A new research has signalled a shift away from globalisation to a multi-polar world.

 

The Credit Suisse Research Institute’s ‘The End of Globalization or a More Multipolar World’ report, presents three scenarios - ‘globalisation thrives’, ‘a multi-polar world emerges at economic, political and social levels,’ and ‘globalisation comes to an end.’ 

 

Michael O‘Sullivan, chief investment officer for the UK and EEMEA, Private Banking and Wealth Management, Credit Suisse: “Globalisation has been the most powerful economic force of the past 20 years, resulting in the rise of global cities, the successes of small states and growing wealth in emerging economies. 

 

“But, its continuation is not a given and the direction that it is going is therefore one of the most important macro-economic issues of the next 10 years.”

 

The report aims at measuring and quantify globalization and its many facets, also to quantify ‘multipolarity.’

 

Credit Suisse has taken many of the indicators and data used throughout the report and constructed a ‘Globalization Clock,’ which plots the development of globalisation and multi-polarity, scaled against their long-term averages. 

 

The figures showed that in the early 1990s globalisation was dominated by the US and European countries, followed by a phase of lower globalisation and low multi-polarity during the period of 2000-2005, driven by the growth of information technology and the consolidation of military power by major advanced countries during the Iraq and Afghanistan wars. 

 

Since then, the world has moved into the first quadrant of the clock – a sweet spot – to become more globalised and more multi-polar at the same time, accentuated by the economic weakness of developed economies and stronger emerging market economies.

 

The first scenario is that globalisation continues. This means the dollar will continue its role as first among equals in the forex world, generally Western multinationals dominate the global business landscape and the fabric of international law and institutions are still Western in nature. 

 

In economics, macroeconomic volatility is low, trade grows with few interruptions from protectionism and the internet economy grows, across borders. Socio-politically, the significant development is that human development improves, characterised by more ‘open societies.’

 

This second scenario is based on the rise of Asia and a stabilisation of the euro-zone so that the world economy rests, broadly speaking, on three pillars – the Americas, Europe and Asia (led by China). 

 

In detail, the report expects to see the development of new world institutions that outgrow the likes of the World Bank, the rise of ‘managed democracy’ and a more regionalised version of the rule of law, migration becomes more regional and rural to urban led rather than cross border, regional financial centers rise, and banking and finance develop in new ways.

 

At the corporate level, the significant change would be the rise of regional corporate champions, who in many cases would supplant global multinationals. 

 

The report expects to see uneven improvements in human development leading to more stable, wealthier local economies on the back of a continuation of the EM consumer trend. In Europe, the EU halts its outward expansion and thrives as the restructuring of banks and companies makes for a leaner economy.

 

The third scenario is a more negative, though lower probability one that recalls the collapse of globalisation in 1913 and the subsequent onset of First World War. 

 

Though the world has been stressed by the global financial crisis and terrorist attacks in recent years, these developments have arguably led to more rather than less cooperation between nations. Still, there are risks to globalization and in this report we outline them in the form of a risk scorecard.

 

The trends and developments the report looks for include slowing economic growth and trade with the added possibility of a macro shock (from indebtedness, inequality, immigration), a rise in protectionism, a geo-political/military clash between the ‘great powers,’ currency wars, a climate events, the rise of broad based ‘anti-globalisation’ political movements and a backlash against global corporations, or a reversal in transitions to democracy.

 

Where globalisation is headed

 

The location of world GDP is shifting eastwards. For example, in the future, the top 50 cities will be comprised by Delhi, Shanghai, Mumbai and Beijing.

 

Credit Suisse Globalisation Index

 

The CS Globalization Index is based on economic, social and technological factors. The index shows that European countries dominate the list, while African nations tend to be the least globalized. Some small countries that act as trade or financial entrepots.

 

Trends within globalisation

 

The world is most multipolar in terms of trade patterns and economic activity. Trade is becoming more regional, though there are signs of the erection of barriers to trade.



Financially, the world is highly globalised but less multipolar, with the US remaining at the center of the financial world in terms of the sway that US markets have over others internationally and the central role of the dollar compared to the euro and renminbi.



The analysis of corporate investment and revenue growth showed that globalisation remains intact in terms of consumption and marketing patterns, there appears to have been a retrenchment in cross- border investment by corporates. 

 

Together with the rise of EM companies in terms of both sales and investment, we read these results as pointing towards a more multipolar world where companies continue to sell across borders but are more cautious in investing across them.



In terms of governance, the impetus provided to the spread of democracy by globalisation looks to have reached a limit, with less democratic forms of government being perceived to produce economic success and new regional institutions replacing the activities of world ones. 

 

New institutions – such as sovereign wealth funds and fiscal councils – are amongst the more prominent.

 

The ‘end of globalisation scorecard’ comprises a range of variables – a trend slowing in economic growth and trade with the added possibility of a macro shock (from indebtedness, inequality, immigration), a rise in trade protectionism, wealth inequality or a reversal in transitions to democracy.

 

It was aimed at gauging the current levels of stress faced by key countries/regions pertaining to these variables. - TradeArabia News Service