NIRANJAN GIDWANI CERTIFIED BOARD DIRECTOR (MCA - INDIA) | BOARD MEMBER | ESG DIRECTOR | DIGITAL DIRECTOR | FELLOW - BOARD STEWARDSHIP | MEMBER UAE SUPERBRANDS COUNCIL

 

With the invention and advancement of the world-wide-web since late 90s, and with better and advanced connectivity options between continents and countries - by air, by road and through water ways, the world turned into a global village. This paved the way for new global opportunities for companies and Industries to operate and function globally and to do business on large international scale. This also created the foundation upon which the world of phenomenal ecommerce could survive and grow.

For over two decades, business leaders of the world made us believe that the world has become “flat.” And a large majority of us have believed it to be so. Global companies, unconstrained by physical borders, have created a significant influence on the world economy. Globalization has internationalized industrialization and urbanization, has liberalized trade and investment. Globalization has significantly integrated peoples and nations – politically, economically and culturally- into a larger world community.

For decades, globalization’s benefits have appeared to be obvious. The interconnectedness of production, production in countries and regions which are most cost-efficient for relevant categories, consumption, and investment flows have provided a large portion of the world with a wider range of choices, and at more attractive prices. Companies have been able to expand their markets, and the efficiency of supply chains has improved and become significantly seamless. 

Global capital markets have expanded access to credit and lowered costs for borrowers. Until now, the pulse of the world has been that governments have engaged in what seemed to be a series of win-win partnerships. And technology – including the accelerated shift towards remote work – has made national borders seem largely irrelevant.

So, can one surmise that everything has been right about globalization? Most certainly not. There is certainly room for improvement. Even after three plus decades, it remains a work-in-progress. One major fallout of globalization has been the overproduction of goods in certain categories. This has led to a flood of such goods in global markets, lowering prices and hurting respective industries in other countries. This started the trend of putting in place countervailing tariffs and taxes to protect industries in various countries.

And yet, the recent cries for a massive pullback from globalization in the face of new and seemingly aggressive protectionist pressures seems to be a major overreaction, in the opposite direction.

Who, in their wildest of dreams, would have imagined that traditional pillars of open markets would start wobbling and squabbling, and nations like China would position themselves as globalization’s staunchest defenders.

There is no denying the fact that in the process of globalization, several communities and countries were left behind, contributing to a widespread sense of marginalization, anger and alienation.  There is also no denying the fact that many environmentally conscious nations have increasingly pushed back against human-rights violators and countries that harm the environment. The weaponization of the international payments system is more frequently visible. 

In the media space and the public policy space, there could be a tendency among the political leaders to underestimate the potential gains from additional globalization and to overestimate its harmful consequences for society.

If there is truly a significant reversal of decades of economic integration, the chances are that it may leave the global economy with higher inflation and reduced growth potential. In this new era, all stakeholders will need to incorporate more sophisticated geopolitical and sociopolitical analyses into their near-to-medium term strategies.

Could the world then be entering an era of a different version of Globalization? Globalization has yet to experience a serious reversal. And even if it did, it would be a mistake to talk about the end of globalization: The “rewind” button on a recorder cannot and should not be confused with the “off” button.

The current trend will likely continue over the next few years, as companies increasingly diversify their supply chains, and as governments resort to near-shoring and friend-shoring to maintain the production of critical inputs and sensitive exports.

And what then happens to ESG? Since ESG is all about our planet, is this too a form of globalization likely to get a setback?

The world is likely to see some hard-fought gains getting reversed. But in a lot of cases, allocators who have become wise and seen the promise of value-based investing will continue with the good work.  Concerns about sustainability are now part of daily life. From wildfires to extreme weather, the challenges are clear, urgent, and undeniable. One can see a lot of people are beginning to make lifestyle changes because of anxiety about climate change. If we as a race are changing how we live, why wouldn't we reconsider how we invest…….it’s just that our work is likely to get harder.

As you read this article, the world surely stands on the precipice of significant change. The strategic recalibrations that are required could redefine alliances and partnerships in a major way, altering the global geopolitical landscape significantly. The ripple effects will stretch far and wide, transcending borders and affecting lives in many ways. Only time will reveal the full extent of these transformations, but one thing is a certainty: the human race has always exhibited infinite adaptability. Over time, the global community will adapt, innovate, and collaborate to navigate this new and challenging era of international relations.

Meanwhile, in an always switched-on, online world, the more the confusion and chaos prevails, the more our cyber risks and the scale and frequency of attacks will rise.

Even though the immediate future may look chaotic, confusing and uncertain, the region where I come from - India and the Gulf - will find ways to significantly gain in the long-term.