The shake-out of the past two years has exposed the fragility of many elements of the global financial system, but one thing it has not done that many previous crises have done is flatten the emerging markets. As we find out in our cover story this month (see page 18), the recent financial and economic turmoil has, in fact, accelerated many of the changes that were already under way before the crisis, such as the gradual shift in the balance of economic power from West to East. The erosion of the status of the United States as the world’s only superpower is also speeding up, while the cast-iron grip in which free-market capitalism held the global economic system has weakened considerably during the crisis.
The fact that the emerging markets are busy getting on with building a globalized economy while the West struggles with the fallout from the financial crisis may come as a surprise to some. Many observers, perhaps indulging in a bout of wishful thinking, had interpreted the speed with which the crisis spread around the world as evidence that decoupling was a myth and that the emerging markets were just as dependent as ever on the West for their continued economic progress. In fact, it simply demonstrated how effective globalization can be. In the globalized economy, financial turmoil can be exported around the world just as readily as goods, services, information or disease.
Of course, the emerging markets have been hurt by the collapse in demand from some of their biggest customers. But while the West has been preoccupied with trying to stabilize its crippled banking system, China and Brazil, for example, have been planning new trade pacts that show they’ll be just fine, thank you, whether or not the US or Europe’s economies recover. And the revelation that they are also considering a plan to dump the dollar as their de facto trading currency (see Newsmaker, page 4) is not just another blow to the US’s global prestige; it’s a wake-up call to anyone engaged in international business.
While many of the changes affecting the future of global business are easy to spot, there are less obvious developments taking place that will have a profound impact on any business that has international or global operations. The culture of international business is changing, and those who succeed in the next generation of globalization will be the ones who recognize the shape of the new world and adapt to it.
Until next month.