Deglobalization & Its Impact on The Built World

After over 5 centuries of globalization, the world’s largest economies are disconnecting to insulate themselves from geopolitical vulnerabilities. The pandemic catalyzed 10 years of digital pull-forward in a matter of 10 months, providing economic superpowers (the European Union, the United States & China) with the technological wherewithal necessary to become totally self-sustainable (such as scalable sustainable energy sources, ubiquitous digital connectivity, automated manufacturing, productivity-driving AI, etc).

The conflict-driven energy crisis in Eastern Europe and strained political relations between the two largest economies on the planet (US & China) furnished international superpowers with a reason to repatriate previously outsourced operations.

In just a 24-hour span last week, the world’s leading central banks illuminated just how disjointed these economies have become over the past 3 years. The US Federal Reserve announced it would be holding interest rates steady Wednesday afternoon (6/14), while the European Central Bank (ECB) pushed their benchmark rate 25-bps higher (to the highest level in 22 years) to fend off the boundless inflationary pressures that continue to plague the region (largely as a result of the energy supply shock from the war in Ukraine).

At the same time, the People’s Bank of China dropped its benchmark rate by 10-bps as the world’s second-largest economy grapples with the international repatriation of production, self-inflicted regulatory measures on its largest tech companies, and overlending to the heart & soul of the Chinese economy, small businesses (SMB/SME), who are now struggling to repay these debts (SMEs represent 60% GDP, 79% of job creation, & 68% of exports in China).

Globalization has long been seen as the cornerstone of economic success with each region leveraging its respective core competencies for the greater good of all. Today, rapidly advancing technology, and mounting geopolitical concerns have pushed prudent economies to function autonomously (not requiring the support of international trading partners).