One stark reality exposed by the pandemic is “the fragility that 50 years of purposeful globalization has brought to various countries and markets,” writes Rana Foroohar, Financial Times global business columnist, in her new book, Homecoming: The Path to Prosperity in a Post-Global World.
Remember how scarce personal protection equipment was in the early months of the pandemic? The world’s one-track focus on corporate efficiency and profit through the tenets of globalization was a primary factor in that problem. According to Foroohar, the pandemic signaled the beginning of the end of globalization.
What does that mean for entrepreneurs looking to capitalize on the changes this new reality will bring?
Foroohar provides a thorough review and uncovers valuable lessons for entrepreneurs as she makes the case that a new age of economic localization will reunite place and prosperity, putting an end to the last half-century of globalization.
Homecoming explores both the challenges and the possibilities of the rise of local, regional and homegrown businesses, and how this new era can usher in a more equitable and prosperous future.
Foroohar argues that the neoliberal economic philosophy (the hallmark of globalization) prioritizes efficiency and profit over resilience and local prosperity. In the past five decades, it led to tremendous inequality and economic insecurity—and an overall distrust in institutions that influence the way the world runs. However, Foroohar sees a change on the horizon: The pendulum will swing back, ushering in a wave of local, regional and homegrown businesses where local prosperity trumps profit as businesses become more stakeholder-focused with an eye toward equity.
Here are six ways we see that a retreat from globalization could impact entrepreneurs.
1. Place matters more than ever
More companies are near-shoring production and localizing or regionalizing operations because, as Foroohar explains, “rising wages in emerging markets and increasing energy inflation have made it more costly and less productive to ship products all over the world.”
“It’s impossible to know yet how this arbitrage for jobs, place and labor will play out,” Foroohar writes. “But when it comes to prosperity, place matters—a lot.”
Entrepreneurs can take advantage of a renewed focus on stakeholders and regionalization in their businesses by building relationships with and serving the people who are nearby.
She continued: “Are we serving all of society? Are we serving the communities we exist within? Or are we just serving ourselves? It’s a question that many industries and institutions, particularly in the most globalized area, technology, will soon be asking themselves.”
2. Go green, and make it local
Foroohar noted a shift “to more locally made products and services, particularly those that are part of the green-energy transition.”
In the U.S., “localnomics” appeals to voters both on the left and the right side of the political and economic spectrums for different reasons. On the left, it supports Green New Deal thinking, and on the right, it appeals to “security-conscious conservatives worried about sharing technological secrets with geopolitical nemeses. Both groups are interested in connecting the dots among sustainable energy, jobs, and economic and geopolitical security.”
3. Self-sufficiency and manufacturing matter
Half a century ago, offshoring industries such as furniture and textiles that could be made far more cheaply in another country made economic sense (at least for the companies doing it). But now that wages have risen along with domestic demand in many of those formerly lower-wage countries, it no longer makes sense.
Foroohar describes this production shift as nothing short of an “industrial renaissance,” and she notes that it “has been brewing for more than a decade.”
Millennials and Gen Zers are seeking more sustainable, locally produced goods. Additive manufacturing (think 3-D printing) is a way that regions without access to specific products might access some of the necessary parts that aren’t readily available.
“Manufacturing matters not as some kind of silver-bullet solution to middle-class employment, because robots will do more and more factory jobs—but because owning key parts of the industrial commons is crucial for innovation,” Foroohar noted.
4. Care jobs will be key
While manufacturing jobs were once a significant slice of place-based employment, in the future, care jobs may step into their role. Care jobs involve high-touch careers—think nurses, teachers and in-home care for growing populations of seniors, the differently-abled and the very young.
“Care jobs could be a key part of connecting wealth and employment in forgotten communities,” Foroohar writes. “What’s more, some experts estimate that these jobs could become an even bigger driver of wealth than old-line manufacturing jobs were, producing as much as double the wealth for local communities.”
5. Training may overtake education
“There is a growing revival of the secondary school vocational programs [in the U.S.] that liberals unwisely threw away in the seventies. Getting rid of such programs was a huge mistake, given that about two-thirds of the jobs created in the U.S. don’t require a four-year degree,” Foroohar explained. “And yet so many young people are taking on crippling debt to try to obtain one.”
She continued, “As secondary and higher education continues to evolve, I suspect the common thread will be to graduate students with practical skills but also with the core liberal arts math and science background that takes them beyond a particular vocation into a larger world of enlightenment values. That’s key, given that we don’t really know what the future jobs will be. We simply know that they’ll require both technological skills and emotional intelligence.”
6. Crucial industries will be re-shored
The pandemic made it clear that “seemingly disparate issues (climate change, supply chain disruption, inflation, financial instability, inequality, and nationalism) are, in fact, intricately related.”
Foroohar thinks the fact that 92% of global semiconductor chip fabrication capacity is concentrated in Taiwan, one of the world’s most contentious geopolitical regions, isn’t just bad politics —it’s bad economics.
“It’s not an overstatement to say that making U.S. supply chains resilient in the face of risks, be they climate-related, geopolitical, or simply unpredicted, is now the Biden administration’s number one economic priority,” Foroohar wrote. “This will inevitably lead to more reshoring of crucial industries.”
Overall, Foroohar is optimistic about the potential changes brewing in this move away from globalized economies:
“If the last 40 years were about unfettered commerce economic ‘efficiency,’ and no holds barred globalization, the next 40 years will be about bolstering community resilience and finding a new way to think about what economic success really means—and how it should be measured,” she wrote.
“While paradigm shifts can be scary, they also bring opportunity. Supply chain disruption … isn’t a blip, but rather the new normal. Business is looking to produce more products and services locally as a way to smooth such disruptions and the inflationary pressures that result.”
“Pandemics always change things, profoundly reshaping cities, countries and the world—and this time will be no different,” Foroohar stated. “If we’re lucky, the result may be a world that is fairer, stabler, more varied, and a lot more interesting than what came before.”
And that’s a world where small to mid-sized entrepreneurs and business owners, like the kind who make up the international EO community, will prosper, along with their customers, partners, employees and local communities.
Contributed by Anne-Wallis Droter, a writer and editor for the Entrepreneurs’ Organization. EO has no relationship with the book publisher or author and received no compensation for this book review.