Eight drivers of change

Eight drivers of change: Globalisation


Of all the drivers of change, the one which arguably receives the least attention is the impact of global dynamics. It is also perhaps the driver that is least easy to predict. International developments nonetheless have a profound effect on the world of work.

The last 30 years has been a period of rapid globalisation, with international trade as a proportion of global GDP increasing by 50% from just over a third to nearly 60% over this period. Globalisation has seen manufacturing shift from the richer countries with higher labour costs to those with lower ones. Jobs first moved to places such as China and Mexico and, since then, one of the most significant shifts has been the rise in China’s importance in world trade. In May 2021, The Times reported that Chinese investment into the UK had now reached £135 bn. The growth of China and Mexico has meant their labour costs have increased, leading many manufacturers to look elsewhere for lower-cost jurisdictions such as Vietnam. Clothing manufacture has moved to countries including India and Bangladesh. Services have followed a similar course, with the outsourcing of call centres and the like to countries such as India and the Philippines.

It has not just been the search of cost-savings that has driven globalisation. Businesses have sought to sell their goods and services to developing markets and to establish operations closer to those customers. Global businesses have looked to rationalise supply chains and attract the best people wherever they might be based. Reversing this trend may seem unlikely, although there are good reasons for uncertainty.

Domestic and global politics are much more uncertain and fragile today than they have been for some time. Nativist populism and protectionist trade policies have been gaining support, with Brexit and Donald Trump’s presidency providing two examples. On the other hand, the impact of Joe Biden’s more internationalist outlook to trade should not be underestimated. Crystal-ball gazing is not easy as we shift from a unipolar world, with an omni-powerful US, to a bipolar one with China and the US competing for pre-eminence.

Meanwhile, the costs and delays of shipping goods from continent to continent (subscription required) have greatly increased, significantly undermining the savings to be made by manufacturing in low-cost countries.