A Solution to Declining Globalisation and Rising Protectionism
by Dr Pieter Steyn
Dr Brane Semolic
Globalisation has dominated economics and trade for decades. The Merriam-Webster dictionary defines globalisation as: “the development of an increasingly integrated global economy marked especially by free trade, free flow of capital, and the tapping of cheaper foreign labour markets”. Many critics, including delegates attending the 2017 World Economic Forum event in Davos, Switzerland, are of opinion that globalisation has flat-lined and is now going into reverse (Levy, 2016). This trend started with the financial crisis in 2008, and, now with the prospect of Brexit and President Trump having assumed office in the United States, globalisation is distinctly in decline. Moreover, critics believe that the world has reached a turning point in the nature of capitalism, a view also expressed by Steyn and Semolic (2016). At the same time, protectionism is rising in popularity.
In a note to clients, Jason Rotenberg and Jeff Amato (from Bridgewater, one of the world’s largest hedge funds) averred that the political backdrop in the world looks negative for globalisation and everything associated with it. Many critics believe that globalisation, competitiveness and internationalism are firmly in retreat, and that the protectionism now rearing its head does not augur well for the future. With the financial crisis of 2008 seen as the trigger of this phenomenon, many critics, including George Saravelos, chief foreign exchange strategist at Deutsche Bank, view the retreat as a new global mega-trend. Saravelos is of the opinion that globalisation has reached its peak and that the world is about to witness an unwinding of this trend, even labelling it as the slow death of globalisation.
Saravelos identifies three crucial aspects involved in the demise of globalisation. Firstly, he believes that world exports as a percentage of GDP peaked in 2014, having been in steady decline since then. Gross financial flows into the United States peaked in 2008 with the financial crisis, and are now moving sideways. Currently the number of new trade deals is at its lowest in more than two decades. Secondly, anti-globalisation sentiments are growing in the political domain. Brexit is set to be implemented in the foreseeable future, and the recent United States election was heavily focused on concerns related to globalisation and immigration, with other countries to follow. Thirdly, changes in regulation worldwide suggest that globalisation is waning. He mentions that China is slowing down on its capital account liberalisation programme, and changes in banking regulation have forced greater national reporting and capital standards, while raising the cost of cross-border business. The position of Deutsche Bank is that the only exception in the reversal of globalisation is the global dissemination of ideas, powered by political freedom and assisted by persistent innovations in technology, such as social networks.
Saravelos’ Deutsche Bank colleagues John Reid, Nick Burns and Sukanto Chanda, are of opinion that the current economic age is reaching its cul-de-sac. They believe that the global economy will change drastically over the decades to come, and that it will be subjected to subdued growth, lower profits, higher inflation, and diminishing global trade. Moreover, they argue that the world has reached a demographic peak and that huge changes will occur in the near future, predicting what they call “a far less exciting economy”. They contend that the deterioration will lead to a situation where it is unlikely that the next couple of decades will see real growth rates returning to the pre-crisis levels. They add, however, that should a sustainable exogenous boost to productivity surface, a more optimistic scenario may result, but they find it hard to see where such a boost will come from.
Like many other critics, George Osborne, former British Chancellor of the Exchequer, believes that the forces of protectionism are increasing, and he is concerned that the pace of technology growth can be detrimental to economic well-being. The former vice-chairman of Merrill Lynch Europe, Lord Adair Turner, is concerned that advances in technology are actually undermining capitalism, killing jobs, driving inequality and preventing the global economy from recovering from the financial crisis of 2008. He believes that the current capitalist system is not delivering as it should, and also not to enough people to maintain its legitimacy. He labels this “tech-driven inequality that contributed to the popular resentment for elites and mainstream politics”, and calls for a solution to “the problems presented by the new tech economy” to restore global trust in capitalism and repair the global economy.
At the recent 2017 World Economic Forum gathering in Davos Switzerland, the same sentiments as above were expressed, accompanied by major disagreement on what the solution should be. All admitted the failure of political and business elites to predict any of the political events that occurred during 2016, and even raised questions regarding their capability to understand and to address the anti-establishment trends and events that emerged. However, all were in agreement that change for the better should occur. This group included two Nobel-laureate economists, Joseph Stiglitz and Angus Deaton, who are very critical of the current European order.
