Globalization in Transition: CEO Perspectives

The Changing Landscape of Globalization

Susan Lund from McKinsey Global Institute observes that the benefits of globalization, predominantly enjoyed by large companies over the past three decades, are now facing headwinds. Trade flows have stagnated, and cross-border financial flows have significantly decreased since the Great Recession. This shift is coupled with rising opposition to immigration and globalization, especially in developed economies. In response, companies are reevaluating their strategies, and business leaders are seeking ways to ensure the continuation of free and open markets.

CEO Insights on Globalization's Future

Three CEOs of global companies—Andrew Liveris (Dow Chemical), Bill Winters (Standard Chartered), and Joe Jimenez (Novartis)—shared their perspectives on these evolving dynamics:

• Andrew Liveris (Dow Chemical): Views globalization as an ongoing, almost irreversible force, akin to gravity. He emphasizes the role of digitalization in further propelling globalization. However, he acknowledges a current pause due to the unequal distribution of globalization's benefits, leading to populism and pushback. Liveris notes the diminishing competitive advantage of China based on cheap labor, signaling a transitional phase in globalization.

• Joe Jimenez (Novartis): Anticipates increasing challenges to the free flow of goods across borders. Novartis is preparing for this by improving its cost structure, given the pressure on pricing due to strained healthcare systems. Rationalizing the manufacturing base is becoming more difficult due to resistance to exiting certain manufacturing sites. Jimenez stresses the need for tailored country strategies to navigate relationships with different governments.

• Bill Winters (Standard Chartered): Notes a divergence between the increasingly connected economy and the fragmenting global financial system. Banks are facing stricter regulation, with local regulators seeking control over local banking entities through the breakup of international banks into regulated local banks. This balkanizes capital and cash within separate countries. Standard Chartered is countering this trend by leveraging its global network as a key advantage. Winters emphasizes the need for agility in strategy, guided by a clear vision, to adapt to unexpected events. He highlights the importance of helping those negatively impacted by globalization through re-education, job training, and financial assistance.

Strategic Responses to Anti-Globalization Forces

Business leaders can take several actions to address anti-globalization sentiments:

1. Advocate for Free Trade: Communicate the benefits of multilateral free trade agreements, which have positively impacted countries and populations.

2. Acknowledge and Address Populism: Recognize the ongoing nature of populism and treat governments as customers, adapting strategies accordingly.

3. Support Affected Stakeholders: Help workers and communities understand how globalization can be a force for good. Focus on re-education, job training, and financial assistance to help people through transitions.

4. Encourage Public Service: Advocate for business leaders to enter public service and civil service to address the frustration, fear, and anger directed at globalization. The suggestion is for leaders to run for office, act as a service without expecting to be reelected.

Key Points and Implications

• Irreversible Momentum: Despite current challenges, globalization is driven by technological advancements and is likely to continue in some form.

• Unequal Distribution of Benefits: A primary cause of anti-globalization sentiment is the unequal distribution of globalization's benefits, leading to economic insecurity and populism.

• Regulatory Fragmentation: The global financial system is becoming less interconnected due to stricter regulations and the balkanization of capital.

• Need for Adaptability: Companies must adapt their strategies to navigate a more complex and fragmented global landscape.

• Social Responsibility: Business leaders have a responsibility to address the negative impacts of globalization and support affected stakeholders through education, training, and financial assistance.

This content underscores the complex and evolving nature of globalization. It highlights the need for businesses to be agile, socially responsible, and politically engaged in order to navigate the challenges and ensure a more equitable and sustainable future for global trade and investment.