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✪ Rana Foroohar | Financial Times Global Business Column
Tan Jinzhe (translation) | The world of the law and the world is
[Introduction]
Since the COVID-19 pandemic, the "globalization ebb" has become a hot concept, and the breakage and restructuring of the global supply chain have been continuously attracting attention from all parties. Of course, the epidemic is just a fuse, and the deep principles are inseparable from the logic behind liberal globalization and its fundamental problems.
This article believes that traditional economics conceives that the global market will reach a balanced end after the degree of integration continues to deepen, and it is unlikely to be achieved at least under the promotion of the "invisible hand" of the market economy of ; global economy . The "localization" of politics will be an inevitable trend in the future. This is because
, the global supply chain of complex products becomes complex, fragile and expensive while growing; Globalization has caused workers' income to decline in some regions, which has led to political disputes; environmental protection and climate change requirements... These are all transforming the global economy to regionalization.
In this new and more heterogeneous world, alliance building will be key, and countries that can leverage the power of the network to ensure their own resources will be developed at the best.
And at present, the United States is obviously leading in this regard.
At the same time, localism as a political prospect is also meaningful, it requires more attention to citizens rather than consumers, and in fact let people control their own economy and destiny. Globalization that has been popular for decades in the past has been mainly neoliberal globalization. The rise of regionalization and localization of global trade and supply chains in recent years should not be interpreted only in the context of "anti-globalization". It actually reflects the transformation of the neoliberal capitalist model to the so-called stakeholder capitalist model.
This article was originally published in Financial Times, reprinted from "The World of Law and Idea". The original title is "My guide to a deglobalising world".
only represents the author's views and is for readers' reference.
Local manufacturing:
The road to prosperity in the post-global world
I will never forget my interview with the late Richard Trumka (Richard Trumka), who was then the chairman of the largest trade union in the United States, the American Federation of Labor and the Federation of Industry Trade Unions (AFL-CIO). Trumka, a tough-talking former Pennsylvania coal miner, told me he had a conversation with an official in the Clinton administration in the 1990s about the consequences of the NAFTA ratified in 1993 and the potential impact of China's accession to the global trading system.
Trumka is concerned about the sudden influx of cheap labor into global markets and its impact on the income and lives of American workers. “I told [the official] that these trades would kill us, and he agreed with me,” the official said. “After a while, wages will start to rebound and things around the world will be balanced.” When Trumka asked him how long this "resurrender" process might take, he replied: "About three to five generations."
Three to five generations, which is a century for the people in the question. So, what's strange about ordinary American workers, like workers in many wealthy countries, begin to question globalization? What's strange about or nationalism and populism is on the rise? As Dani Rodrik, a professor at Harvard , pointed out in 2011, he is one of the few mainstream economists in recent years to challenge his professional general theory. "Democracy, national sovereignty and Global Economic Integration are incompatible. We can combine any two of these three, but we will never have them at the same time."
Today, it is obvious that the pendulum of history is moving away from global economic integration.Some of the changes that followed , from market chaos to trade wars to real wars, are extremely worrying. But beyond these disturbing headlines in front of you, challenges and opportunities coexist. Here is my guide to our new era.
(screenshot published in this article)
▍Globalization has not died - it just became different
Until recently, the idea that capital, goods and personnel may not be able to continue to seamlessly cross national borders is still heretic. As former US President Bill Clinton said in a speech in 2000, "The question is not whether globalization will succeed, but how it will succeed." But long before the COVID-19 pandemic or the Russian-Ukrainian War, a series of transformations - population, geopolitics and technology - are moving the world away from one-code-take-all globalization and moving towards a heterogeneous world of economic policy formulation and business models that are more suitable for local interests. The wave of technological innovation in is making it possible to transfer work and wealth to more places. Millennial workers and voters are pushing politicians and business leaders to consider local sustainable development , not just global growth.
Some people believe that there is no middle ground between unrestrained, 1990s-style hyperglobalization and 1930s nationalism (even fascism). However, the balance between national and global interests has been changing; too much of the former will lead to protectionism or worse. Too many of the latter means that many people lose trust in the system.
Today, we are entering a new era of localization. This does not mean that all globalized things will fade. On the contrary, businesses, policy makers and society as a whole need to pay more attention to localization to ensure continued recognition of globalization. As world economy becomes increasingly digital, ideas and information will still flow across national boundaries (although this will be a limitation based on geographical differences in privacy and data systems). Financial institutions in liberal democracies have more restrictions on funding governments or reducing the economic welfare of their citizens, which should be. It will also rethink trading rules, labor rights, and how the costs and benefits of economic growth are incorporated into the data that policymakers use to shape our world.
