There is a cold logic to globalization—especially when it appears to be dying. Can growth be maintained in the world’s leading economies without expanding internationally? Can education start-ups and new ventures rely solely on their local markets? How long will new markets and new consumers in emerging and frontier markets—the world’s engine for future growth—be ignored? Can technology, finance, education and skills be controlled by immigration visas and halted by nationalist policies?
In the wake of a deadly pandemic and a poisoned US-China trade relationship, the idea that we are entering a period of de-globalization, decoupling, extreme nationalism and the end of trade and international exchange as we know it is now conventional wisdom.
Consider these dire prognostications:
- “COVID-19 is like the last nail in the coffin of globalization” following the great financial crisis of 2008, US-China trade war and Brexit (Carmen Reinhart, incoming President of the World Bank).
- In predicting another Great Depression, we are going to witness a post-pandemic world “marked by tighter restrictions on movement of goods, services, capital, labor, technology, data and information.” (Nuriel Roubini, NYU)
- A “lost decade” for stocks largely due to declining earnings among global corporate earnings as a result of impeded globalization and growth (Ray Dalio, Bridgewater Associates).
- Even in pre Covid-19 the “financialization” of growth has put a drag on the global economy and that wealth inequality and dominance of multinationals will kill momentum for further globalization, as noted by Michael Sullivan in his book “The Leveling: What’s Next After Globalization.”
In a moment of deep uncertainty, there is indeed a kernel of truth to all of these forecasts. But they ignore a stubborn fact: most countries remain in the early stages of global integration, view it as an imperative, and will look for ways to survive even if this excludes leading global players. We can see this potential across 49 Emerging and Frontier Markets as part of our own Global Edunomix Survey this year, where the levels of human capital built over past decades are poised for growth.
To gain a different perspective, forget for a moment G7 countries and developed financial markets. Globalization is increasing being driven by places far away and it is there where it will be re-imagined, through a different lens. Trade geographies such as Indian Ocean Region and the Belt and Road Initiative (BRI) are nascent and will develop irrespective of trans-Pacific and trans-Atlantic trade. International education hubs are already growing outside of North America, the UK and Australia, in places such as Ghana, Malaysia and Turkey. The digitization of the service sector as part of The Fourth Industrial Revolution is unlocking frontier markets and leveling access to talented workers and the exchange of information far beyond the world’s richest countries. What is more, the underlying drivers of globalization that have taken root over the past 50 years continue to underwrite billions of people around the world as they strive for better education, more productive work, new business opportunities and more comfortable lives.
Who will tell a large proportion of the world’s 7.5 billion population that globalization is on hold, or even worse, dead?
The Impact of Covid19
Covid19 may temporarily eradicate 100 million jobs in emerging markets alone, damaging many industries along the way. This has already set back global trade and production, particularly for heavyweight regions such as the US, EU and China. It has jeopardized educational achievement as millions move back to the countryside. But the world is also more resilient than the past.
Years ago at the Milken Global Conference during the height of the 2008 Financial Crisis, the late Nobel economist Gary Becker was asked for his views of the future. Amidst the gloomy forecasts of other panelists he was surprisingly sanguine. Why? The level of human capital accumulated in the US and the world were dramatically different from the 1920s and the Great Depression which will limit economic damage over time, and help to re-accelerate global trade [italics mine], which it did.
The world today looks nothing like the Great Depression. The key reason is educational levels. In 2020, with Covid-19 still raging, it is easy to see a world succumbing to dramatic change, or at minimum a greatly diminished globalization.
This author argues that any retreat from global engagement will be temporary, insignificant in terms of scale, and rapidly reversed—which has important implications for investment into international education and human capital development. In short, there is no growth alternative for the human race.
Global Edunomix Survey: and Globalization X
This year’s 2020 GES report focuses on the measurable results of global education and human capital but also offers a specific interpretation of what globalization means, how it can be measured and tracked, and what education stakeholders and investors can expect to emerge in the decades to come. “Globalization” itself remains a loosely defined term that has existed throughout modern history but bookmarked by certain boom-and-bust periods—the late 1800s Gilded Age financial meltdown; pre and post WWI periods of trade and the Great Depression; the post-War II period of unprecedented global integration; the coronavirus pandemic. The 21st century version of globalization is already being distinguished by returns to technology and human capital—far from the traditional Ricardian wine and cloth. This creates a deeper global imperative for the world’s populations to engage further and with effort, a durable feedback loop for continued integration, even in the face of a pandemic.
Does there exist an alternative growth model for the world, across developed, emerging and frontier markets at this moment in history? To be sure, there are priorities at the country level which will change, such as protecting some domestic industries and national security supply chains. But the vast proportion of global trade in services and information, including education and skills training, is more likely entering a new and hyperactive-phase of engagement defined by human capital, technology access and mobility—and it will not look like the past.
Let’s call it Globalization X — a theme I will be exploring in future posts.
How are we positioning our investments and those of our clients? To find the latest results from our 2020 Global Edunomix Survey, click below.