Global integration is here to stay, albeit with nuance.
In light of the pandemic, Russia’s invasion of Ukraine, and years of rising geopolitical tensions, some experts speculate that the world is becoming less globalized. However, a recent McKinsey Global Institute research paper points towards an interdependent world. Rather than deglobalizing, the world is integrating in a different way.
During a McKinsey Live webinar, senior partners Olivia White and Sven Smit outlined five principal insights from the research.
- Flows linked to knowledge and know-how are driving global integration. In the 30 years before the global financial crisis, the primary drivers of global interconnectedness were manufactured goods, resources, and capital. Now intangibles, services, and talents propel the growth of global flows. Flows of data, services, intellectual property, and international students are out-pacing traditional flows like manufactured goods and resources.
- No region is close to being self-sufficient. All regions are mutually interdependent, joined by corridors of flows that crisscross the world. Every region imports at least 25 percent of at least one important resource or manufactured good for consumption. No region has the domestic workforce to fulfill its own demand.
- Products that originate in only a few places exist in every region and sector. For example, 60 percent of electronics and textiles products originate from China, the Asia–Pacific contributes disproportionately to exports of concentrated minerals, and most medical and pharmaceutical products come from Europe. Although product and resource concentrations can enable efficiency gains, the interruption of concentrated trade flows can be particularly disruptive.
- New forces may reshape global value chains in the coming years. The next evolution of global value chains is expected to follow one of four pathways: reconfiguration influenced by new policy incentives, diversification and creation of new hubs, a new wave of unbundling, and steady evolution.
- Multinational corporations can be instrumental in reimagining global connections. Global flows are a source of potential growth as well as vulnerability. Multinationals, which account for about two-thirds of global trade and 82 percent of knowledge-intensive global trade, play a pivotal role in the management of global flows to deliver both growth and resilience in an interconnected world.
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For more on this topic, see “Global flows: The ties that bind in an interconnected world” at McKinsey.com.
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