Business Today

'Globalisation is moving from products to services and data'

Hans-Paul Burkner, Chairman of the Boston Consulting Group, is among the world's top consultants. In an interview with BT's Goutam Das and Sumant Banerji, Burkner defends globalisation. Edited excerpts:
Goutam Das & Sumant Banerji   New Delhi     Print Edition: May 19, 2019
'Globalisation is moving from products to services and data'
Hans-Paul Burkner, Chairman of the Boston Consulting Group (Photograph by Shekhar Ghosh)

A lot of countries are closing borders, and there is a mood of anti-globalisation. There are right-wing attacks. How does this effect business?

It is not just right-wing attack but a populist attack from both sides of the extreme. They are seeing loss of control. In developed countries, they fear losing factories, and jobs. Overall, we have gone through a very positive development across the world, which has reduced poverty, increased life expectancy. More children are going to schools than ever before. Fewer people die than ever before in civil wars and (national) wars.

This does not mean that we want to diminish the suffering that people in Syria and other places are going through. However, we should not forget that enormous progress has been made. A lot of it has to do with globalisation and global cooperation. Before the Cold War, we had iron curtain and all kinds of barriers not just to trade but also movement of people and capital. When we talk of globalisation, it has not been a straight line. There have always been setbacks. Sometimes wars, sometimes difficult economic conditions. But in the end, we have all benefited enormously, certainly in India and Europe. When people feel unhappy, often it is due to local reasons and not globalisation.

Is it also because of growing inequality?

There is this perception and in some countries it is also a reality. We have declining income inequality across the world because emerging markets have done so much better over the last 20-30 years. That has reduced the gap between the haves and the have-nots. In China, 40 years ago, 80-90 per cent of the population was in extreme poverty. Today, it is less than 2-3 per cent. At the same time, some people have become very rich. There is a huge gap between them and those who are doing okay. Now, what would you like to have? Almost everybody out of extreme poverty but some doing so much better? Or everybody being extremely poor? Even in India, extreme poverty has come down but income inequality has risen. Should we feel bad about reducing extreme poverty but at the cost of high inequality?

There is also an argument that inequality leads to lower growth. If there is an oligarchy, or crony capitalism where very few people benefit and a large majority remains in poverty, it hinders development, is bad for the society, and is really a crime. There are some examples of that. In many emerging markets, we see rising standards of living. But the gaps have increased. Often, people focus on the US - they talk not just of the top 1 per cent but the top 0.1 per cent. Those in this segment have increased their incomes by hundreds of times whereas people at the bottom have had very little increase or even stagnation. But the US is not the standard. When you look at Europe, and many emerging markets, things have not developed as extremes. In Nordic countries, Germany, the Benelux (Union), income inequality has risen a bit but not that much. Today, those in the bottom quarter are much better off than they were 30-40 years ago in terms of health, levels of education, housing and life expectancy. We should keep this in mind.

Unfortunately, there is this discussion that everything has become worse. Many people are using just the sentiment. Even in India, over the last 25 years, I have seen enormous progress, though there is still a lot of room for improvement. Yes, we are seeing globalisation being attacked. Companies clearly see the need for re-thinking their global supply-chains, may be do some re-shoring. At the same time, we are moving from products to services and to data in globalisation.

What's visible is products. Trade relative to global GDP is stagnating or has even declined a bit but there is more exchange of services, more flow of data across the borders. There are also many more people moving across borders. You always see waves. Who knows where we will be in 10 years' time. It could be a period of 5-10 years during which we are retreating a bit, but we will move forward again. Overall, there will be more globalisation, but visibility will be less because it is services and data.

The exchange of data and information will create new ways of working together. Globalisation has entered a new stage and we need to understand that it is not coming to an end; it is shifting its quality.

How are companies addressing insecurities at the workplace because of automation and job loss in western countries? How does that pan out in emerging nations?

It is important not to think of the western world as homogeneous. You have record employment in the US, the UK, Germany and many countries. There are issues in southern Europe. You also have significant demographic issues... very much in Japan, South Korea and Taiwan but also in western Europe. There is stagnation or decline in population. The workforce is growing in the US and India. So, currently, we have unemployment in some places but we also have scarcity of people at all levels. Many companies are worrying much more about how to get the talent and are very careful about laying off people. Companies are trying to hold on to their people because getting them back when things pick up again is much more difficult. This picture of 'we will be displaced, machines will do my job and your job', is a false one. Technology can help us address scarcity of skills, jobs and people. In Europe, we are likely to run out of people before we run out of jobs. The same is true of Japan. We have looked at all the job categories and there is a significant decline in working population in Europe and Japan, and you have to compensate with much higher productivity and much higher use of machines and automation.

In emerging markets, it is quite the opposite because there is a demographic dividend. One million people are joining the workforce every month in India, which means that a humongous number of jobs have to be created every year. If companies are looking at productivity, that's at the cost of people?

The Chinese Premier has stated that they created 14 million jobs last year. The Chinese and the Indian economies will have to create the same number of jobs to absorb the incoming flow of people. It is doable. We will not see autonomous taxis and lorries in India anytime soon. There is an enormous opportunity to create more jobs by putting more effort into infrastructure building, in housing. We can also unleash a lot of demand in retailing and logistics. It is important that opening of the economy continues. Supply-chain - from fields to consumers - can create an enormous number of jobs if we put emphasis on it rather than thinking in terms of hand-outs, be it loan waivers or subsidies on fertilisers or seeds. I know half of India's population is in rural areas but if we want to improve their lives, we need to find jobs for them in factories, in the service sector, in the urban areas. Making that change happen will require further steps. With its different states and languages, India is among the most complex countries in the world. But there is a big job to do and it requires investing in people, health and education. A demographic dividend is there only if we have better healthcare, hygiene and education. Otherwise, it is just quantity of people and not people who can meet their full potential.

@Goutam20 and @sumantbanerji

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