What is 'Peak Globalization'?

Peak globalization is a theoretical point at which the trend toward more integrated world economies reverses or halts. Peak globalization is a similar concept to peak oil, which is the point where global oil production enters a permanent decline. Unlike oil, globalization is an economic trend rather than a commodity, so there are no hard physical limits to globalization. Instead, peak globalization can be caused by a collection of factors such as domestic pushback to the loss of jobs due to a decline in exports, increased nationalism, or overall anger at unfair trade practices such as dumping and currency manipulation.

BREAKING DOWN 'Peak Globalization'

Peak globalization has been a popular subject of discussion since Brexit and the mounting challenges facing bilateral and multinational trade deals. Although globalization has a net positive effect on populations, on average, the uneven distribution of the gains has created resentment. For example, a $10 T-shirt at a local store may be a source of frustration to an individual who as been laid-off from a domestic textiles factory due to international competition. The tendency of manufacturing companies to move operations to regions with cheaper labor has been detrimental to many populations.

Peak Globalization and Global Jobs

Offshoring in a globalized world creates tensions around immigration. In 2016, Donald Trump became the presidential nominee for the Republican Party in part by claiming that trade deals are unfair and are destroying jobs, and that immigration is detrimental to America. Trump’s success in gaining the nomination in addition to Brexit and other nationalist movements have some believing that peak globalization has been reached and that the trend of freer trade will soon reverse.

International trade is a popular subject among politicians as more businesses operate in a global labor market. From an investor’s point of view, a company should seek the most cost-effective ways of providing goods or services. Increasingly, this has required moving production and services – and the associated jobs – to regions where labor is cheap. From a politician's point of view, if jobs are moved out of a district, whether it is to the next state or another country, resentment will build among residents. When global economic growth is strong, regional jobs are often stable because opportunities are created even as others move across borders. 
 
The movement of physical goods may slow, if not decline, because new technologies and the global supply chain is enabling “production-at-the-point-of-consumption” for products such as energy, food and products. However, the movement of people, information and data worldwide is increasing and is not expected to slow in the near future.
 
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