About the Authors
Founder, Director, Principal
Cranefield College of Project and Programme Management
Pretoria & Western Cape, South Africa
Dr Pieter Steyn is Founder and Principal of Cranefield College of Project and Programme Management, a South African Council on Higher Education / Department of Education accredited and registered Private Higher Education Institution. The Institution offers an Advanced Certificate, Advanced Diploma, Postgraduate Diploma, Master’s degree, and PhD in project and programme-based leadership and management. Professor Steyn holds the degrees BSc (Eng), MBA, and PhD in management, and is a registered Professional Engineer.
He was formerly professor in the Department of Management, University of South Africa and Pretoria University Business School. He founded the Production Management Institute of South Africa, and in 1979 pioneered Project Management as a university subject at the post-graduate level at the University of South Africa.
Dr Steyn founded consulting engineering firm Steyn & Van Rensburg (SVR). Projects by SVR include First National Bank Head Office (Bank City), Standard Bank Head Office, Mandela Square Shopping Centre (in Johannesburg) as also, Game City- and The Wheel Shopping Centres (in Durban). He, inter alia, chaired the Commission of Enquiry into the Swaziland Civil Service; and acted as Programme Manager for the Strategic Transformation of the Gauteng Government’s Welfare Department and Corporate Core.
Pieter co-authored the “International Handbook of Production and Operations Management,” (Cassell, London, 1989, ed. Ray Wild) and is the author of many articles and papers on leadership and management. He is a member of the Association of Business Leadership, Industrial Engineering Institute, Engineering Association of South Africa, and Project Management South Africa (PMSA); and a former member of the Research Management Board of IPMA. He serves on the Editorial Board of the PM World Journal. Pieter is also Director of the De Doornkraal Wine Estate in Riversdale, Western Cape.
To view other works by Pieter Steyn, visit his author showcase in the PM World Library at http://pmworldlibrary.net/authors/dr-pieter-steyn/
Founder and Head of LENS Living Lab –
International living laboratory
Brane Semolic studied mechanical engineering, engineering economics, and informatics; he holds a scientific master degree and doctorate from business informatics. His focus of professional interest is industrial and system engineering, innovation and technology management, virtual organizations and systems, project and knowledge management. He has 40 years of working experiences in different industries (industrial engineering, IT, chemicals, household appliances, government, and education), as an expert, researcher, manager, entrepreneur, counselor to the Slovenian government and professor. He operates as head of the open research and innovation organization LENS Living Lab. LENS Living Lab is an international industry-driven virtual living laboratory. He is acting as initiator and coordinator of various research and innovation collaboration platforms, programs and projects for the needs of different industries (ICT, robotics, laser additive manufacturing, logistics, education). He was co-founder and the first director of the TCS – Toolmakers Cluster of Slovenia (EU automotive industry suppliers). Since 2004 he is serving as the president of the TCS council of experts. Besides this, he is operating as a part-time professor at the Cranefield College.
He was head of project and information systems laboratory at the Faculty of Mechanical Engineering, Head of the Project & Technology Management Institute at the Faculty of Logistics, University of Maribor and professor of project and technology management at the graduate and postgraduate level. He acted as a trainer at the International »European Project Manager« post-graduated program, organized jointly by the University of Bremen.
He was the co-founder and president of the Project Management Association of Slovenia (ZPM), vice president of IPMA (International Project Management Association), chairman of the IPMA Research Management Board (2005-2012), and technical vice-chairman of ICEC (International Cost Engineering Council). Now he is serving as a director of the IPMA & ICEC strategic alliance. He actively participated in the development of the IPMA 4-level project managers’ certification program. He introduced and was the first director of the IPMA certification program in Slovenia. He has been serving as the assessor in this certification program since 1997. He performed as assessor in the IPMA International PM Excellence Award Program in China, India, and Slovenia.
He is a registered assessor for the accreditation of education programs and education organizations by the EU-Slovenian Quality Assurance Agency for Higher Education.
He was a Member of Strategic Advisory Board of European Competitiveness and Innovation, as well as the president of the Slovenian Chamber of Business Services.
He got the award as ICEC Distinguished International Fellow in 2008. He received the »Silver Sign« for his achievements in research, education, and collaboration with the industry from the University of Maribor in 2015.
Professor Semolic is also an academic advisor for the PM World Journal. He can be contacted at firstname.lastname@example.org. Additional information about the LENS Living Lab can be found at http://www.3-lab.eu/ .