There are many implications of the increasingly globalized and automated global economy, from less protectionist trade, automation, AI and technology, which will rapidly and increasingly change the global economy. The global economy is headed towards a much more rapid changing future where AI is going to be a major component of the success of your country and access to core technologies is more important than simple industrial production. It’s been called the 4th industrial revolution, coined by the Germans, spearheaded by the Chinese and loathed by the developing world as their ladder to prosperity gets taken out from under their feet.
We’ll go one by one on the implications of these trends:
- Globalization and trade
It’s now much easier to go across borders to trade, do business, set up shop and the such, want to go to Finland? Get a VISA and a Permit and apply for a loan, here I’ve found a link off of Google (http://www.moneral.fi/lainojen-yhdistaminen/), although it’s in Finnish, this just demonstrates how interconnected the global economy has become in recent years. Want to set up a toy factory? Simple, go to a Chinese aggregate site and get in contact with a manufacturer, they can set up preferential rates and negotiations almost immediately.
- Demand aggregation
Hyper-demand aggregation is occurring where increasingly complex supply chains are springing up in manufacturing juggernauts like China and the US, where economies of scale, better supply chains, automation and globalization and cheap internet connectivity has made manufacturing much more agile and competitive, driving prices down and keeping productivity high in countries thought to be de-industrializing. China’s Shenzhen is a great example of this, I as an investment banker have noted that although almost all of my business partners thought that by now China would have no manufacturing left, China’s increasingly automated and complex supply chains + hyper-aggregation has led to a much more competitive Chinese manufacturing sector that stubbornly refuses to let go of mid to high value chain manufacturing. This has been theorized by some to be a cause of premature deindustrialization.
- Automation and AI
Automation and AI are thought to be one of the main reasons why premature deindustrialization has been happening in the developing world, where countries fail to develop industrial bases and are mired in poverty. Expect this trend to get worse as the payback period of robots falls and automation increasingly gets better and better and countries like the US, Germany and China benefit instead of the masses of Africa, South Asia and Latin America.