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05 Aug 08

Protein® Feed | Could Globalization Be Going In Reverse?

"The world is flat" or "the world is spiky" or ..."the world is complex," maybe? At any rate, this article questions the idea that outsourcing will continue to continue, spreading outward in some sort of new and flattened topography (akin to a downward spiral insofar as the search for ever cheaper labor and laxer labor laws continues, but not wholly downward because economically, there's an upward trend associated with it, too - hence perhaps the "flat" topography). And it presents some interesting data as well as suppposition for why this might be so. It's not just the huge up-tick in transportation costs (although that's a key factor), it's also the logistics -- including "reverse logistics." For example, consumers *want* to do better, and are becoming more aware of the "carbon footprint" of the products they buy.

proteinos.com/...balization-be-going-in-reverse - Preview

globalization trends economic_development manufacturing transportation factories shipping

For the first time in recent decades, it seems there are now real reasons to question the logic underlying the official future of ever-increasing global trade.
The biggest, of course, is the rapidly mounting cost of transportation. As oil prices rise, reports the New York Times, shipping costs are driving decisions to shorten supply chains:
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- But transportation costs are not the only reasons why globalization as we know it might be in for some rapid evolution. Consider:
- *Far-flung supply chains may drop costs (even with higher oil prices), but the multiply climate change emissions. That already presents a marketing challenge as consumers grow more aware of their carbon footprints. And if political consensus emerges on pricing carbon (as seems likely), some of the price advantages of global complexity could vanish overnight.
- *Manufacturers and others are already increasingly aware of, and worried about, supply chain diversity. When the entire supply of a critical part or material comes from a distant factory or mine, every company that depends on that part or material is at risk. Increasingly, companies are trying to find multiple sources (and alternative sources), preferably close to home.
- *Some of the economic advantages of globalization have come from companies gaining the ability to skirt labor and environmental laws by doing business in countries with high levels of political corruption (corruption they have often helped create). But now, transparency activism has blown the cover of secrecy off these practices; now it is easier than ever to cause enormous brand damage simply by revealing an unsavory backstory.
- *Much of the logic of globalization assumes a one-way flow of materials, mined and grown in the poorest countries, manufactured into consumer goods in China, Brazil or Mexico, sold on the shelves of megastores in Europe or North America, then shipped away to the landfill. But as we move into zero waste and closed-loop systems (where there is no "away"), reverse logistics start to become a real concern. Producers become responsible for their products, meaning that running their current supply chains in reverse doubles (at least) their already mounting transportation costs. This alone could drive more local manufacturing.
- *Globalization suffers from some big disruptive vulnerabilities. An extreme act of terror, say a dirty bomb in a shipping container, could easily bring the whole system screeching to a halt. Ditto bird flu. Same with mass migrations triggered by environmental degradation and climate change in already desperately poor countries. Heck, even the right kind of invasive species scare could put a hiccup in the system, but some of these could stop trade altogether for quite some time.
- Especially in the developed world -- where we can draw on a huge basin of wealth and a huge capacity for innovation -- even a dramatic reversal in globalization would not fundamentally undermine our civilization (though it would certainly contribute to a number of real changes already underway, like greater urbanization, local food movements, cradle-to-cradle design and so on). We won't be headed back to de-industrialized farming any time soon.
- But if the scenario of a reversal in globalization in fact comes to pass, there will be some economic upheaval, and that upheaval will create winners and losers -- an effect that will be magnified if economic chaos occurs at the same time that the impacts of climate change begin to be felt in earnest. Some regions will plan ahead and do well. Others will suffer.
- One point is probably worth making in conclusion: because communications technologies are (comparatively speaking) dematerialized, a reversal in material trade patterns almost certainly would not also mean a reversal in intellectual trade patterns -- rising oil prices or climate change won't shut down the web or stop Bollywood from making movies or prevent innovators from licensing their ideas in other countries. In fact, it might be that expertise, innovation and culture will flow more freely in a world where goods flow more slowly. We might actually grow more interconnected in a world where supply chains shrank.
  - "...expertise, innovation and culture will flow more freely in a world where goods flow more slowly." = Interesting perspective/ idea, with implications for *location* (obviously)... - on 2008-08-05
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