Culture and Horizon New Issue was launched in October
▍All economic activities will be conducted locally
A few years ago, I interviewed a senior assistant to a senior Democratic senator who told me in surprise that there was a sense of certainty in the party in the past that rural areas and low-density areas are not worthy of political consideration at all. "I remember chatting with a friend of White House in 2016, who had been traveling and seeing many poor rural areas in places like Iowa and Virginia ," the assistant said. "He told me, 'Don't worry. We've figured it out, we modeled it and it turned out that paying people to move to the top 50 cities is less expensive than creating jobs in their place."
The sentence implies that the concept of town and home is not important, and the inherent contempt is not only an insult, but politically wrong (the rural areas have elected Trump , and people no longer migrate across the United States as they did before). But now both parties understand that towns are important. After decades of “winner-takes-all” trend, most of the prosperity has been in a handful of cities and businesses, and businesses are looking forward to business and policy makers paying more attention to ensuring the reintegration of wealth and towns.
This will be accompanied by costs—such as inflation . The old “efficiency” model believed that people, goods and capital would move seamlessly to where they needed it, and this model was cheap. creates more opportunities at home while still maintaining ties to the global economy, and will require a more resilient model – which involves better education, infrastructure, higher local wages, and a focus on the short-term bottom line. is cheap, resilience will cost more. Who will pay these fees is up to date.
However, there will be a chance to change from efficiency to elasticity. The United States and some other OECD countries have been moving too far towards a debt-driven economy, and are subject to the growth of asset prices, they have the opportunity to rebalance and focus more on creating middle-income jobs. At the same time, China also has the opportunity to establish its own regional ecosystem to correct the imbalance caused by transactions between Asia and the West that exchange cheap capital for cheap labor.
▍This is stupid politics…
In the past half century, there has been a view that different political systems, values and national interests are not as important as market forces. But suddenly, in this pandemic, there is an important fact that the United States purchases most of the cheap medical masks and key pharmaceutical ingredients from its biggest geopolitical rival, China. The Russian-Ukraine war made Europe's import of natural gas from Russia a focus of pain. It also shows that voters often behave less like the models predict. Remember the amazing journey of Brexit ? Or Donald Trump election?
The good news is that all these developments ultimately make an important message deeply rooted in people's hearts. If we want to solve the world's biggest problem - from climate change to the gap between rich and poor - then we must start to break out of the black box of traditional economics and look at the world in a more realistic and comprehensive way, using other disciplines such as neuroscience, anthropology , biology , law and business. For example, considering the common economic assumption that the place of work does not matter as long as job opportunities are created, because people will simply move there. But as Harvard scholar Gordon Hanson said, he is one of the representatives of this reimagining free-market capitalist movement. “When workers without college degrees lose their jobs, few choose to move elsewhere, even if the local market conditions are poor.” One reason is that they rely on local family and community relations to buffer them during difficult times. Hansen and his colleagues are building new, highly localized models of how economic growth occurs in different regions.
▍“Dual Circulation” Era
This is China’s official statement, indicating that future production and consumption will be more closely concentrated in the local area. A few years ago, China announced that he wanted his supply chain to be more localized for many reasons, including the vulnerability associated with long-distance production lines. These situations have been around for some time in Western multinational corporations.
Recall the situation of the Boeing 787, which experienced delays and cost overruns in the late 2000s due to its unimaginable complex supply chain, including outsourcing 70% of the aircraft's parts to countless countries around the world. These decisions were made after the merger of Boeing with McDonald, a company that focuses more on finance, focusing on reducing costs and minimizing financial risks. But sometimes, the decision to move costs out of the balance sheet can create real-world risks elsewhere. More importantly, the global trade system itself is easily manipulated by mercantilist countries, leading to serious political differences at home and abroad.
Today's political disputes are leading to more regionalization of the most strategic industries such as semiconductors, electric vehicles, agriculture and rare earth mines. In addition, there are other changes that have also made the cost-effectiveness of global outsourcing in certain areas. Wages in Asia have risen. Energy is more expensive. Companies are more concerned about their emission output.
As a result, long-distance global supply chains become more expensive and complex. Cheap labor, low-profit industries such as furniture or textiles are being regionalized everywhere, because manufacturing products for local markets is more economical than transporting east-west to the United States or Europe through the South China Sea. Former CEO of Google Eric Schmidt believes that the development of additive manufacturing or "3D-printed " may have a disruptive impact on manufacturing like iPhone in the consumer market, meaning complex machinery, cars and even homes can be manufactured locally.
