The globalization dividend will endure
As economic integration continues, we must strive to find new forms of international cooperation
Last year, President Xi Jinping impressed listeners in Davos with his outspoken support for free trade, international cooperation and open markets. Since then, he has backed this with action by pledging that China will keep its doors open to international investors. If anything, his vision is even more pertinent today. Davos 2018’s sobering theme — “Creating a shared future in a fractured world” — is, I believe, bang on target. The past 12 months have demonstrated a sharper perception of inequality, both between regions and between different strata of society within regions. After all, US President Donald Trump’s criticism of the US political elite struck a chord that catapulted him straight into the White House.
The power of major global corporations, particularly those benefiting from the network effect, is starting to cause unease among governments. Consumers are increasingly aware of how companies are behaving and are prepared to vote with their wallets when standards — of sourcing, production or governance — fall below expectations.
So globalization is under fire in some parts of the developed world. This is a worry for us (Eurasian Resources Group), since we are a leading diversified natural resources business operating in 14 countries on four continents. Thankfully, the rhetoric about the retreat of globalization isn’t matched by reality. Global economic markets are still drawing closer. And long may this continue. In the 35 years from 1980 to 2015 the number of people living in extreme poverty fell four times faster than it had in the previous 150 years. While elements of the developed world question globalization, it is noticeable that most of the developing world does what it can to embrace the trend, knowing it is the surest route out of poverty.
Plenty can be done to encourage and facilitate the next phase of globalization. Take the initiatives China has pioneered, such as the Belt and Road Initiative and the Asian Infrastructure Investment Bank. These could very well come to be seen as modern counterparts of the famous US economic initiatives post1945, such as the Marshall Plan and the International Monetary Fund.
The common theme between Davos today and a year ago is the drive for a shared future. President Xi, speaking at the UN a year ago, proposed the concept of “a community of shared future for mankind”. Given what has happened in the past year, this was highly astute. The challenge is to turn the theory into practice.
As economic integration continues, we must find new forms of international cooperation. It is hard to build institutions that work across borders, but it is worth it. Once in place, they tend to endure and prove their value over time. Businesses have no choice but to become responsible global citizens. Woe betide the global brand that neglects its supply chain and is discovered to be exploiting workers in dangerous, sweatshop conditions thousands of miles from its principal markets. They will quickly learn the cost of betraying consumer trust.
We need more cross-industry cooperation to create a world where everyone enjoys the fruits of globalization. Davos can help encourage that. It is also pleasing to see how the Davos planners have this year seen fit to include sessions covering thorny topics such as immigration, privilege, harassment and race.
The big subjects this year are still matters of world trade. Looking ahead, it is plain to me that here China has a tangible advantage over much of the developed world. The United States is increasingly inward-looking. Europe still grapples with disagreements over the speed of integration of the European project, while one of its biggest members, the United Kingdom, leaves completely.
China’s pace of delivery is impressive. Once a course of action is decided upon, things happen fast. In the past 12 months, huge strides have been made in poverty reduction and environmental protection. The task of ensuring that growth benefits more people runs through the policy initiatives.
We are also seeing global leadership from China. The efforts made to communicate its growth plans and how these will benefit the world economy are a good example. The Belt and Road Initiative furnishes China with the opportunity to become a leader in transforming the economies of Central Asia, Africa and Latin America. Sure, no major development in history like this comes without difficulties. Economic and political conditions vary greatly across different countries and jurisdictions, and these will no doubt bring legal and financial challenges in their wake. However, a widespread determination to succeed, careful planning and regular on-the-ground consultation should mitigate these risks.