Is Globalization Waning? One Expert Thinks So—and The U.S. May Benefit

By H.A. Silliman Sacramento CITD Communications Consultant

While the COVID-19 pandemic has hit the pause button for the world’s economies, the question of what happens next—and what should happen next—is being debated by economic development experts.

A recent webinar discussion organized by the foreign-direct investment firm Conway set out a few scenarios of what’s happening—and what businesses and organizations should consider doing going forward—and how the U.S. may benefit.

The webinar host, Conway, assists local, state and national economic development agencies worldwide, to grow their economies, attract corporate investment, compete for jobs—and to recover from crisis. For the webinar, it reported an online audience of listeners from 45 different communities from U.S. Canada and Mexico

The guest speaker was Peter Zeihan, a geopolitical strategist, specializing in global energy, demographics and security. He is the author of The Accidental Superpower, The Absent Superpower and the just-released Disunited Nations.

Zeihan’s view is that the globalization of trade—is ending, but there is “a lot of hope here” and “positive changes to come,” particularly for the United States as more manufacturing gets returned to the Americas.

First, as to the pandemic, he called the virus three times as communicable as the normal flu and spreads the fastest in tight confines. For now, the only way to overcome is by lockdown.

As the virus peaks in the U.S., lockdowns will be released but then regions will return to lockdowns as COVID-19 resurges here and there. He estimates the nation will be able to “get back to business” by late summer—with the regional economies disrupted by local flare-ups and resulting lockdowns.

Europe and the rest of the world where there’s mass transit causing the virus to spread more rapidly may have a harder time controlling resurgences, he added. “We can shut down Chicago, it’s hard to shutdown Paris.”

Most countries, Zeihan suggested, can’t maintain their supply systems—which are very complex and easily disrupted. “Every part of the supply system is up for grabs.”

“Medical supplies are not likely to be outsourced again,” he noted.

The other speakers in the webinar were Conway’s international trade development strategists Executive Vice President Ron Starner and President Adam Jones-Kelley. Observations by all three have been compiled and edited here into impacts and opportunities:

Impacts

  • Manufacturing has been returning to the Americas—to the U.S. and Mexico and will continue. It took 30 years to build the global supply chain system, and that is going to break apart in the next 2 years. President Trump’s trade policy was already having an effect here.
  • The U.S. and Mexico will have a much easier time exiting the pandemic crisis than other countries.
  • The U.S. is retooling as machine shops are busier than ever, are absorbing capital and responding quickly—a “flash industrialization” will occur.
  • Some corporate executives are “desperate” to get back to work to full strength and taking “extreme” measures to keep their businesses open and avoid layoffs.
  • The fear in the U.S. of having access to labor is gone because of massive unemployment.  “The day of labor shortage is over.”
  • Smaller companies will recover more quickly as they are more nimble.
  • Canada, which has a better health care system and a healthier population than the U.S., will recover more quickly from the pandemic, but its regulatory structure “crushes out” small producers in every sector, making it harder to be in business if the company is not large. The aerospace and automotive suppliers will be “going down for weeks at a time.”
  • Travel will not return to its 2019 levels until 2022—or possibly 2024. A recent Gallup poll found consumers will be less likely to travel in the next 3 to 6 months.
  • The trillion-dollar U.S. stimulus funding will not likely cause inflation—it’s a “life preserver.” Inflation will be only slight going forward—in Europe and Asia, deflation is occurring.

Opportunities

  • “The world will get through this”—having bounced back after 9/11 and the 2008 recession by relying on ingenuity.
  • Local economic development efforts will be called upon for company-specific retraining of the workforce.
  • Capital will never be cheaper than right now, nor will there be this level of debt forgiveness, and capital is flooding into the U.S. currently—the dollar is maintaining its strength. At every level, now is time to borrow.
  • Brands are built over years and during a recession they get the chance to be considered by consumers who would otherwise not take notice or see relevance. Certain organizations can accelerate during a recession, seeing the downturn as an opportunity.
  • Businesses and organizations should use the present to increase their external marketing activity. The steps taken right now will basically determine when a business will recover and marketing will have a large part in that.  Ford and Kia, for instance, have launched efforts reassure customers—pick up cars for servicing, defer loans; this demonstrates leadership.