The new Globalisation: products localise as services globalise

Globalisation holding handsWe are used to thinking about globalisation as a phenomenon involving products. Economic liberals see it as a good thing, enabling the law of comparative advantage to improve the lives of people all over the world, and uniting nations in peaceful trade instead of sundering them in war. Their opponents on both the political left and right see it as a bad thing, impoverishing their own citizens as cheap goods flood in from “over there”.

Hamburger headGlobalisation is not new. When in 1492 Columbus sailed the ocean blue, he kicked off a massive wave of globalisation, but it was neither the first nor the last. The phenomenon gathered pace in the decades following World War Two, as economies recovered from war, and new technologies reduced the cost of transport and communication. It accelerated further during the 1970s, as containerisation kicked in, and China adopted capitalism (in practice if not in name).

But two current technology trends look set to reverse the globalisation of manufacturing and exchanging products. 3D printing has been around for decades, but the lapse of key patents, and the improvements in their software mean that 3D printers are now ready for prime-time. They are being used to build cars, houses, toys, and spare parts for spacecraft. They are still searching for their killer app, and for better ability to use mixed materials, but it is clear that in coming years, many products which would have been manufactured abroad and shipped to a store near you will instead be printed in your own home, or at a neighbourhood 3D printing facility.

The other globalisation-reversing technology is automation. The prices of industrial robots are falling fast, and their safety and user-friendliness is increasing. The competitive advantage of China’s cheap labour is disappearing. It costs the same to buy a robot here as it does there. (China knows this, and is investing in industrial robots faster than anyone else, partly in a bid to make sure its fast-growing domestic consumer market is supplied by Chinese companies rather than foreigners.)

But while globalisation may be going into reverse in products, services are moving in the opposite direction.

Traditionally, services have been local affairs: conceived, negotiated and transacted by people living in close proximity. With a few exceptions (in particular, some financial services) they have been too inexpensive to convey over large distances, and barriers which stood in the way included culture, and the cost and effectiveness of transport and communications.

These barriers are going or gone. The communications revolutions of the 20th century and the powerful global appeal of American culture have plastered a layer of global homogeneity over the world’s multitude of still-vibrant local cultures. Fast-improving bandwidth and interactivity in the internet means that services like media become ever easier to transmit around the world. Virtual reality will sharply accelerate that process.

Professional services like accounting and management consultancy can increasingly be delivered globally. E-commerce continues to take share from the High Street, and artificial intelligence is enabling healthcare and educational services to be delivered remotely, and globally.

As products de-globalise, services are globalising. Something to cheer both the champions and opponents of globalisation, then.

Services-and-Products

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