The end of globalisation

Global economic growth has been disappointing for some years now – and it is still flagging. This year the global growth rate will probably be no more than 2.7 per cent. This is the lowest rate since crisis year 2009.

One of the most important reasons for the sluggish pace of growth is to be found in the companies’ reluctance to invest, especially in the industrialised countries. In the United States companies have already been investing less in new plant and equipment for as long as three quarters. In other important national economies companies have also been conspicuously reluctant to invest for some time now.

Often cited as possible reasons for this slack investment activity are pessimistic turnover forecasts, restrictive lending by banks or the heightened global uncertainty. In our view, there is yet one more reason for the disappointing investment activity: the trend towards globalisation in the world economy, which has been slowing notably for some time.

This trend reversal in globalisation may be inferred not only from the downturn in world trade, but also from the falling trend charted by direct investments, which may also be described as the “driving force of globalisation.” This explains not only the conspicuous weakness of investment, but also the economy’s concentration on domestic demand, which can be observed in almost all important countries. The disappointing productivity trend of the last few years – which is also an almost global phenomenon – probably also has something to do with the fact that the advantages that could still be drawn from the internationalisation of production and sales relationships – for example in the nineties – are now practically negligible.

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