Davos man lost in a deglobalizing world?

In this week's Global Political Risks our political analyst deals with the threats to globalization. Many claim that globalization seen since the end of the Cold War is coming to a close. Have we entered a period of deglobalization or are we in the midst of a reconfiguration of globalization? And what will be the consequences for investors and businesses of this rearrangement of the world economy?

An excerpt from the publication:?

To paraphrase the founding father of economic science, Adam Smith, we can say that the invisible hand of the market and the visible hand of the government cannot do without each other. Yet they need to guard their independence for the marriage to stay healthy. Finding the correct balance requires constant work and it is far from easy. The state needs to knock the rough ends off capitalism and globalization without doing too much damage to the dynamics of the free markets. And if an equilibrium is found along the way, it never lasts long.?

To sum it up, the rise of capitalism and globalization has boosted economic growth to an enormous extent whereas the real birth of mass prosperity did not come about until there was a 'union' between capitalism and effective government. The state may not always carry out its tasks to everyone's satisfaction but we cannot do without it or allow it to be diluted beyond repair. To quote Frank Sinatra:

You can't have one without the other

Try, try, try to separate them

It's an illusion

And some of the conclusions from the report:

>??????We consider the risks of deglobalization somewhat exaggerated, although we do expect more regionalization. Therefore, it could pay off to look for trades that in essence are ‘long regionalization, short deglobalization’. For example, companies that have successfully worked towards securing regional, diversified supply chains could offer attractive opportunities. Take Procter & Gamble, it’s European president says that over 90% percent of what they are selling in Europe will be produced in Europe. And more generally speaking, consultancy firms like McKinsey and OliverWyman have pointed out that especially generic pharmaceuticals manufacturers and safety equipment makers are among the sectors that have already moved to diversifying supplier networks and regionalizing supply chains.

>??????Strategic goods like rare earths, semiconductors, food supplies, energy etc. will probably face more trade restrictions in the years to come in the name of guaranteeing national security. Also, global networks that are based on trust - such as the exchange of students and cooperation between scientists - may be hampered. Some call it geopolitical friend-shoring. Trends like these will, broadly speaking, put some upward pressure on prices and inflation and a bit of downward pressure on economic growth, but not as much as the doomsayers are predicting.?

You can find the whole report at our website