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The Hard Truths of Globalization
Free trade is under assault—but it’s more important than ever.
It’s easy to feel that globalization—one of the most vital business trends of the past half-century—is in retreat. Millions of voters in the U.S. and Britain blame it for stealing their jobs, and it was a major reason for the international civic convulsion known as Brexit. Political candidates castigate it or abandon trade agreements they previously endorsed. Nobody, it seems, wants to defend globalization right now.
Fortune’s Global 500 list, which spotlights the public companies with the most revenues on the planet, could be read as confirming an erosion in globalization’s success. The total sales produced by companies on the list fell 11.5%, to $27.6 trillion in 2015, with their profits slumping at essentially the same clip. The chief culprits: a surging dollar, the slowdown in China, and the dramatic collapse of oil prices.
In truth, the picture is considerably more complicated than globalization’s critics would have you believe, and the Global 500 list shows it. Start with resilience—specifically, U.S. resilience. In this summer of overheated political rhetoric, it’s tempting to assume that America is in economic decline. But look at the list and you’ll see that companies based in the U.S. (which represents about 4.4% of the world’s population) make up 27% of the total. Indeed, there were six more American names than there were in 2015, for a total of 134. (China, too, continues to surge. It now has 103; a decade ago, a mere 19 made the cut.)
This issue illuminates many of the crucial challenges relating to globalization, circa 2016. Indeed, Shawn Tully’s “Beware the Almighty Dollar” makes that U.S. resilience look all the more impressive. Tully examines the consequences—past and future—that a strong currency is having on American companies. As he explains, it’s a “major drag on the U.S. economy that will get only heavier—especially as it is likely to last for years to come.”
For a sophisticated look at strategies for dealing with the antiglobalization backlash, don’t miss “After Brexit, Global Is Local,” by GE GE -0.95% CEO Jeff Immelt. Among other things, he lays out an astute approach that will help big companies thrive around the world and make themselves welcome presences. (Hint: The answer is spelled j-o-b-s.)
You can find insight on some of the ripple effects of the Chinese slowdown—and equally important, a rare inside journey into one of the most secretive big companies in the world—in Vivienne Walt’s feature on commodities titan Glencore. It is titled “Glencore Digs Out of the Abyss” and shows how precarious 2015 was for the company—the situation was dire enough at its worst moment that executives reached into their own pockets to contribute money to Glencore—along with sketching out CEO Ivan Glasenberg’s plan to restore the company’s luster.
Glencore embodies why globalization is now an immutable reality. As Walt puts it, “The commodities that Glencore mines and moves now touch virtually every facet of our hyperwired lives. Charge your cell phone, turn on your computer, flick the light switch, drive your car, ride a train, take a flight, eat a bowl of cereal or a plate of sushi, or drink some sugared coffee—Glencore could have had a hand in all of that.” The company operates all over the globe to make that happen. And so, while voters may want to rebuff a system that they think robs them of jobs, their lives hinge on it—and it’s here to stay.
11 Comments on "The Hard Truths of Globalization"
Northwest Resident on Thu, 21st Jul 2016 11:28 pm
“it’s tempting to assume that America is in economic decline”
Actually, it’s easy to see that America is in economic decline. Along with the rest of the world of course.
Nice PR piece. I’m sure they’ve swayed a certain amount of their readership’s opinion as intended. For a while. It takes some pretty twisted “logic” to avoid the obvious, but this article gives it good effort.
This article should have been titled: “Why you should invest in Glencore”?
sinnycool on Fri, 22nd Jul 2016 3:25 am
If the author is referring to “free trade” agreements like the TPP being under assault, then let’s all be very thankful.
Of course he doesn’t say what he means and just engages in hand-waving. Or more like hand wringing in his case. Anyway,
“To call TPP a ‘free trade’ agreement is ridiculous.”
~ read why: here is one of very many articles on that subject…
https://mishtalk.com/2015/04/07/obamas-trans-pacific-partnership-fiasco-vs-mishs-proposed-free-trade-alternative-how-will-tpp-function-in-practice/
onlooker on Fri, 22nd Jul 2016 4:29 am
Actually, it’s easy to see that America is in economic decline. Along with the rest of the world of course.—
And I may add, ongoing social decline
brough on Fri, 22nd Jul 2016 4:57 am
This is the most accurate analysis of the Brexit fallout I’ve seen. At the moment British politians are trying to re-negotiate trade agreements with soon to be ex trading partners. They are wasting their time, because the rise of globalisation has run parallel with the almight rise of transnational companies such as Glencore. An example is the large industry of automobile manufacture. The UK is Europes largest manufacturer of finished automobiles, despite not having a significant national carmaker of its own. No way is the British going to put import duty on BMWs as is the EU going to recipricate with duty on Fords, Nissan or Jaguars. Globalisation has not only degraded many jobs in the western world, but has also made many national economies irrelevant. The sooner politians wake up to this the better. Perhaps Trump already has.
