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?
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.