The Broad View
What’s the future of globalism?
Talha Khan
Political Economist

Questions for an uncertain time: Globalism

The past six months have provided a master class in uncertainty. COVID-19 touched nearly every aspect of daily life for hundreds of millions of people. Stocks fell drastically as the outbreak erupted — the fastest retreat to a bear market in modern history. They then recovered much of that decline in less than two months.

We asked Capital Group economists and analysts their opinions on COVID-19’s effects, both in the short and long terms. They covered topics as broad as the future of global trade networks and as narrow as the prospects for telemedicine.

Below, you’ll find economist Talha Khan’s ideas about international interconnectedness.

You can also see political analyst Matt Miller’s ideas about the presidential electioneconomist Jared Franz’s opinions and insights on entrepreneurship and economist Darrell Spence’s take on the labor market.

What’s the future of globalism?

By Talha Khan

For decades, a simple principle has guided global economic policy: Wealth generation doesn’t have to be a zero-sum game.

Under the mercantile models of old, wealth was a one-way street. If you were paying your neighbors, they became stronger and you became weaker. Globalism, by contrast, posited mutual benefits for trading partners. By exporting manufacturing, U.S. consumers would enjoy lower-cost goods. In turn, U.S. capital buoyed workers in emerging markets such as China and India, helping to create a stable middle class that would gravitate to American iPhones, soybeans and movies.

Globalism remains at the heart of today’s interconnected world, with a mutual interdependence among economies, companies and consumers. But the model of recent decades is evolving amid a waterfall of economic and political forces.

For example, tight international ties boosted economies and living standards around the world. But there were unintended consequences, including a decline in U.S. manufacturing jobs as emerging countries developed their own industrial bases. Meanwhile, a chorus of nationalist voices has risen up to oppose international ties on principle, choosing to hew toward self-sufficiency. In some ways, the risk is that we could be on a path toward less international cooperation and perhaps less efficient economic systems.

Fraying global unity has been building for years. Russia and China have expanded their borders with little meaningful opposition. Britain chose to leave the European Union despite the prospect of at least short-term economic self-harm. Voters have ushered in isolationist governments in Hungary, Poland and the Philippines. The U.S. has abandoned several international treaties.

In the middle of this, COVID-19 has stepped onto the world stage. In some ways, the coronavirus has been an argument for globalism: An international pandemic is best fought with a united, international response. But the disease has also laid bare some of the weaknesses of an interwoven international economy. China’s aggressive shutdown paralyzed international supply chains, leading to product shortages and production headaches around the world.

What’s the practical effect of these changing dynamics? For consumers, it could be more expensive goods as countries diversify their supply chains. For businesses, it means having to acclimate to changes in individual markets.

However, this also creates opportunities for nimble companies that can adapt to these shifting sands. Smartly managed businesses with global vision have the chance to distance themselves from less agile rivals, expanding market share while strengthening their overall prospects.

For investors, a key to success will be a research-driven approach capable of spotlighting companies that are best poised to excel in the new era.

You can also see political analyst Matt Miller’s ideas about the presidential electioneconomist Jared Franz’s opinions and insights on entrepreneurship and economist Darrell Spence’s take on the labor market.

Talha Khan covers the euro zone and broader political issues at a political economist at Capital Group. He holds a master's in international political economy from the London School of Economics and a bachelor's in economics and political science from Macalester College.

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