The age of Western economic dominance is all but over, according to a recent Griffith University seminar on the impact of the rise of nationalism and populism around the globe.
Speaking ahead of the Business As Usual? event — held by the Griffith Asia Institute (GAI) at the university’s South Bank campus this month and featuring contributions from Professor Sara McGaughey and Adjunct Professor Clinton Dines — Hitosubashi University Associate Professor Jesper Edman explained the risks and opportunities facing multinational firms operating in an increasingly inwardly focused world.
“These are trends that are not really going away,” Associate Professor Edman said. “This is not just about Trump or Brexit or Xi Jinping; these are long-term trends that companies have to deal with.
“The obvious risks can be dealt with easily. The more uncertain ones are what it does with sudden changes — whether sudden sanctions or companies cutting off trade or exports of some kind.
“Companies are living in a much more uncertain world so they have to become much more proactive about this. That’s also where the opportunities come, because if we keep on going down this trajectory, what we could see is a reversal of some of the gains we’ve made from globalisation.”
That reversal is likely to be made all the swifter if multinational firms fail to recognise the value placed on being a meaningful part of a given country’s local economy, Associate Professor Edman said.
“There was a time where, yes, the idea was for companies to become global, or stateless, and it was fine; you were going to be the global organisation and employ people from everywhere,” he said.
“That’s still something to strive for in terms of employing people from everywhere, but you do have to manage your identity and who you are in a much more strategic way.
“This idea of having global identity can be risky, because you need to have some kind of anchor somewhere. You can’t just say ‘We’re a global firm’.
“What ends up happening there, especially if we have this strong nationalism, is no one identifies with you. So I think that’s going to be a really important thing for companies going forward, is how to manage that effectively.”
“We’re going to see a steady relative decline of Europe — potentially even the United States — and a strengthening of the emerging markets.”
As to whether companies are able and prepared to meet the challenges posed by the surge in nationalism and populism around the world, Associate Professor Edman suggested that it’s likely to be an ongoing process over the next several years.
“We’re going to muddle forth and we’re going to take two steps forward, one step back,” he said. “We are going to have more populists being elected, but they’re going to stay in power for one period, maybe two.
“Then people are going to realise that they couldn’t live up to what they promised, so we’re going to swing back the other way. We’re going to go back and forth in this process of trying to figure out a new balance in the world economy.”
Associate Professor Edman concluded that, whatever the outcome for firms themselves, they’ll be facing a new status quo when it comes to the global political and economic environment that will have wide-ranging consequences for companies acting on an international scale.
“I do think that the biggest change is that the developed economies, their dominance is clearly over, and it’s declining,” he said.
“China’s strength, India’s strength, other developing markets, they are on the rise. Africa is a continent of amazing potential that hasn’t been realised yet, with a huge, young population.
“Things like that are going to change over the next 10 years. We’re going to see a steady relative decline of Europe — potentially even the United States — and a strengthening of the emerging markets, which in a sense means they’ll become more equal.
“And that will change geopolitics, I think — and it also means companies will have to think more carefully about their strategies than they have before.”