forbin on Fri, 22nd Jul 2016 5:21 am
“…their lives hinge on it—and it’s here to stay. .”
so long as the oil flows freely
Forbin
dooma on Fri, 22nd Jul 2016 6:12 am
Money, get away
Get a good job with good pay and you’re okay
Money, it’s a gas
Grab that cash with both hands and make a stash
New car, caviar, four star daydream
Think I’ll buy me a football team
Money, get back
I’m all right Jack keep your hands off of my stack
Money, it’s a hit
Don’t give me that do goody good bullshit
I’m in the high-fidelity first class traveling set
And I think I need a Lear jet
Money, it’s a crime
Share it fairly but don’t take a slice of my pie
Money, so they say
Is the root of all evil today
But if you ask for a raise it’s no surprise
That they’re giving none away
Away, away, way
(Away, away, away, away)
joe on Fri, 22nd Jul 2016 9:25 am
Brexit on one side of Europe! Turkzit on the other, in between there is the euro, TTIP, is about to be finalised thats gonna make the TPP look like a mom and pop operation. TTIP makes the EU obselete because the deal is for each european country in the EU and the standards etc are LOWER than EU standards its as easy right now for the US to sign 30 TTIP deals with Europe as to sign one. Globalisation is about to go on steriods.
Oil is lower but thats not the issue. Brexit was about the UK being the facilitator and clearing house for TTIP countries, so now Germany (the maker of the finest European cars) will be forced to buy American cars en masse, also the same will go for all kinds of foods and medicine, services will also go in as well, thus Britains exit ring-fences their economy as they wont be forced to increase taxes when the German economy tanks and dollar bends the euro over and really gives it one.
penury on Fri, 22nd Jul 2016 9:43 am
“Globalization” another meaningless way of big money ripping of the workers and the consumers, and the tax payers. The rich get richer and the workers and tax payers get “Pokeman 2”, Corporations no longer pay taxes, or living wages but have convinced the consumers that they are getting a bargain, Do the math, what do cheap products from China at Sprall Mart really cost?
Davy on Fri, 22nd Jul 2016 10:28 am
Globalism is what happens when you let a corruption of capitalism and representative democracy run amok. In the effort to be more productive and efficient with capital and labor in an environment of destructive change from relentlessly advancing technology you get corruption and malinvestment of the systematic kind. We have private profits at the publics and social fabric expense because the individualism of capitalism and representative democracy has come to allow it.
As the vicious cycle of corruption and moral hazard increases this malinvestment and drive to ever greater efficiency is accelerated without regard for anything but profit motive. The checks and balances are marginalized because power and money skip across borders. Countries fight for the right to benefit from power and wealth instead of protecting the environment and their people. This has progressed with the steady and focused initiative of the wealthy of the world to where we are now with a global world in overshoot with population and consumption. The wealthy control the world and they want globalism.
We are in a die off position with no options except to keep digging the hole deeper thinking we are going to eventually get out of the hole. Globalism is the end game of a failed human drive of technology, efficiency, and development. It is the end game of the Holocene epoch. A beautiful and diverse climate and ecosystem period. Globalism has not only destroyed our human fabric but also our ecosystem. There is absolutely nothing at all good about globalism. It has been bad in every way bar none. Eventually you can take each and every benefit of globalism and follow its trail back to something that was good that is now destroyed. Nothing we have today related to globalism has in the end made a positive difference.
The connections we had in earlier times when travel was slow and trade minor was OK but what is going on today is an out of control orgy of the lust for more at the expense of the environment and the social fabric. All this with the social narrative that globalism has been the best thing that ever happened to man. If you hear me say we are in a time of paradox it is because wrong is right and right is wrong. Globalism is wrong. Localism is right. Technology and development is wrong. Traditional human activities from preindustrial times is right. I could go on and on but that should give you a taste of what I think about globalism.
penury on Fri, 22nd Jul 2016 11:32 am
Good call Davy, humans are so screwed.
Boat on Sat, 23rd Jul 2016 8:54 pm
Mexico to have tougher truck emissions rule from 2020
A significantly tougher rule governing heavy-duty truck emissions in Mexico will take effect in 2020, earlier than the truck industry had wanted, a top government official said on Friday,
After years of heated debate between truck makers and environmental activists, new heavy-duty vehicles will have to meet emission standards used by the United States and the European Union, known as Euro VI, in 2020, Mexico’s undersecretary for Environmental Policy and Planning, Rodolfo Lacy Tamayo, said in an interview.
New heavy-duty trucks will have to meet a lower emissions standard known as Euro V from July 1, 2018, six months later than the date proposed in 2014.
http://www.reuters.com/article/us-mexico-emissions-idUSKCN10303P
This is my idea of globalization at work for the good of humans. Now to get all trade following cleaner rules.