Globalisation remains an irresistible trend

By Frank-Jürgen Richter

South China Morning Post, September 25, 2012

Frank-Jurgen Richter says while there are still kinks in the process, these will be ironed out.

We hear all too often today the leaders of various nations railing about keeping jobs at home, keeping factories at home, creating a more insular economy and fighting against the forces of globalisation. The crowds will cheer; so will companies and politicians. But the economists will be rolling their eyes and Theodore Levitt, who popularised the term “globalisation”, will be rolling in his grave. Levitt knew the truth that today’s leaders so badly need to hear: globalisation is not only good for the future, it is inevitable.

One hundred years ago, to make a car in the US, Henry Ford would have bought his steel from a US manufacturer, his wood from a US lumberyard and assembled his car in a US factory using American workers.

Today, things are different; a modern Ford requires parts and materials harvested, mined and assembled in plants, quarries and mines across the world, all delivered precisely and on time. The result is a car that is not only better built than the ones before it, but also made more cheaply and involving more workers across more countries, distributing the benefits of mass production to all.

This means that the same jobs we have had in our respective home countries will not be the same. Whichever country can do a particular job most efficiently will perform that task, and the global economy will benefit from such cost savings.

In theory, globalisation means that the factory worker in China can buy the computer he builds for the same price as the engineer in California who designed it. Moreover, the profits from the computer will be shared between the two countries based on how much of the work is actually performed.

This process will mean that everyone reaps the benefits of their work. At the moment, however, we are still in the process of integrating the world economy and have a long way to go. And there is no sign that the forces of globalisation will slacken.

A united global economy will distribute its wealth and resources to exactly where it is needed, when it is needed. Gone will be the days when cheap crops from US farmers go unused, or when Africans go hungry because they cannot produce enough food. Expect a global currency to emerge, along with global standards for workplace and product safety, efficiency and production prowess.

The road to globalisation will not be an easy one. But the internet has proved how truly connected we are across the world, and this is essentially the first step towards globalisation – communication. Eventually, the bigger pieces like production and distribution will come together and we will finally see the fruits of our labours.

Frank-Jurgen Richter is founder and chairman of Horasis, a global business community