Finally, climate change is driving localization. Although solving this problem requires a global perspective, the practical actions to achieve this goal are local. The supply chains of agriculture, textiles and residential buildings are one of the most polluted supply chains in the world. More community-based agriculture, ending fast fashion, and not wasting emissions, the argument for delivering insulation , concrete or plastic around the world is clear. While some fear that the conversion is too expensive, an analysis by BCG in 2021 found that more localized production networks will increase the price of a $35,000 car by only 2%, increase the price of a smartphone by 1%, or increase the price of a $200,000 home by 3%. This, coupled with precise data technology that allows extremely precise tracking in the supply chain (textile retailers can now determine where cotton comes from, until a certain farm or field), and younger consumers who tend to buy fewer things of better quality, will encourage more localization and help the planet.
▍Thinking about citizens, not consumers,
With the rise of the stakeholder capitalist movement, the recovery of organized labor, and the emergence of a new group of regulators from the Federal Trade Commission, the Securities and Exchange Commission, the Justice Department and the White House, people have begun to shift from consumer welfare to the national welfare of citizens. Politicians are pushing businesses to consider their impact on the community as a whole, not just consumers. Customers want to know if the company they are purchasing is a good local and global stakeholder. In this era when politics is more important than half a century ago, "Main Street" instead of " Wall Street " will have the upper hand.
This means that the values enforced by law will begin to become more important. Although the father of modern capitalism, Adam Smith, believes that in order for free markets to function properly, participants need to have a common moral framework, today's global economy is composed of a large number of countries with extremely different values and political systems, and these transactions are often formulated and approved by global technocrats rather than elected officials.
But even they do not fully agree with the unrestrained global capital market. Like Keynes and Marx, Hayek is the father of "neoliberalism" like everyone else, and he believes that the market will not necessarily return to equilibrium. They need to be controlled by a "framework" that connects capitalists and businessmen around the world, allowing them to float above the socialist interests of labor or the fascism of the 1930s. As law professor Ernst-Ulrich Petersmann, one of Hayek's students, said, "The common starting point of neoliberal economic theory is that in any well-functioning market economy, the 'invisible hand' of market competition must be supplemented by the 'visible hand' of law'." Law is about values, and countries and regions have different values. From monitoring capitalism to the concept of corporate power, values and laws that enforce these values will increasingly shape the market.
▍Have your own network
In our new, deglobal world, countries that can leverage the power of the network to ensure they have enough food, fuel and consumption needs will be the best development. At present, the United States is obviously leading in this regard. But in a more heterogeneous system, building alliances will be key. From financial networks to production networks to social networks, companies and countries that own their own or work with allies to own these networks will do the best. For example, vertical integration of among enterprises has once again gathered strength as leaders want to buffer supply disruptions, cut shipping costs, and reduce geopolitical risks. Retailers from Johnson & Johnson to Volkswagen , as well as retailers such as Chanel or Jenia are shifting more production internally and trying to purchase and control more raw materials.
Elon Musk is ahead, and he found that it is harder to innovate in real time and costs more when the supply chain is away (as author Ashlee Vance describes in his biography), so he produced most of the Tesla products in the interior. Ultimately, Tesla is committed to purchasing and innovating its battery and power train technology locally.
currency decoupling is also moving forward, because after the Ukrainian War, the US dollar's weaponization has been set up a track to a desire independent of the US dollar system. In fact, various types of decentralized technologies are becoming increasingly popular. Localized production of wind and solar energy will replace fossil fuel energy systems. Blockchain and other decentralized ways of mobile and shared data, although still incomplete, will improve and promote.
Localism is meaningful not only as an economic prospect, but also as a political prospect. In his 1996 book "The Dissatisfaction of Democracy", political philosopher and Harvard professor Michael J Sandel sharply explains why decentralization is crucial to democracy. He summarized the arguments against various centralized monopoly power in Woodrow-Wilson in in 1912, which was one of many precursors to large-scale economic changes in the 1930s. He wrote: "Restoring freedom means restoring a decentralized economy, cultivating independent citizens, making local communities the masters of destiny, rather than victims of economic forces beyond their control."
This not only summarizes the founding principles of the state, but also the core challenge of the new era - how to reconnect the global market and the value created therein with the nation-state.
This article was originally published in Financial Times, reprinted from "The World of Law and Idea", and the original title is "My guide to a deglobalising world" . is welcome to share it personally. Please contact the copyright owner for reprinting in the media.
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