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Globalization did not collapse amid Covid-19. That is the conclusion of the latest report from DHL / New York University on globalization, which annually provides a deep insight into data on the global flow of trade, capital, information and people. It’s always a good finger on the wind when it comes to global connectivity, and it will put a lot of FT folks at ease.
First, while connectivity decreased a bit in 2020, the authors say it will increase by the end of 2021. This is in part because the US and China still need each other – trade between the two nations actually increased during the pandemic (although it must be said that it saw a sharp decline in 2019). Overall trade in goods is already at pre-pandemic levels, and while cross-border portfolio flows declined sharply in 2020, FDI increased in 2021.
One thing that surprised me was that while long distance trade in goods had increased (again, in part because China was providing so much of what the world needed amid Covid), the flow of digital information at a slower and post-growth rate longer-term trend has returned sharply at the onset of the pandemic.
This is counter-intuitive. It was assumed that the trade in goods would be much more regionalized. This is due to issues with monopoly power, supply chain issues, emissions costs, and geopolitics. There is also a desire to link production and consumption in new industrial systems based on resilience rather than efficiency. (See my article here on why production is still important to most superpowers.) Dan Breznitz ‘book Innovation in real places also does a good job of saying why this is so important.
But everyone thought that the flow of information across borders would continue to grow exponentially, as it has in recent years. Read my colleague Gillian Tett’s column last year in which she wrote about why reports of the death of globalization have been grossly exaggerated.
The crackdown on both capital and data between the US and China may create the start of a splinter web. The global regulation of the technology giants in so many regions, countries and states could also have an impact. Cross-border data flow is becoming increasingly difficult as different regulatory systems evolve.
It’s also worth noting that some of the regionalization of trade, which is particularly happening in areas like semiconductor foundry manufacturing, could be a decade-long process. Building, let alone better dismantling, takes time.
I suspect that the survey could show a bit more regionalization in the next year, especially if we continue to diverge between emerging and rich countries in the post-Covid economy, different regimes in technology and trade worldwide, more travel restrictions and an ongoing adjustment of the supply chain see.
Ed, what’s your bet? And I’m curious to see if you have your own soft metrics or personal anecdotes that you would call upon to illustrate your point of view on the state of globalization today?
This week’s Gillian’s article on how congressional sausage-making can end in wrong legislation for the right reasons is a cautionary story for Washington and Wall Street.
Katherine Eban writes a worrying post in Vanity Fair about the failed efforts of the Biden government to distribute donated vaccines around the world so we don’t see any more Covid variants. Evan’s current book on the problems in the booming generic business is also worth reading, Bottle of lies, which did not get enough attention.
I picked up my very first edition of the Hipster New Yorker, n + 1, and really enjoyed this piece, which documents an early, instantaneous experience with the pandemic.
Edward Luce answers
Rana, I’m all about soft metrics, especially when I feel like the tough ones are too hard to contest. Our colleague Alan Beattie and FT employee Megan Greene both wrote recently about resuming normal globalization. What you write about the slowdown in the flow of information across borders amazes me both for the reasons you have outlined, but it also resonates with some recent anecdotal experiences. I have subscribed to the view that Covid has not changed the contours of history, but has accelerated existing trends – digitization is an obvious example. Another of these trends is the emergence of a Cold War between the US and China which, you point out, will increasingly lead to technological ramification. Other countries take note of this.
I was recently in Abu Dhabi and couldn’t get around local internet censorship with my VPN, as it easily did on my last visit two years ago. In India the changes are even more pronounced. I suspect that in a few years’ time it will be normal for large parts of the world to be cut off from the global Internet, or at least large parts of it. VPNs won’t work. Clouds of data are nationalized. And information is increasingly being used as a weapon.
Covid has undoubtedly improved our ability to work remotely. But I think it also gave governments a pretext to enforce controls much faster and tighter than usual. We have thus accelerated the digitization of our increasingly privatized life, but restricted the flow of information and reduced openness on a global scale. I don’t like any of these trends. If this week’s virtual summit for democracy can make a difference, I hope it can make a solid promise in favor of open digital standards and the global internet. I don’t have much hope that such a statement would have teeth. But the promise in itself could plant the seeds of something more useful.
And now a word from our Swampians. . .
As answer to ‘America’s long goodbye to Roe vs Wade‘:
“Rana, I can understand each of your points, but they are all so thoughtful and reserved. What about your feelings Your horror? Your anger? What if you didn’t live in New York and your daughter didn’t have a British passport and a family with sufficient funds to take her away? How would you feel then? ” – Elizabeth New Town, Cambridge, Massachusetts
“Lawyers on all sides have viewed Roe vs Wade as a ‘bad’ law – Ruth Bader Ginsburg is a famous example – and that the real solution lies with the voters and Congress. . . By refusing to move to adequate federal regulation, pro-choicer purists may have done as much damage as bigoted pro-lifers. – Simon Noble, Madrid, Spain
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