MainStreet Macro: Globalization: The Promise, Perils, and Possibilities

Globalization: The Promise, Perils, and Possibilities

Last week I joined the World Economic Forum meetings in Davos, Switzerland. After a two-year hiatus from in-person events, world leaders, CEOs, international investors, and nonprofits reconvened at a time of great risk to global growth.

Traditionally, big issues like climate change and inequality have dominated the conversation at this gathering of the global elite. This year, the summit was pared down from previous years, but the challenges facing the world, including the invasion of Ukraine and a growing food crisis, are greater than experienced in many years.

With more than 500 panels, interviews and bilateral meetings taking place at Davos, the topics of discussion are highly varied, yet they’ve always had a common thread: The benefits of globalization.

That theme has begun to fray. Countries have turned their attention to onshoring production in the wake of the pandemic’s supply shortages, elevated inflation, the Ukraine invasion and China’s lockdowns.

This week, on the occasion of the Davos meetings, I’ll review the promise, the perils and the possibilities of globalization from the perspective of Main Street.

The Promise

Globalization promised that technology and other advancements would spread, leading to a higher standard of living for both poor and rich countries. Inequality would narrow. 

Technologies such as digitization and ecommerce have in fact brought the world closer and made cooperation and problem-solving easier than at any other point in history.

The Perils

While globalization has its champions—among them the well-heeled leaders in Davos— its detractors note that it hasn’t uniformly delivered on its promises, especially when it comes to vulnerable countries and populations.

By picking winners and losers, globalization rewarded multinational companies more than the low-skilled workers whose quality of life it promised to enhance. For many economies, free trade has gone hand-in-hand with wage stagnation, trade imbalances, rising unemployment and widening inequality.

During the pandemic we saw the gulf between the haves and the have-nots grow, with huge differences in access to Covid vaccines, credit, and basic energy and food resources.

Now comes the backlash. Main Streets worldwide have seen the damage unfettered globalization has wrought on domestic economies, and they’re less willing to support it.

Campaigns to deglobalize are taking root as countries seek self-sufficiency and fewer, more targeted trading partnerships.

The Possibilities

Deglobalization, however, isn’t the solution. The world is more interdependent than ever.  Financial shocks, viral outbreaks, wars, and weather in one part of the globe can lead to famines, supply shortages and lockdown somewhere else. 

Globalization’s checkered past does not have to be its future. Cross-border cooperation doesn’t require losing sight of local economic issues and values. In fact, domestic issues, from the environment to worker protection, can give shape to global solutions.

My Take

We saw first-hand how companies, governments and universities around the world came together to develop a coronavirus vaccine in record time.

While there are lessons yet to be learned, such as how to make the vaccine’s distribution across rich and poor countries as equitable as the development process was efficient, the vaccine rollout was a triumph of global cooperation, one that can be repeated to address other world challenges.

The promise of a new, smarter globalization – when the world not only trades together, but also solves problems together – is that it can lead to positive possibilities for the world—and for Main Street.