After Brexit and Trump: Is the Age of Globalization Coming to an End?
After Brexit and Trump
Are globalization’s days numbered on the back end of Trump and Brexit victories?
Brexit: The Problem
What we are seeing is the need for a more nuanced globalization. The disaffection of the underserved and deferred in the processes of globalization and automation can no longer be ignored or treated with political indifference and functional undeeservice.
After Brexit and Trump: The Solution
There are several indications of solutions to the inequality and disaffection caused by misdirected globalization.
After Brexit: TIVA
Tesla’s purchase of Grohmann Engineering in Germany is a case in point. This acquisition will help Tesla to boost production through automation as well as assist Tesla in scaling in the European market. This solution is indicative of the fact that trade in value-added products (TIVA) is much more sustainable than the Trump simplistic view of how countries compete for manufacturing jobs. Automation must be part of the calculation. So must the determination of whether a country has enough skilled workers to program the machines that increasingly automate production.
I have pointed out in numerous occasions that there is a much more transformative form of globalization afoot. It is e-commerce. The previous forms of globalization involved the national scaling of large corporations in the direction of monopoly and the global scaling of these same corporations towards oligopoly, which represents an almost unprecedented concentration of wealth. By contrast, the marshaling of entrepreneurs and SMEs into e-commerce platforms capable of encouraging reciprocal trade of what Ricardo named the comparative advantages of nations, increasingly prevails.
After Brexit: Lessons
Many assumptions are made about globalization in a more democratic manner which is what e-commerce represents. Alibaba has assumed that it is ok to sell counterfeit goods on Taobao. Amazon has assumed that it is as simple to do e-commerce in China and India as it is in the US or Canada. It is not. Uber has had its clock cleaned by Didi Chuxing in China and by Grab (taxi) in Southeast Asia. Hard lessons about logistics, hazardous materials transport, export regulations are being learned by e-commerce platform providers as they go cross-border.
The Limits of Capitalism and Globalization
Issues of cybersecurity, the privacy of national citizens, the egalitarian treatment of entrepreneurs and the diffusion of wealth attend globalization.
Cross-border trade must be financed and this requires the determination of how credit-worthy a buyer is and what the political and commercial risks are of dealing with both buyer and buyer’s country. This process involves the determination of credibility based on very private information. Not all countries are happy about platform providers in one country sharing across border this private information. Banks handled such information with discretion and subject to increasing regulation. Will e-commerce platforms be subject to the same scrutiny?
Trade finance, my field for 40 years, is an incredibly elitist discipline. Can it be democratized? These questions attend forms of capitalism that are more egalitarian and less elitist. These, like e-commerce will endure.