The Next Stage of Globalization

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The Next Stage of Globalization

Globalization was perhaps the most significant institutional development marking the Installation Phase of the Digital Techno-Economic Revolution. For the first time, information technology enabled people on opposite sides of the planet to coordinate, collaborate, and interact, instantaneously. But, during the revolution’s transitional phase, which began with the collapse of the dot-com bubble, globalization effectively ground to a halt.

What happened, and what will happen next?

To answer these questions, let’s examine the history of globalization and its drivers. The A.T. Kearney Global Business Policy Council recently reviewed the available data and divided globalization into three stages.1

International economic interactions have obviously existed for millennia, but the current wave of globalization—defined as “the cross-border movement of goods, services, capital, and people” really took off after the end of the Cold War in the early 1990s. As former Soviet bloc countries and China liberalized their economies and integrated into the U.S.-led global economic system, they powered globalization as never before in modern times.

After decades of a global economy partitioned into separate blocs, truly global integration accelerated. Over the next decade, global trade grew by 85 percent and Foreign Direct Investment flows rose by an astonishing 580 percent. This 1989-2000 period is referred to as Globalization 1.0.

The period beginning in 2001 and leading up to the 2008-2009 global financial crisis is termed Globalization 2.0.

In that stage, the cross-border movements of goods, services, capital, and people seemed to be on an ever-upward trajectory. Globalization declined temporarily following the U.S. dot-com crash of 2000 and the attacks of September 11, 2001.

However, it rebounded relatively rapidly throughout the rest of the 2000s on the back of strong growth and international integration of the BRICS economies, as well as of many other smaller emerging markets, which provided seemingly unlimited fuel for the new engine driving globalization.

By 2007-2008, global trade flows had hit an all-time high of 64.3 percent of global GDP, and Foreign Direct Investment inflows had reached an apex of over $2.2 trillion. Global portfolio investment flows were also far above their historical average, at almost 2 percent of global GDP in 2005 and 2006...

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