Russia’s invasion of Ukraine has led to a new round of predictions that the end of globalization is nigh, much like we saw at the beginning of the Covid-19 pandemic. However, global cross-border flows have rebounded strongly since the early part of the pandemic. In our view, the war will likely reduce many types of international business activity and cause some shifts in their geography, but it will not lead to a collapse of international flows.
The State of Globalization in 2022
As companies contemplate adjustments to their global strategies, it is important to recognize how much continuity there still is even in a period of wrenching change. The idea of a world where economic efficiency alone drives patterns of international flows was always a myth. Globalization has always been an uneven process, with cross-country differences and international conflicts significantly dampening international flows. That’s a big part of why — even before the present crisis in Ukraine — only about 20% of global economic output ended up in a different country from where it was produced. As the landscape shifts, global strategies must be updated, but managers should avoid the costly overreactions that tend to follow major shocks to globalization.