Globalisation in reverse

Globalisation in reverseWe are still living in the aftermath of the crises. Before the financial crisis the interconnections between countries were growing. Since 2008 both international trade and capital flows have been reduced.

One reason for the retreat is the financial crises. Another reason is increased costs of shipping. It currently costs about USD 5000 to ship a container from Shanghai to United Kingdom. This is more than double the amount charged when oil traded at only 20 USD a barrel. The price of oil alone has had a severe impact on shipping costs and in some cases caused companies to go into reverse globalisation and return to local production. A third reason is the high growth in the emerging economies like China is raising costs for both energy and labour, and making offshore production there less interesting.

Financial Times and McKinsey have studied global capital flows and compiled the data in the graph below, which shows the development over the past twelve years.

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In the video below from Financial Times, Ralph Atkins, capital markets editor, explains to John Authers the results of the FT study, which shows that capital retreated behind national borders during the crisis.

Globalisation in reverse

2 comments

  1. Hi Jorgen,

    Something to share … after the Oct 2008 crisis, when the industry was reeling, I wrote a communique’ to show a different perspective; in which I had indicated that the down cycle might hit us around now … in India that has happened in some businesses, while some have grown at 25-30% … although macro causes will effect a pull or push, specifics may differ region wise … in case it is of interest, here is the link .. http://www.ajeets.org/archives/LeanManufacturing/Think%20growth,%20not%20recession.pdf

    Rgds, Sanjeev

  2. Dear Sanjeev,

    Thank you for the link, I will take a look. It is very interesting to hear about your experience in India. Technology and global social integration are strong forces that drives globalisation and hyper competition and I think it is discouraging that it is slowing down. However I guess many emerging economies, for example China, have now reached a level of development where domestic demand can compensate for lower exports.

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