Trend #1 – Globalization unraveling

This is a very tricky one. It is likely that the global financial crisis is now over in most parts of the world (OK, maybe not in the UK and a few other fragile economies like Greece) and that growth will return to previous levels. Surging demand will result in higher oil prices and resources shortages, while government debt will push up inflation* and interest rates. In short, globalization will accelerate once again, albeit with a few billion rather disgruntled and jittery people at its core. Only perhaps it won’t. Maybe what will happen is that developing nations will embrace globalization whilst developed nations will resist it. Hence, a ‘new normal’ where globalization occurs within a context of localism and protectionism.

Could globalization ever stop? It’s not probable but it is possible.  It happened once before, starting with the outbreak of WW1 and consolidated by the Great Depression of the late 1920s and early 1930s. The most likely scenario, in my view, is that despite getting the global economy back on track, nationalist sentiments will take over and certain things will collapse back into national boundaries.

This is partly because people will be worried about the level of connectivity and complexity (hence risk) that is still built into the global financial system and partly because a few people have got an eye on what a booming global population, together with shifting consumption habits, means for raw materials.

Resource nationalism is hardly a new idea. It refers to governments shifting control of key resources away from foreign and private interests but it could also mean governments refusing to sell certain resources (e.g. farm land, rare earth minerals and gas perhaps?) to other nations, regardless of price, citing national security reasons.

Implications? Expect borders to become less permeable. Also expect anti-Chinese sentiments to increase and expect G20 relations with China to deteriorate once China becomes the World’s #1 economy (somewhere between 2020 and 2025).** Expect a shift in free trade too.  Free trade is an excellent way for a dominant power to fortify its position, but once power is lost things can reverse quite quickly.

Also expect rage to increase. In the US, 1 in 8 mortgages are in delinquency or foreclosure. Add rising unemployment (one person every 7.5 seconds in the US), declining real wages, runaway executive compensation, simmering discontent with President Obama – and a few million guns in the US – and things could turn very nasty indeed. In particular, watch for companies stressing local heritage and connections and also for the extreme right manipulating popular rage for political advantage.

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* The jury seems to be still out on this. What is significant currently is a lack of inflation, so perhaps some countries (UK, US?) will slide into a deflationary spiral instead?

** Unless complications within the Chinese system lead to a systemic collapse