Until recently, globalisation was the only show in town. Whether wanted or not, higher levels of economic and social ties were seen as inevitable – a force that could not be stopped. As United Nations' Secretary-General Kofi Annan put it in 1999: "Globalisation is an irreversible process, not an option."
Read more: The Chinese startup trying to democratise manufacturing
Then, against expectations, polls and, in many cases, hope, the script changed. January 2017 was when the changes kicked in. As Trump put it: "We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs." Trump dominated headlines, but the reversal was underway. We're entering a phase of deglobalisation.
The canary in the coal mine for deglobalisation is the scale of trade to global economic activity. Between 1970 and the financial crisis of 2008, the ratio of global trade in goods to global GDP rose from around 20 per cent to just under 52 per cent. Since the crash, however, trade hasn't been as dynamic and the ratio of trade to GDP has fallen to 45 per cent. Optimists call this a glitch, but increasingly it looks like a feature.
Finance has been feeling the pressures of deglobalisation. Foreign direct investment is well below its pre-crisis peak and is projected to decline in the coming year. Multinational companies' cross-border investments fell by around 15 per cent in 2016. The Bank for International Settlements' recent reporting indicates a big fall in currency trading. Money isn't moving around the world as quickly as it used to.
Even manufacturing is becoming more local. Foxconn, Apple's key supplier, is reported to be considering investing in manufacturing in the US. General Electric is moving production closer to the customer. As automation reduces the labour needed for production and new technologies allow for smaller factories, regionalised production is more possible – a boon for customers demanding personalisation and near-immediate delivery. The new Adidas Speedfactory in Ansbach, Germany, is an example – it takes advantage of automation and 3D printing, with a heavy dose of the internet of things, to make customised trainers on demand in an expensive location.
This changing organisation feeds directly back into trade and finance flows. If companies shorten supply chains and have fewer component parts, there will be a knock-on effect on trade volumes. As the overlap between a company's market and its footprint increases, there is the potential to pool capital in large markets. Non-repatriation of profits creates a transfer mechanism from physical deglobalisation to financial deglobalisation.
Read more: RIP the VCR: the last manufacturer in Japan is finally stopping production
What makes this hard to see is that different elements are moving in different directions. Even without the refugee crisis, it is obvious that free movement of people is a distant ideal. Financial connectivity is too loose in some ways (think Panama Papers) and too tight in others (more than $2 trillion (£1.6tn) in profits held offshore). However, the amount of cross-border bandwidth that is used has increased by a factor of 45 since 2005. The idea of ever-increasing physical, digital, economic and social integration - like some form of hyper-globalisation - is wrong.
The danger is that we have high uncertainty as we lack a stable set of global political relationships. Our politics has taken a sharp and relatively sudden turn towards nationalism and protectionism.
The challenge is to understand and adapt to physical deglobalisation. But as increasingly nationalist politicians kick dirt into the air, and society in general has a weak understanding of the reality of manufacturing, it is less likely that we will be able to manage this ongoing transition well. If globalisation has in the round increased growth, but failed for many people individually, an inability to manage deglobalisation runs the risk of making inequalities worse, not better. The countries and companies that can see through the confusion and manage a local structure effectively will be the ones that will come out best once the dust settles. How the economic and political map of the world will be redrawn is another question altogether.
From Global To Local: The Making of Things and the End of Globalisation by Finbarr Livesey is published on May 18
This article was originally published by WIRED UK
