Deglobalization: The ultimate ‘fake news’ story

This then begs the question why is there so much talk of deglobalization? Whilst numerous explanations come to mind the most logical one seems to be around the need for political leaders to create a narrative for their voters which suggests that he or she (i.e. the leader) is the person who can provide deliverance from economic misery. After all, unless a leader creates a bogeyman there isn’t much to separate him from his rivals on matters of basic economic policy (for example, everybody believes these days that independent central banks are a good thing).

The fact that that anti-trade rhetoric has not impacted flows of goods & money around the world is a tribute to the strength of globalization. An article written by Paul Wiseman, the Economics writer for the Associated Press, captures this point nicely. Wiseman says, “America’s deficit in goods and services now exceeds what it was under President Barack Obama. Steel and aluminium makers have cut jobs despite Trump’s protectionist policies on their behalf. His deals made scarcely a ripple in a $20 trillion economy” (read more here).

If de-globalisation is a myth and if the globalisation of trade and capital flows continues apace then who are the winners and losers? The winners obviously are Emerging Markets – most obviously the large economies of China and India and increasingly smaller, vibrant markets such as Bangladesh and Vietnam. Large global companies listed in the Western world e.g. Apple, Google, Nestle and Diageo are also major beneficiaries of the continued rise of Emerging Markets. The casualties of globalisation are inefficient companies – regardless of location – whose factories and operations continue to be predominantly domestic or whose domestic factories have been unable to rise to the challenge of introducing labor-saving technology such as robotization and other efficiencies. Unless sheltered from global competition by tariffs or specific local factors (e.g. the market for barbers is necessarily local, not global), they will be unable to compete with efficient companies operating on a global scale without necessarily being giants. Indeed, some of the most promising plays on globalisation are small cap companies operating in niche markets on a global scale.

Mark Mobius: Founder, Mobius Capital Partners LLP. Saurabh Mukherjea, Marcellus Investment Managers. The authors thank Nandita Rajhansa at Marcellus Investment Managers for her help with this piece.