Welcome to globalisation’s two-speed future

Unwinding globalisation would be hard, slow and financially ruinous. It won't happen. But it can — and will — change in unexpected ways.

There’s a danger, as we think about the post-pandemic world, of predicting what will happen. Nothing is an inevitability. But changes in society are determined by people, not absolute rules of existence. Whatever happens to us, and to globalisation in particular, will be the result of the decisions we make, as societies, countries and even as individuals in the coming months.

In fact, it’s likely — and this will come as no surprise to regular readers — that the outcome will be complex, and multi-faceted. And it’s likely to be played out over years, starting with those early decisions.

It seems almost inevitable now that we will end up with two-speed globalisation. Digital globalisation will accelerate, while physical globalisation will decelerate, and quite possibly go into reverse, in selected areas.

Let’s explore that dynamic.

Digital Globalisation

If there’s one thing that the great pause has proved, it’s that there’s little risk of globalisation retreating in knowledge work. If anything, the pandemic has proven to us that we can work remotely quite effectively. It has embedded the value of location independence into company’s business approaches, be it Facebook announcing it will be doing more remote hires, or a travel publisher giving up its offices.

So, even if there are questions about the global flows of capital, in a recession-hit world, information is likely to continue moving around. That has been the great gift of the internet: low-friction information movement. Indeed, rapid and fluid flows of information globally have been critical to countering the spread of the novel coronavirus. We’ve been able to communicate both clinical and research findings with greater speed than ever before. Rarely in human history have we been able to witness our scientific understanding of a virus evolving before our eyes.

Globalising services markets

Many people are finding international co-operation easier than before. On a personal level, the switch to online training was forced on me by lockdown and financial necessity, but I’ve found myself training people from Germany, Sweden, Switzerland, Russia and the USA, where before I would often have been faced with a room full of Brits.

The crisis, by constraining us physically, has forced us to abandon the crutch of physical meeting, and explore the virtual options more throughly. Our innate resistance to change has been shattered, and now we’ve been forced to adopt virtual working, many of us are warming to it, and the new possibilities it opens up.

It is inevitable that physical meetings will return, but perhaps we’ll value them all the more for that. Meeting physically will be something special, to be treasured, while virtual meetings become the norm.

When the NEXT community next gathers in Hamburg, for example, think how much more meaningful that will be after this period of largely virtual communication. Which brings us, naturally, to the much more challenging arena of physical globalisation. And that means addressing the easy movement of people and goods around the world.

Physical Globalisation

Martin has already dug deep into the underlying economics of a saturated globalisation. But it’s worth noting that it’s hard to retreat from some of our existing approaches rapidly. Atoms shift less quickly than bits.

There is no short term way to unpick the global supply chains we rely on without inflicting incredible additional harm on our economies. That would be a brave political choice. Our economies are already wounded from the slowing economic activity of lockdown. Replacing global manufacturing chains with local ones will take years of investment and training – and might well lead to higher prices. That will, in turn, restrict the flow of available capital for other businesses.

Is it worth it?

Indeed, it’s been remarkable how well global supply chains have held up through this period. Food supplied keep arriving, months into thr crisis. The problems that did arise have been more about the changing nature of demand, than supply chain problems. For instance, flour shortage is more about the balance between commercial flour use and domestic – and a similar problem emerged around toilet paper.

Goods designed for corporate offices or industrial baking can’t be easily switched into consumer product mode. Supply chains are slow to adapt.

Global supply chains with local resilience

What is likely to happen is that governments will seek more local resilience. Few nations whose health workers have been hit by a lack of personal protective equipment (PPE) will be able to avoid the necessity of securing a robust local supply for the foreseeable future.

Indeed, the more foresighted have already spotted that the uneven spread of vaccine manufacturing capabilities might readily become an issue if a SARS-CoV-2 vaccine is found. There’s likely to be an increased demand for prophylactic local capacity in these key areas.

Travel globalisation

Many of us don’t miss the regular commute to our local big city. We like where we live, and those small, local travels aren’t that valuable to us. But the idea of not going to Hamburg again? Or Singapore? That’s harder.

Since the birth of the package holidays in the 1960s, we’ve seen over half a century of cheapening travel. Air travel, in particular, has become a “pack ‘em in” business. The airlines reduced frills and comfort, but drove down prices, too. Cheap air travel became mainstream. In fact, that direction of travel seemed so clear that really uncomfortable solutions were being proposed

How dated those “stand up” seats look already in the social distancing age.

There is little doubt that many airlines won’t survive the current crisis. The budget carriers might find it hard to maintain their low prices with aircraft outfitted for social distancing. The likely long-term drop in business travel, which is the most profitable, will further erode their sustainability.

It’s certainly possible that flying might become a more luxurious experience once more – something that you pay more for, but appreciate all the more when you do so. That might well be a good thing, in climate change terms. It’s also likely to further the digitalisation of work, as flying for a meeting becomes less cost-efficient in a world hit by a global recession.

Longer-term issues

A drop in the price of fuel might counter-balance this, reducing one of the biggest costs of air travel. And consumer demand for travel is unlikely to catastrophically collapse in the longer term. As our What’s NEXT? co-host David Mattin so often says, “new world, same humans”. A desire to travel is intrinsic, and people will find ways of catering to it, as the threat of the virus recedes through vaccination, treatment or emerging herd immunity.

This, though, may take time. And the cull of existing aviation businesses and the development of new technology in the meantime might open some doors. It could herald a technology-driven boom in more sustainable forms of aviation. This could be lead by upstart aviation providers, more willing to gamble on emerging technology, and able to use vacant airport space.

These complex webs of supply, demand and costs will probably take years to play out.

Photo by hamza tighza on Unsplash