Globalization is out and deglobalization in … maybe
When you look at factors such as the rise of populism in politics (which actively opposes globalization), changes in regulation, trade and manufacturing, as well as growing restrictions on the movement of people around the world, it looks like the new trend is deglobalization — or a retreat into localism or nationalism.
Deglobalization seems to be largely a tech issue: Technology companies appear to be either driving the deglobalization trend, or they’re the instrument by which national governments are effecting change.
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What’s going on? To coin an oxymoronic phrase: Is the world getting less global?
Panic about the coronavirus goes viral
The yet-unnamed coronavirus that originated in Wuhan, China, has laid bare an unpleasant fact about globalization: A viral infection that emerges anywhere can spread everywhere. To stop such an outbreak, the best remedy is radical, sudden and temporary deglobalization. This containment deglobalization is really clobbering the tech industry. It’s going to get a lot worse before it gets better.
The most immediate impact is technology trade shows. The most important mobile trade show, Mobile World Congress, will either be cancelled or have greatly reduced attendance (the show is scheduled to begin February 24 in Barcelona, Spain). Mobile giants LG and Ericsson have already canceled. Dozens of Chinese trade shows have been cancelled outright.
The next effect will be sales and manufacturing. Foxconn, where iPhones are made, is closed indefinitely. At least for making electronics. For now, they’ve switched to making face masks.
Sellers on Amazon are bracing for product shortages resulting from factories closed because of the coronavirus.
Tesla shut down its Chinese factory, halting manufacturing of Model 3s.
Hardware Kickstarters are starting to notify users of big delays for the same reason.
Companies like Google, Amazon, Facebook and Microsoft have shut down offices in China or curtailed travel to China. (Yesm Google and Facebook have offices in China.)
Starbucks closed 2,000 stores in China. (That’s right, I consider Starbucks a technology company.)
And the third effect will be earnings. Most Chinese tech companies are expected to report earnings far below expectations.
And the outbreak is also one of the biggest sources of fake news and misinformation on the social networks, leading to what the World Health Organization calls an “infodemic.”
Politics gets in the way of Huawei 5G
International politics is also driving the apparent deglobalization trend. But they’re mostly using technology and technology companies to effect these changes.
For example, the United States is determined to block Huawei’s dominance of future 5G networks, citing a security risk, and the pressure is even straining the U.S.’s alliance with Britain.
The U.S. ban on Huawei was also extended to Android, prompting that company to pursue its own operating system, called HarmonyOS.
European regulation of technology is causing further deglobalization. The so-called right-to-be-forgotten laws are creating different search indexes for Google Search users inside and outside the Eurozone. The GDPR rules make hundreds of U.S, news outlets unavailable to European users. And European laws and proposed laws around requiring search engines to pay news sites for linking to them in search results could essentially cut off European news sources from global searches. Because of European regulations, online news in Europe is completely different from the news outside of Europe.
China is the gold standard for deglobalizing the internet. The Great Firewall of China, plus bans on foreign social networks and other rules in China makes the Chinese Internet close to its own isolated network. Russia and other countries are trying to emulate Chinese control over what locals see online.
Russia’s experimentation around closing its Internet to the outside world, as well as its requirement for foreign companies to add government spyware to phones, is temping Silicon Valley companies, including Apple, to stop serving the Russian market.
In other news, the “splinternet” has replaced the “internet.”
Uber: It’s been a wild ride
San Francisco-based sharing- or gig-economy startups like Uber seemed to enhance globalization. You could travel anywhere and use your normal Uber app to get a ride or order food. But Uber is being pushed out of national markets it once dominated or where they were expected to dominate in the future.
Uber cashed out and sold its Chinese presence to the “Chinese Uber,” called Didi, in 2016.
Uber also exited Indonesia and other markets in the same way as China. In Russia, Uber ended up in a joint venture with Russia’s Yandex.taxi, with Yandex owning a controlling share.
In India last month, Uber’s food-delivery subsidiary, Uber Eats, sold out to its Indian rival, called Zomato. Now the growing food-delivery app market is controlled by two Indian companies.
Uber will never be a global service. Ubers retreats from some of the world’s largest markets are seen as evidence of deglobalization.
The social networks are becoming globally anti-social
For a while, it appeared that social networking would usher in a global “town square” where everyone in the world would converse with everyone else. But that trend is being aggressively reversed.
The social networks themselves are algorithmically deglobalizing social networks. The trending topics and content, “news feed” and, in general, the default selection of content is different for every country. And governments increasingly enforce bans on specific types of content for their own countries.
Sites like Facebook are banned outright in China, Iran, Syria and North Korea. The U.S. is looking to ban TikTok, which is already banned by the U.S. military. Country-specific versioning, censorship and banning of social networks will continue to trend.
But … is deglobalization really a thing?
All these trends and changes look like a broad reversal of the globalization trend, but I think that’s illusory. Economically, nations are becoming more dependent on each other. For example, the poster child for technology isolation, China, depends on exports and contract manufacturing entirely for its continued growth. As its economy matures and population ages, its dependence on the outside world will only grow.
Technology, in fact, increasingly enables not only international travel on an unprecedented scale, it enables lifestyles like mine, where people can live just about anywhere in the world while working for a company that is either anywhere, or itself distributed and nationless.
Many of the factors that appear to be evidence of deglobalization will drive further globalization. For example, the lesson of the coronavirus and its effect on technology companies worldwide is that reliance on a single country for manufacturing, components and labor is risky. The response will be a growing drive to diversify manufacturing internationally.
The political drivers of deglobalization — namely nationalism, populism and regulation — tend to be temporary and cyclical, as well. The pendulum will swing in the other direction, if history is any guide.
Europe’s aggressive regulation of technology companies is divisive, but only temporarily. In some cases, like GDPR, Europe is ahead of the curve and their regulations will be emulated. In others, like actual or proposed requirements for search engines to pay for linking to news sites, the regulations will likely backfire and fail.
And the forces deglobalizing social networking won’t even matter in the long run. Another trend, driven by users rather than governments or companies, is the replacement of giant, all-purpose social networks by small, personal ones. These so-called “anti-social social networks” are the future.
What you should do about these trends
Maybe the world isn’t really deglobalizing. But something is happening. The world is getting more complicated. As large organizations make plans, it’s important to keep in mind this growing complexity. In a nutshell, we’re facing a future of both increasing globalization, but also increasing local requirements and contexts.
That means planners and buyers need to step up their game about local knowledge in dozens of countries around the world. It’s important to become obsessed with flexibility, adaptation, local customization and diversification.
And the coronavirus? Well, there’s good news and bad news. The good news is that science is getting faster at developing vaccines. The bad news is that this kind of outbreak will happen again and again.
Viruses happen. Politics happens. But business also needs to happen. So learn from these trends that create the illusion of deglobalization and adapt. Your organization and your career depend on it.
