More than half a decade ago international trade was a familiar concept, and its roots could be found far earlier than that. However, globalisation was an emerging concept back then and took over from international trade about a quarter-century ago giving rise to the supply chain. Products and goods are now available at every market and have come from half a dozen of countries that were involved in producing one single product that you now use.
So globalisation sentenced the concept of international trade’s location proximity to death. It is no longer an issue of location but more of labour cost, which has gained an advantage from the supply chain. Products are now designed, assembled, finished and packaged in different states, and then distributed to the markets where buyers can get them from.
Where Is The World Going?
Now globalisation is declining, it will not die but rather it will decrease, due to the emergence of robotics, artificial intelligence and 3D printing. Those emerging technologies will reduce the role of the supply chain, as artificially intelligent robots could assemble various products with optimum efficiency, thus replacing the workforce. In addition, 3D printing eliminates the advantage of economies of scale, because traditional manufacturing requires multiple moulds for multiple products.
On the other hand 3D, printing can produce multiple products from a single machine, though the cost of replacement of current machinery with 3D printers, as well as the consumption of energy of a factory run by robots, will be high. The transition to the next technological era will emerge gradually giving slow decline to supply chain and globalisation, as those emerging technologies are being developed and optimised year after year.
The Winners And The Losers
Countries that are now seen as low-cost cheap manufacturing locations will struggle in the next industrial revolution, as products will not be required to be made at far locations. Instead, they could be produced nearer to the consumer. Countries which have been seen as the replacements for China such as Mexico, Africa, and the Middle East, as well as some Far East countries, are the ones to be affected the most by the decline in globalisation.
The sustainability of their economic growth has reversed and the prospectus of a potential developing economy to stagnation, while highly developed countries regarding technology such as the US, Europe, Japan, South Korea, and China will benefit the most.
The Butterfly Effect
This means that the current situation of low rates, low growth, and low inflation cannot continue, although the beginning of the next industrial revolution will bring less international trade, less globalisation, which means low GDP, but it will also witness high salaries and paid wages, which in turn will widen the gap of inequality leading to political instability, pushing governments to raise taxes on the wealthy. Financial Institutions will set extreme asset pricing to maintain their clients’ profits, thus leading to significant volatility and illiquidity, making every financial asset a risky instrument, even bonds. Hence, the world will collide with economic, growth, and financial turmoils and might experience another crisis similar to 2008 one.
Financial institutions will set extreme asset pricing to maintain their clients’ profits, thus leading to significant volatility and illiquidity, making every financial asset a risky instrument, even bonds. Hence, the world will collide with economic, growth, and financial turmoils and might experience another crisis similar to the 2008 one.
One last hope is to get companies to invest in their business, thus accelerating the cash flow cycle within economies in order to overcome and surpass recession, which will likely help the world avoid the next global crises.