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Looking forward to 2020?

ECA 2020

As we approach the 21st century’s third decade, it could be easy to despair at the state of the world.  Despite easier access to more information than ever before, many people have never felt so in the dark.  “What’s fact and what’s fake?” is a question we all frequently ask, as our basic assumptions about the way the world works are brought into question.

While it’s tempting to react to every tweet, we need the benefit of perspective to understand how we’ve got to this point and see where solutions may lie in the future.

After the huge loss of life and economic devastation of two world wars, transnational institutions like the UN and World Trade Organisation emerged to try to ensure future peace and prosperity, largely through the encouragement of global trade. While they worked effectively for many years, in recent times they have been undermined by technology and the ease and speed of global communication. Put simply, they have become victims of their own success.

While global trade increased steadily from the late 1940s, two other political events in particular had an impact way beyond what anyone could have foreseen. When Deng Xiaoping opened up China’s economy in 1979, he offered the world cheap labour on a scale previously unseen.  And when Mikhail Gorbachev began his policy of Perestroika in 1985, it led four years later to the demise of the Soviet Union, the end of the Cold War and the fall of Communism along with its most visible symbol, the Berlin Wall. The familiar East-West balance was gone, and the United States became, for a while, the world’s only superpower.

These two turbo-chargers of globalisation led to the biggest concentrated creation of wealth, but also the biggest economic disruption, the world had ever seen. While bankers in the West were making money like it was going out of fashion, many lower skilled jobs were being lost to the fast-growing tiger economies of Asia. The result: a huge rise in living standards and the number of middle-class consumers in the East, and a growing inequality between the ‘haves’ and the ‘have nots’ in the West, which in large part has led to the rise of populism we see today. As economic globalisation continues apace, there are many who are no longer feeling its benefits.

Technology continues to change the way we all live, work and trade, and it has created growing uncertainty about jobs and competitiveness. As people look to their governments for guidance and security about the future, the inter-connected nature of countries’ economies means that answers to problems are increasingly complex. Governments find it increasingly hard to provide the reassurances their people demand, resulting in the steady left / right pendulum of politics swinging further each way, and populist instincts increasingly coming to the fore.

A perfect example of this tribalism comes from an IPSOS survey in the US in 2017. The respondents were told “People say that the 1975 Public Affairs Act should be repealed”, and then asked to what extent they agreed or disagreed.  23% of Republicans (who generally want ‘less government’) agreed, while only 18% of Democrats agreed.

When a similar but subtly different question was asked, “Republicans say that the 1975 Public Affairs Act should be repealed”, the proportion of Republicans who agreed went up to 27%, and Democrats who agreed declined to 12%.  When the question was posed a third time, but on this occasion as “Donald Trump says that the 1975 Public Affairs Act should be repealed”, the number of Republicans who agreed soared to 39%. When the question was asked with Democrats or Hilary Clinton saying that the 1975 Public Affairs Act should be repealed, the proportions predictably shifted the other way.

Apart from clearly demonstrating tribal instincts, the problem with this survey is that the 1975 Public Affairs Act is an entirely fictional piece of legislation. The survey proved that many people are quite happy to give an opinion on something they know nothing about, based purely on the alleged opinions of someone else who shares or opposes their views.

However, although tribalism and populism are now widespread, they certainly aren’t new. An analysis of all elections held across 33 European countries has shown the proportion of votes to populist parties (both left and right) has doubled from 10.7% in 1980 to 22.3% in 2018. And while this means that nearly 78% of votes still go to mainstream parties, it is often the populist parties who end up holding the balance of power. Authoritarian populists currently make up part of 11 of 33 European governments and offer parliamentary support in an additional four countries.

So whether it’s the election of Donald Trump, the UK’s vote to Brexit, the Five-Star movement in Italy or many others elsewhere, it is clear that populist politics, fuelled by social media, will continue to feature globally for many years to come.

