The Explosion of Globalisation

by Jörgen Eriksson on February 26, 2016

imageConventional wisdom says that globalisation has stalled. Measured by trade statistics, the flows of goods and money to pay for goods are slowing down and even reversing. The Financial Times wrote today, that the value of goods and services which crossed international borders last year fell by 13,8%, in the first contraction since 2009. Much of the slump was due to a slowdown in China and other emerging markets.

But although the global goods trade has flattened and cross-border capital flows have declined sharply since 2008, globalisation is not heading into reverse. Instead, it is entering a new phase defined by soaring flows of data and information.

The way we measure international flows, by the value of traditional goods and services, is disrupted with digital internet based business and digital payments.

A new report my McKinsey Global Institute, Digital Globalization: The New Era of Global Flows documents this. I came across this report as I recently did some research on how disruption has hit the financial industry, and remarkably, digital flows, which were practically non-existent just 15 years ago, now have a larger impact on GDP growth than the centuries-old trade in goods.

Although this shift makes it possible for companies to reach international markets with less capital-intensive business models, it poses new risks and policy challenges as well. The world is more connected than ever, but the nature of its connections has changed in a fundamental way. The amount of cross-border bandwidth that is used has grown 45 times larger since 2005. It is projected to increase by an additional nine times over the next five years as flows of information, searches, communication, video, transactions, and intra-company traffic continue to surge.

In addition to transmitting valuable streams of information and ideas in their own right, data flows enable the movement of goods, services, finance, and people. Virtually every type of cross-border transaction now has a digital component.

Trade was once largely confined to advanced economies and their large multinational companies. Today, a more digital form of globalisation has opened the door to developing countries, to small companies and start-ups, and to billions of individuals. This opens up a huge business opportunity for developing disruptive fintech businesses. More about this in another blog article very soon.

Tens of millions of small and midsize enterprises worldwide have turned themselves into exporters by joining e-commerce marketplaces such as Alibaba, Amazon, eBay, Flipkart, and Rakuten. Approximately 12 percent of the global goods trade is conducted via international e-commerce. Even the smallest enterprises can be born global: 86 percent of tech-based start-ups surveyed by MGI report some type of cross-border activity. Today, even the smallest firms can compete with the largest multinationals. After all, on the internet any business is 13” inch across the screen.

Screenshot 2016-02-25 22.23.18

About Jörgen Eriksson :

Jörgen Eriksson is the founder of Bearing and is the Chairman of the firm since it was created. He has successfully expanded Bearing into covering projects on four continents. He is also Adjunct Professor of Innovation Management at the International University of Monaco and at Universitat Politècnica de Catalunya in Barcelona and he is an active member of the Founders Alliance organisation.

Working with consulting engagements across Bearings practices, he has over the past fifteen years participated in and supervised a large number of client projects, from innovation system development and place development and branding, to merger and acquisition assignments and leading edge research and business development activities for key clients.

His new book, Branding for Hooligans, will be published in 2015. It is about how innovation and branding are key survival factors in our modern times of hyper competitive markets.

Prior to Bearing, he was Director of Europe, Middle East, and Africa for Trema Treasury Management, a technology and consulting services provider, supplying financial software solutions for the global financial industry, Clients included The European Central Bank, Citibank, SEB, South African reserve Bank, Deutsche Bank, Abu Dhabi Investment Authority (ADIA), as well as many other large financial institutions and Fortune 500 companies.

Early in his career Eriksson was educated at the Stockholm School of Economics, where he studied economics, financial economics and philosophy. He then worked in Scandinavian investment banks and also for the Swedish Institute of National Defense Research.

You can contact Jörgen on e-mail, connect on LinkedIn onörgen-eriksson/0/38/8a0/ and follow him on twitter on joreri508.

{ 2 comments… read them below or add one }

Dr Alfred Quintano February 26, 2016 at 09:10

We have to be careful on how we use the term Reverse Globalisation since the modern understanding of the term is flows in the ‘east’ to ‘west’ direction rather than the original ‘west’ to ‘east’ product and FDI flows. The meaning in this blog is a reduction in the overall level of globalisation activity. With best regards – Dr Alfred Quintano – Malta

Jörgen Eriksson Jörgen Eriksson February 26, 2016 at 09:22

Excellent comment, I will clarify the text.

The main point of the blog is that the way we measure international flows, by the value of traditional goods and services, is disrupted with digital internet based business and digital payments.

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