2008 to 58 per cent now. Further, the share of global profits’ of multinational firms has dropped from 33 per cent in 2008 to 31 per cent now. Global Foreign Direct Investments (FDI) has also dropped from 3.5 per cent of the GDP to 1.3 per cent in 2018. 

That the world is heading towards slowbalisation of the economy is further corroborated by a report by the professional services firm, PriceWaterhouseCoopers which says that, in 2019, the global volume of merchandise traded slowed down drastically and even went into reverse. This was in contrast to a growth rate of around 3.4 per cent per annum in the early 21st century. This proves that while there is the continued integration of the global economy, it is at a much slower pace. This also means that large businesses with a global presence should plan for a variety of factors and scenarios, some of which may not have been encountered before.

Many factors have contributed to this trend. As per the Economist, the halt in falling transport prices, which had dipped rapidly in the 1970s and 80s, is a major reason why cross-border trade has become more expensive. The shock of the 2008-09 economic crisis also caused banks to become more stringent in financing trade. Further, MNCs are realising that local enterprises are far more competitive than they have imagined. The Economist also points to how services are becoming a larger share of the global economic activity, and since they are harder to trade cross border as compared to goods, companies are looking inwards.             

US President Donald Trump has been a vocal critique of globalisation and has taken up protectionist policies such as withdrawing from participation in the Trans-Pacific Partnership and imposing tariffs on products from Mexico, China, the EU and Canada, with the European Union retaliating with tariffs of their own. Further, a nearly two-year-long US-China trade war, which began with President Donald Trump imposing trade barriers and tariffs on China in a bid to force it to stop following, what the US calls, ‘unfair trade practices’ also remains a key factor in the slowdown of globalisation.

The outlook is, however, not all gloom. Slowbalisation would mean that countries become more self-sufficient in manufacturing goods, which would encourage the flourishing of smaller, local entrepreneurs. The United States and China have also just signed a phase one trade deal aimed at calming tensions, which experts hope could be a boost in confidence for global markets. Further, as Birla mentioned in his article, with the likes of teen climate activist Greta Thunberg being the conscience of Gen Z, the generation, born in a post-hedonistic world, will make choices which are influenced not only by considerations of personal good but also of how they will impact the world 50 years from now.