Jacques Bughin is Director of the McKinsey Global Institute
This article is based on a speech delivered at Friends of Europe’s annual State of Europe conference, 12 October 2017.
The US elections, Brexit, and more recently the German elections and tensions in Spain are among a series of events in recent months that demonstrate a self-centred discontent with globalisation. This rise of what some now call “glob-alone-isation” is not going away anytime soon, or easily. The tendency for nationalism is correlated with a perception among many Europeans that their countries are losing influence in the world.1
The rhetoric about unfair competition in trade of goods and services has now expanded to include the risks of human flows and migration. While refugees make up only 10% of all migrants, their number has nevertheless risen by about 25 million in 50 years, according to research by the McKinsey Global Institute.2 Our research also tells us that, with income inequality on the rise in developed countries, those feeling the most pressure are twice as inclined to claim they are being adversely affected by migration and trade, and are thus eager to resort to nationalism.3
Should we simply take note, or should we counter these perceptions to ensure greater prosperity in Europe? Here are seven brief yet crucial facts about globalisation from a European perspective, along with some paths forward.
Most companies think EU membership has been good for business
1. Economically, globalisation matters. In spring 2017, we asked more than 2,000 C-suite executives in Europe which trends have the most important impact on their business’s performance and their will to invest and thus nurture the European economy. They told us that the pressure of anti-globalisation, nationalism and increased migration are among the top factors running counter to increased investment.4
2. A majority of businesses want “more Europe”. The EU has delivered 60 years of peace and prosperity, with faster GDP per capita growth than the US over that period. Our research also found that, today, most companies (53%) think EU membership has been good for their businesses, with only 15% disagreeing while the rest feel neutral. Importantly, 65% of businesses want “more Europe” rather than less.5
3. Globalisation is changing rapidly – and it’s all about the rise of data flows. Every day, around 25 million cross-border Google searches lead to e-commerce. Those flows have grown by a factor of 45 in the last 15 years, and are projected to grow another nine-fold in the next five years. Their contribution to our economies is today as large as the ones of traditional trade in goods and services.6 Data flows should positively affect growth; in fact, our recent research suggests that in the short term, they contribute 50 basis points to the EU-28’s GDP.7
Just 42% of citizens say they trust the EU
4. Perception never goes away if not managed; we need to do more about migration. A recent Eurobarometer shows that 38% of EU citizens think of migration as one of the two most important issues facing Europe, just behind terrorism at 44%.8 Multiple experiments provide evidence that migration can be managed – and best practice could be scaled across Europe. Ideas to consider may include developing financial transfer mechanisms to support southern and eastern EU countries in dealing with border protection, or jointly developing genuinely attractive incentives for some migrants to return to their home countries.
5. A proof of our strength: are we able to defend ourselves? One of the arguments about whether Europe is a viable concept often concerns our ability to guarantee our own security. Europe spends half as much as the United States on defence (€227 billion vs €545 billion), despite a similar-sized economy. A majority of European citizens across 10 countries (between 55-90%) says the EU should play a more active global role.9 In addition to the politically challenging ideas of harmonising European defence, Europe has a range of initiatives it could adopt. For example, it could increase cost-sharing and pooling of security and defence resources at the European level, enhance Europe’s cybersecurity capabilities, or even launch a European “DARPA”, along the lines of the US Defense Advanced Research Projects Agency, to focus spending on key emerging technologies.
6. Resist pessimism about the future of work. Alongside the backlash to globalisation, another fear stalking our societies is that new technologies, especially artificial intelligence and automation, will kill many jobs. Perhaps surprisingly, European citizens on the whole remain optimistic about the benefits from those technologies. Our analysis suggests that there could be as many new jobs created as displaced, showing the resilience of labour markets.10 The key will be to work collegially on new education and training roadmaps and new forms of work, as well as catching up on our digital delays.
7. Last but not least, you can only fight fear with trust. Europe, like much of the world, is facing a crisis of institutional confidence, in an era of fake news, authoritarianism and populism. Just 42% of citizens now say they tend to trust the EU, down from 57% ten years ago.11 As a consequence, there is a sense that democracy is no longer sufficiently effective. To rebuild trust, European citizens need to be more engaged in the European project. In addition to creating a more attractive European narrative and improving government service delivery, Europe may aspire to directly engage citizens in policymaking decisions. The public consultations French president Emmanuel Macron proposed at the end of September are one welcome experiment.
1 Katie Simmons and Bruce Stokes, Populism and global engagement: Europe, North America and emerging economies, Pew Research Center, 8 December 2016.
2 People on the move: Global migration’s impact and opportunity, McKinsey Global Institute, December 2016.
3 Poorer than their parents? Flat or falling incomes in advanced economies, McKinsey Global Institute, July 2016.
4 European business: Overcoming uncertainty, strengthening recovery, McKinsey Global Institute, May 2017.
6 Jacques Bughin and Susan Lund, The ascendancy of international data flows, VoxEU, 9 January 2017.
7 European business: Overcoming uncertainty, strengthening recovery, McKinsey Global Institute, May 2017.
8 Standard Eurobarometer 87,. European Commission, Spring 2017.
9 Post-truth, post-West, post-order, Munich Security Report 2017.
11 Shaping the future of work in Europe’s digital frontrunners, McKinsey & Company, October 2017.
10 Standard Eurobarometer 87, European Commission, Spring 2017.
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