As globalization continues to shape financial markets around the world, the issue of international trade is becoming an increasingly unstable force. In the last 25 years alone, international trade has increased at an astounding rate, with trade in 2007 alone accounting for 60% of total global GDP; yet in more recent years, global trade has begun to see a decrease, with only 55% of the global GDP accounting for trade, and capital flow within the United States decreasing from 16% to a mere 2% in a ten year span. Even in terms of human movement, European immigration rates have seen a decrease in five million people in the last four years, with the flow of people entering the US from Mexico similarly coming in at negative numbers over the past three years.
Interestingly, while the global economic landscape may currently be in a state of flux, the social landscape may be in an even more unstable state. With the dramatic rise of countries such as China, India, Indonesia and Brazil, inequality among nations has declined dramatically over the past 25 years; conversely, inequality within countries simultaneously continues to rise. Ultimately, these increasingly dramatic shifts reveal the need for less focus on growth and trade and more focus on redistribution in terms of both the social and economic global landscape, which raises two important questions: first, are new strategies needed to cure globalization’s current fluctuating status? And how can the private sector aid in this effort?
One of the biggest challenges that faces today’s global economy is the increasing lack of confidence in the private sector as a force for good. Indeed, with economic anxiety on the rise throughout the US and the world, the issue of expanding trade agendas between the US and other countries continues to remain controversial in today’s political landscape, with the US’s decreased role as a global policeman and value leader also leading to a general lack of trust in the US government and the business sector. Therefore, without the private sector’s ability to instill confidence in the general population, these problems will most likely continue into the foreseeable future.
Despite this fear over international trade, over 40 million Americans’ jobs are directly tied to international commerce—meaning that the total isolation some Americans demand could cost 12% of the population their jobs. Even more concerning, with an abysmal economic and job growth rate of 1.6 – 2%, it is not only necessary, but also imperative that the US expands trading and exports even further in order to reach a more healthy and sustainable 3 – 4% growth rate.
Unfortunately, a general lack of knowledge in international issues and definitions may cause the current trend of distrust towards international relations to continue. When polled about trade agreements between the US and foreign countries, for example, a majority of US citizens agreed that these agreements were beneficial; but when asked about the same issues in more economic terms—such as using the term T-TIP—most polled citizens showed a general lack of knowledge about international terms, despite the fact they showed earlier indications of agreeing with such practices. Perhaps most concerning of all, when asked if they were for or against free trade relations, many people were expressly against the idea due to a misinterpretation of the term, citing they did not want to “trade for free” with foreign countries.
Even if the US were to increase their involvement in international relations, the cost needed to accomplish all of the UN’s Social Development Goals would cost over 100 trillion dollars. With only 135 billion USD being spent on global aid by all countries annually, however, not even 1% of the total needed is being spent. It is becoming increasingly apparent, therefore, that the public sector cannot handle global social issues alone, and will need assistance from the private sector in order to make the progress necessary to accomplishing the SDGs.
While many differing opinions exist around the benefits of globalization, the world’s increasingly connected landscape has undoubtedly created a lot of social good. In the past 30 years, for example, poverty rates have decreased from 2 billion to 700 million around the world and show no sign of stopping anytime soon. In the US specifically, issues such as indoor plumbing—which 17% of Americans did not have access to even as recently as 1960’s—have been nearly erased, with over 99% of Americans now having access to indoor plumbing. These factors ultimately demonstrate just how important globalization is to solving the world’s biggest social problems, and even more importantly how crucial it is for the private sector to be involved in these issues.
Indeed, it has become overwhelmingly apparent that the private sector is key to creating permanent social good. While a mere 20 years ago the private sector lacked the interest and investment necessary to today’s social infrastructure, this huge shift away from public funding has created a system in which private funding is now the go to method for solving social issues. In fact, many private companies are now in charge of traditionally publicly funded projects, such as building power plants, maintaining health clinics and rural schools, and implementing large-scale transportation systems. Even more surprising, this shift in private sector investment has not only created more rapid job creation, increased innovation and more personal profit, but has also increased the speed at which social issues are being resolved.
However, in order to restore confidence in business as a force for social good, there are several things the private sector must do: first, the relationship between business and workers needs to include new training methods to ready the workforce for future technologies and potential issues, as well as provide job counseling, assistance and relocation services; second, business needs to think through how best to represent America’s interests through commercial transactions around the world; and third, business needs to more heavily focus on rebuilding America’s infrastructure through investments in education and encouraging an immigration system that creates more free movement of goods and people.
Ultimately, the private sector will need better analytics and data to assist investors in finding opportunities that are both profitable and deliver strong returns while simultaneously addressing challenges at the heart of global instability. But by focusing on both the economic and social landscape—such as using advocacy to push out tax and regulatory strategies in order to channel more resources into social projects, or by developing financial instruments and mechanisms required to put capital into the field efficiently in order to track social-based projects more effectively—the private sector can begin to influence society in a more positive way and reclaim their ability to truly be a force for good.
Participants: Myron Brilliant, EVP & Head of International Affairs, US Chamber of Commerce; Elizabeth Littlefield, President, Overseas Private Investment Corporation; Tomicah Tillemann, Director, Bretton Woods II Program; David Wilton, Managing Director AIP Private Markets, Morgan Stanley; and, Moderator: Fareed Zakaria, Host, CNN.
Photo: Fareed Zakaria giving a keynote at the 2016 Global Action Summit in Nashville. Photo by Paul J. Hughes.