For decades, the anti-globalisation movement has been associated with dissenting leftist radicals holding protests at meetings of ‘capitalist’ international organisations. These activists have now been joined by the masses on both sides of the Atlantic, who have given several displays of their dislike of globalisation through the ballot boxes in 2016.
Are we witnessing a watershed moment in history right now? And what would that mean for international companies and their investors, who have been the major benefactors of globalisation during the past decades?
Of course, not all who voted for Trump did so because of his anti-globalisation rhetoric. Some Brexiteers even saw their vote to leave the EU as one endorsing more globalisation rather than less. However, it is fair to say that disappointment with the impact of globalisation on their personal lives was a factor for many, if not most of the electorate that voted for Brexit and Trump. And the fact this anti-globalisation vote occurred precisely in the two countries that could easily be called the cradle of globalisation, is of course of high symbolic value.
The retreat of globalisation
“These recent two votes have cemented a trend. It could be a blip but I don’t think it will be,” says Gervais Williams, CEO of Miton, a London-based asset manager that specialises in investing in mid- and small-cap companies. Williams has just published a book on the topic, carrying the apt title ‘The Retreat of Globalisation’.
"It seems appropriate to prioritise those companies with capital projects on short payback periods over those with higher internal rates of return that stretch off further into the future" - Gervais Williams
“There have been deep-seated changes in the electorate. I believe the direction of travel is clear,” he says.
It has been for a while. Populist, nativist political movements have sprung up all across Europe since the start of the century. In fact, the retreat of globalisation is already well underway: world trade has been growing slower than the world economy as a whole since 2008, breaking with a decades-long trend. Trade as a percentage of world GDP grew from 24.5% in 1967 to more than 61% in 2008. In 2016, it stood at 57.7% of GDP. (see ‘Growth of trade’ graph, opposite page).
Since the days of Adam Smith and David Ricardo, international trade has been considered perhaps the most powerful driving force for GDP growth, along with technological innovation. Declining global trade has indeed historically been associated with a global recession. The Great Depression, the golden age of protectionism in the 1930s, is perhaps the most powerful example of that. There are certain parallels between the current political and economic environment and the 1930s, when nationalism and protectionism were also on the rise, as were certain politicians who exploited such sentiments.
