The Changing Face of Globalisation
“There has never been a war between two countries that both have a McDonalds”.
This was US political commentator Thomas L Friedman’s “Golden Arches Theory of Conflict Prevention” that he outlined in his 1999 book, The Lexus and The Olive Tree.
It was a tongue-in-cheek but powerful argument in favour of globalisation. If we are trading with each other, we won’t go to war with each other.
But with Russia’s invasion of Ukraine, the theory is now dead in the water.
Does this mean globalisation is over? Are all those cheap goods we enjoyed thanks to China’s cheap labour going to be a thing of the past?
There is definitely a movement afoot to wean ourselves off foreign dependency – especially as regards energy and other key strategic areas. Fracking is back on the table, as are domestic nuclear reactors. Huawei is to be removed from UK 5g networks.
Taiwan is to semiconductors what Ukraine is to grains and Russia to gas. If China “does a Russia”, the world is very vulnerable, and there was some discussion last week about the Chinese takeover of UK semiconductor company Newport Wafer Fab, although the government, in my view wrongly, has not blocked that.
But as I stroll the booths of the UK Investor Show, this is a question I will be asking pretty much every business. “Where is it made?” I want to get a better idea of the future of globalisation. My view is that it has changed, but it’s not over.
We will remain dependent on foreign manufacturing. It’s just too expensive to do it ourselves, and price usually wins.
After the Investor Show, I’m pretty sure I’ll have a much clearer idea of where things are headed.