It wasn’t very long ago that many people thought globalization was irreversible. Now there are growing signs that it is slowing and risks coming to a halt.
In just a few decades, the world has become a very small place. While roughly 300 million people boarded commercial airlines in 1970, today well over three billion fly each year. And in only 15 years, the number of internet users worldwide increased from 400 million (2000) to 3.2 billion (2015). The rapidly growing global interconnectedness resulting from air travel, container shipping, the internet and much more has created unprecedented mobility for people, goods and information. This newfound feeling of endless freedom has perhaps been most succinctly captured in the well-known phrase: “the world is flat.”
But the theory of an inevitable global village was already raising doubts when author Thomas Friedman published his 2005 international bestseller by the same name. Although the world’s borders have undoubtedly become more porous, what was true back then still holds true today: trade among people and businesses continues to be defined largely by borders, distances and geographical roots. Our interactions with others still take place to an astonishing degree within national borders or geographical regions, as shown by the biennial DHL Global Connectedness Index (GCI).
The world is not flat
The GCI documents this with a wide variety of findings: For example, exports make up less than 25% of global GDP. The share of annual outflows of foreign direct investment is less than 10% of global gross fixed capital formation. And it may surprise you to find out how little information crosses borders: less than 5% of all telephone calls worldwide are international, and the percentage of internet traffic that crosses national borders is below 20%. Even the extent of global migration is often grossly overestimated: migrants make up less than 5% of the total population worldwide.
“Our interactions with others take place to a large degree within national borders and geographical regions”
In short: the world is quite far from being flat, and it appears that it is no longer getting flatter. Although it is still too early to draw a definitive conclusion – the next GCI will be released in the fall of 2016 – there are growing signs that globalization is slowing and risks coming to a standstill. In particular, the decades long and worthwhile progress toward more free trade is grinding to a halt. The World Trade Organization (WTO) is struggling to accommodate the interests of its 164 member states, with the fate of the Doha Round a telling example. Bilateral trade agreements are also becoming increasingly difficult, as seen by the controversial TTIP and CETA negotiations.
What’s more, borders broken down long ago are being rebuilt while new ones are being drawn. These are barriers that we thought we had overcome – the fences and the economic, societal or thought barriers. Crises and wars, streams of refugees and international terrorism have awakened fear and begun tilting the scales toward isolationism. Nationalistic movements are gaining traction and European integration has been in crisis mode for some time. The Brexit decision in the UK represents a watershed moment that has the potential to jeopardize the entire European project.
Interconnectedness means more opportunity
I find this development alarming. After all, an interconnected world is also a better world. The more open, connected and integrated we are, the more opportunities we have for prosperity, freedom and stability. This is just as true for an industrial and export country like Germany as it is for many developing countries and emerging markets that have benefited immensely from globalization and the international division of labor. One example is the rapid growth of business process outsourcing in the Philippines, which is already helping over one million people earn a living and is one of the country’s top performing economic sectors. The Philippines is one of the largest global hubs for call center services, for instance.
In recent decades, we have seen in many places how increased trade and interaction have raised economic output, reduced poverty, cultivated diversity and enriched lives culturally. What’s more, globalization in the digital age opens up completely new opportunities – for both people and businesses alike. Today it’s easier and faster than ever to seize upon new ideas from all over the world, benefit from groundbreaking innovations and take a ride on the global information highway. I am confident that an extraordinarily positive force is at work here – one that we need to harness better in order to bring about new growth and greater prosperity.
In Europe especially, we should have a deeper understanding of these relationships. Broken and battered by war some 70 years ago, today our continent is the most interconnected region on the planet. Nine of the ten most globalized countries are found here. Europe is the prime example of the opportunities arising from cross-border integration. It has led to long-term peace, stability and prosperity – to pluralistic societies and a high degree of individual freedom. I firmly believe that there is no better environment in which to write the next chapter of our success story – even in today’s transforming digital world.
Fighting centrifugal forces
We Europeans should know only too well the consequences of new borders, nationalism and egotism. Right now it is particularly important to not allow forces to slowly chip away at our solidarity, which has been the envy of many other regions of the world. And it’s also quite clear that the biggest problems of our time – from climate change to terrorism – are inherently global and therefore require internationally coordinated solutions, not unilateralism.
That’s why we need governments that acknowledge – both to themselves and to their populations – that ‘going it alone’ is not an effective strategy for solving these problems. Efforts can quite literally get held up at the border. Instead, we need to create a broader awareness of the fact that there is simply no alternative to working at an international level, even if achieving international agreement is often an arduous task. Obviously we understand that international organizations such as the European institutions or the United Nations and others are not perfect. Nevertheless, we need them now more than ever – as forums of exchange and enablers of increased cooperation and common solutions.
“The biggest problems of our time are global and require internationally coordinated solutions”
Such cognizance does not develop on its own. That’s why we must all be advocates of it – all of us who see the tremendous advantages of more political cooperation, economic exchange and societal interconnectedness. Global companies like Deutsche Post DHL Group also need to be a part of the discussion. With many employees and customers around the world, we have a special responsibility to take a stand and convince others to support more integration. As far as I’m concerned, this is a fundamental part of our corporate responsibility.