The New Normal: De-Globalize, Re-Localize

Posted by: Bruce Nussbaum on April 20, 2009

Everyone is struggling to define what the New Normal will be once we get out of the current Great Recession. I’d like to start a conversation about what the elements will be for that New Normal value paradigm. How much the US and the rest of the world change depends on two factors: 1) how long the deep recession lasts (the Great Depression lasted over a decade, long enough to seriously change attitudes and values); 2) the price of energy (the higher it goes, the faster and deeper we transition off carbon to a greener economy). We must await the development of the two factors of influence.

Yet I would venture that however we emerge, globalization will slow. Look to the slow-food movement of local, seasonal and organic crops as a model. Local means using less energy. Local means knowing the people who grow your food (the CSA food movement is booming). Local means acknowledging community.

The talk out of Washington these days from the Obama Administration is all about Green Jobs and a Green Economy. It also means domestic manufacturing and infrastructure jobs. This is the national economic policy of the government—building a green economy. That means going local.

Finally, financial globalization has failed, mostly because the private markets did globalize and government regulation and oversight did not. China and India escaped the worst of the financial meltdown because their financial markets were not nearly as open as those of the US and Europe. Financial globalization was key to the amazing rise in leverage that so hurt the banks. Money appeared to be everywhere in the world, so why worry about risk? And China’s surplus was key to financing US consumption. Money was global and available so why should people worry about debt?

Wrong.

Financial globalism is unraveling. Other forms of globalism will follow. R&D went global in recent years and, as Mike Mandel points out, it may very well be that this hurt US innovation. It may have distributed innovation knowledge to India, China and Eastern Europe, but the process may have undermined the development of new products and services in the US. This may change now.

So, however it turns out a year or so from now, I’m betting that one big aspect of the New Normal will be De-Globalize, Re-Localize. If you are a corporation out there, you might want to check your consumers to see where their new normals are.

Reader Comments

Ang

April 21, 2009 7:24 AM

Re-localize? One of the fundamentals of the globalization paradigm is that once a certain market segment "globalizes" it does not suddenly revert to localism.

For example, you mention innovation, Multi-national firms have limited incentives to re-localize R&D in some instances. This is not to say that every piece of R&D can and should be outsourced by multinationals, but in situations where it is cost-effective the status-quo of outsourced R&D, globalization of finance, etc. will remain

David Barrie

April 21, 2009 10:32 PM

insanely, to think and behave "locally" demands a certain confidence. you need to believe that actions can effect change. you need to be able to trust neighbors and supply chains. you need to know why it's worth bothering. there's also a lingering cultural idea that self-sufficiency is a manifestation of poverty and lack of sophistication. I'm not sure that billion dollar investments in green economies will translate in to re-localism. but certainly the collapse in real estate values *is* starting to focus minds on the need to work with and exploit other assets: some of which include the skills, land, physical, social and knowledge resources that flow in, around, under and through the local areas in which we live.

Mohan

April 22, 2009 8:31 PM

While there will certainly be a move towards localization in
some aspects, the broader trends in globalization are perhaps irreversible.
It is hard to visualize walking into a Wal-mart anytime soon and
not finding the same percentage of “Made in China” goods. While the fresh produce section may have fewer Mangoes from Costa Rica, we are sure to find Chiquita bananas from some Banana republic thousands of miles away.

slim

May 25, 2009 5:44 AM

Here we go again. Someone is claiming that we will have "a new economy". Pessimism is now in.

Disregard the fact that stocks rise by 7% on average per year (from 1950 to 2000). All this is going to change. El-Erian said so!
Didn't we just see how wrong BusinessWeek was when they proclaimed "a new economy" in 2000? Just because the DowJones has gone from 10,000 to 8,200 in the past 10 years and company prices are artificially low, crackpots come out of the woodwork and confidently state that the markets will go much slower in the future than they have in the past. Hogwash! If you look at the past 10 years, we see that the Dow is at 42% of where it would be if there were annualized 7% stock appreciation over the past 10 years.

The media has pounded the fairy tail mortgage hype into consumers-- 90% of media stories have been about the 3% of people who were in foreclosure. Yet, they haven’t mentioned the 20% of people had held off on buying houses over the past 5 years because they have thought housing was too expensive. Housing is loaded with pent-up demand (first time buyers, buyers moving to larger houses, buyers moving to better neighborhoods, etc). Everyone thought they could be a market timer. Now, these market timers have missed the bottom which occurred in March 2009. I feel so sad for the folks that were tricked by the banks into giving up their homes. Please, don’t try to make your goal so obvious Mr El-Erian.

Chrysti

August 6, 2009 12:22 AM

Interesting, I read about banks like Citibank liquidating foreign assets in an attempt to show a profit. To me, that is a retrenching strategy, which indicates that this company feels overloaded. Many companies went global without strengthening their infrastructure, but continued to leverage and buy as an expansion strategy for growth. I agree that this strategy is no longer desirable and that companies will refocus their efforts locally and divest themselves of global interests. Re-localizing is not necessarily a bad thing; it is necessary to retrench and become more competitive.

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Want to stop talking about innovation and learn how to make it work for you? Bruce Nussbaum takes you deep into the latest thinking about innovation and design with daily scoops, provocative perspectives and case studies. Nussbaum is at the center of a global conversation on the growing discipline of innovation and the deepening field of design thinking. Read him to discover what social networking works—and what doesn’t. Discover where service innovation is going and how experience design is shaping up. Learn which schools are graduating the most creative talent and which consulting firms are the hottest. And get his take on what the smartest companies are doing in the U.S., Asia and Europe, far ahead of the pack.

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