But while populists have simple solutions – generally based around anti-globalisation, nationalism and anti-immigration measures – the problems the world must solve are actually extremely complex.

Take climate change as an example. The last 12 months have seen no let-up in extreme climate events, with an increasing frequency of hurricanes, typhoons, other storms and floods. Searing heat and lack of rain contributed to unprecedented wildfires in California and Australia. Meanwhile CO2 levels continue to rise, and the ice cap in the arctic continues to melt. With climate issues mobilising the young, personified by Swedish campaigner Greta Thunberg, and while there’s much disagreement on practical solutions, the scientists are in agreement that this is an issue the world needs to tackle collectively and, above all else, quickly.

There is one relationship that is crucial to sorting out many of the complex problems of the world, and that’s the one between presidents Trump of America and Xi of China. The on-off trade war that has been bubbling for a while has the potential to be resolved, but also to escalate both politically and economically. There’s a saying that when America sneezes the rest of the world catches a cold.  With 35 Chinese cities now having a larger GDP than entire countries elsewhere in the world, the same is now true of China.

One concern about Trump’s approach to China is that he appears to view trade deals as a zero-sum game; America can’t ‘win’ unless China ‘loses’. That goes against the whole point of trade deals which is for each side to play to its strengths. Trump’s attitude may be as much about US domestic politics and appealing to his core fanbase as it is about economics, but it’s a worrying sign nonetheless. With Europe increasingly of secondary importance in US trade policy, it would be wrong to lay the entire blame at Trump’s door.  The pivot to Asia began long before Trump, with President Obama declaring early on in his first term that he would be “the Pacific President”.

Of course, China has its own issues too. The policy of ‘state capitalism’ which has been so successful to date, becomes increasingly hard to maintain in a complex and diverse economy. It relies on huge state subsidies which at some point become unaffordable as the economy grows. So the economy will need to be freer to look after itself which also requires more political freedoms, yet these are currently incompatible with China’s system of government.

Despite the tensions, globalisation is not dead. It’s alive and kicking and evolving. One big shift over the last 10 years is the shift towards trade in services which now, for the first time, account for more than 50% of global trade. While trade in goods in that period went up by 25%, trade in services increased by double that amount.

Economies that are increasingly dependent on trade in services require two other significant changes: an upskilling of the workforce away from manual and administrative tasks, and a robust set of regulations about the way in which data is collected, stored and transferred. There is currently no global standard for data transfers with the EU implementing the General Data Protection Regulations (GDPR) last year, and the US, China and Japan all looking at creating their own. Over time it is expected that these regulations will converge, with the most stringent probably winning through rather than it being a race to the bottom.

As an organisation that acts as a data processor for clients, ECA takes information security very seriously.  We have completed our ISO:27001 certification and have invested significantly in related staff training, and we maintain rigorous processes for continuous improvement.

Data really is the new oil, and it’s staggering to realise how much data we voluntarily (or unknowingly) give away. In addition to the billions of Google searches we make, emails, WhatsApp and WeChat messages we send, and Instagram photos and Facebook posts we make every day, the world uploads 28 million gigabytes of data from wearable devices. This contains information about all sorts of things including where we’ve been and our bodily functions. According to a recent PwC report, the accumulated digital universe of data in 2020 will be ten times what it was seven years previously. Where is it, who’s looking at it and what are they doing?

With populism on the rise, and so much information and misinformation around, the world is clearly in a difficult place. The populists are wrong to say globalisation has run its course.  But for all the bad press they get, they are right about inequality and people being ‘left behind’ although that is more a result of rapid change and new technologies than of globalisation itself.

Implementing beneficial and inclusive change will be complex and difficult. It will need to be tackled by world leaders who can take a big picture view. But that’s a hard ask in countries whose leaders need to go back to the people every four or five years.

Business leaders have their part to play too, by being ethical employers and creating jobs and training around the world. And as global mobility professionals, we need to also play our small part in making that happen.

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