Is the First Globalization Age Already Over? The Foucault Pendulum is Swinging Again

Something happened during these last months to the global manufacturing scenario. It seems as if some events, unconnected to each other, emerged from the river of globalization as obstacles to its apparent uninterrupted flow. In the current panorama, where the fear of another deep recession and the crisis of sovereign debt of some European countries capture the attention of the analysts and the opinion of the general public, few have noticed that there are some structural changes underway. For decades, globalization had worked in one direction only: allocation of FDI in some LCCs in the Far East, most likely in China; manufacturing there; and exporting the product to the rich market countries. But now, there is a new evolution in the final demand markets and in the allocation of the manufacturing power. These two factors are pointing at a different direction in globalization, thus opening a new scenario of rising opportunities, as well as of unknown potential risks.
This new direction includes: the current weak demand of goods in the final markets; the rising costs of stock of finished goods, and the resulting increased risk of their quick obsolescence; the unsolved problems of the general level of quality of goods made in the Far East and China; the rising production costs in the LCCs; the general customer reaction of avoiding those goods that are mass-produced in some remote industrial environment like China or any country where the overall conditions of workers and the protection of the environment are not taken into adequate consideration —all of these factors are stumbling blocks that are rising at the same time; they are forming a “wall” that could be considered both a new barrier for imported goods and a new opportunity for locally made ones.
This new situation is already perceptible in some mature markets like those in Europe and North America. It should not be considered a new chapter of the same history, but rather a new book that still needs to be written. In other words: the manufacturing capability flow can return back to the final markets, so as to make the supply chain shorter and the process more efficient because of the strong reduction of stock. It also lowers the total cost of production, thus reducing the gap of goods imported from the LCC. Likewise, the presence of an adequately trained manpower and the level of quality of goods manufactured in Europe and the USA are advantages which, considered together, support the relocation of production away from the LCCs and back to the old industrial countries.
In this new field of opportunities, governmental industrial policies make the difference. Whereas in Europe political attention is still focused on how to solve the financial crisis of sovereign debts (how myopic is this view!), on the other side of the Atlantic, both the US Federal Government and the State governments are applying various incentive policies (i.e. fiscal incentives on new employees) in order to attract industrial investments. This way they accomplish a reduction of unemployment, an increase of both the GDP and the personal income levels, the recovery of the industrial network. The effect on the economy is decisively beneficial.
There are new requirements on the final demand, and there is a new rising offer (‘new’ because it is not just a recovery of the old production system, but an offer which adds to the history of how it currently works, in other words a new way to manage the offer itself). The link between the new requirements of the final demand and the new rising offer could become a new direction of globalization. The Foucault pendulum is not simply returning to its starting point; it is sketching a new pattern of movement: be close to the final market; be flexible; be prompt to change its offer in response to the final needs; and do all these things at a competitive cost. It is the new competitive game. Whoever adopts quickly this new knowledge of the final market will gain a Schumpeterian advantage over competitors. The race has already  started and it involves also those companies of the LCCs that have already achieved, during these trying times, good levels of management skills and financial capability. They will continue to compete in the market and to expand their presence by moving some of their industrial assets from their original countries to those countries that are close to the final markets. But in this new game, Europe seems absent and astonished, focused on how to remove with a bucket full of holes the river of sovereign debts flowing into its house, instead of deciding how to build a solid new roof of economic growth that can protect it from the heavy rain of impending recession.
The course of history, as that of a river, shows changes in direction. Sailing successfully requires Keynesian “animal spirit” vocation, intelligence, and farsightedness from both the people and the governments.