Citing new McKinsey Global Institute research on global flows, Bob Sternfels urged leaders to reimagine, rather than retreat from, globalization in a ‘firestarter’ speech at the 2022 Bloomberg New Economy Forum in Singapore.
“After four decades of increasing connectedness, we are facing the greatest challenge to globalization that our generation of leaders has ever seen,” Bob said. “Instead of bowing to decoupling, can we instead reimagine globalization to try to drive sustainable and inclusive growth?”
You can read edited highlights from Bob’s speech below, or head to Bloomberg to watch the session, Resilience in an interdependent world, in its entirety.
On our interconnected worldThe world is more connected than ever before. Exports, as a percentage of GDP, have doubled since 1990. The growth in trade on intangibles, data and IP, has grown twice as fast as goods. Cross-border talent flows are at an all-time high, so we are actually more connected than ever before. Since 1992, the proportion of the global population enrolled in secondary education is up 50 percent. The proportion living above the poverty line is up over 70 percent. Most interestingly, the contribution that low- and middle-income economies make to global growth has grown from about 16 percent to now a majority of global GDP growth at 58 percent.
On pressures to decouple
The pandemic disrupted supply chains and people movements, and the war in Ukraine has upset commodity flows. This has been incredibly costly. Energy prices at the highest the since 1973, and supply-chain pressure is at the highest level that we’ve ever seen. Critically, global food prices have soared, increasing the pressure on the most vulnerable. Recent statistics show that 345 million people are suffering from a food crisis due to the war in Ukraine. In response to all this, we hear words that focus on breaking apart: independence, on-shoring, friend-shoring, localization. These words are dominating debates today.
On the need for continued collaboration
No region, no country is an island today. The McKinsey Global Institute has done some modeling on this, and they estimate that up to 10 to 40 percent of global GDP is dependent on staying connected. Additionally, as we think about the world’s most complicated problems—climate, health, security, innovation—we don’t have a hope of solving these issues independently. These are problems that require collaboration not separation. And finally, solving the world’s supply/demand mismatch with talent can’t be solved individually. If we look out to 2050 and take Europe and China alone, they will lose 120 million workers from the workforce by 2050. The only places that can hope to make that up are India and Africa. That requires collaboration.
On the way forward
How do we do it? I’m humble enough to know that I certainly don’t have all the answers. I’m not sure that anybody does. I will offer five ideas that might be part of the answer. The first is, I wonder if we could start talking about diversification of trade rather than reduction or isolation of trade. To do this, we need to collaborate on standards and we need mechanisms to enforce them, not only on trade but on things like IP. We need to invest in talent; here’s where I think the private sector can play a huge role to meet the needs for that 30 year mismatch that I spoke about earlier. Increasing capital flows will be absolutely critical to make sure that emerging economies participate equally in the growth that this can drive. Finally, access—access for all. Think about small- and medium-sized enterprise and the barriers they face in cross-border trade; and also access for women, minorities, and other vulnerable populations. If we think about immigration right, everybody can come along.
On what could be gained
What could this decade look like if we reimagine globalization versus defaulting to decoupling? This is not an easy path but it is an inspiring one. Our models show that there’s a potential to grow GDP this decade 30 to 50 percent. There’s a potential, if we focus on training, to actually reskill and upskill 100 million workers to solve this talent problem. We can add 45 billion years of life to those alive today on the planet by more access to health care through technologies that exist today. And with current climate technologies, we can take out 74 gigatons of carbon this decade.
I think we face a choice as we go forward in these turbulent times. I think we can retreat, and start using words like localization, decoupling. But the consequences could be quite severe. The alternative is that we can be courageous and try to reimagine globalization, recognizing its faults but also recognizing its strengths. I’d argue this is the time for courage, and we should not be thinking about retreat. We should be thinking about reimagining.