Machines, Asia And Fintech – Rise of Globalization and Protectionism as a Consequence

Grow VC Group Research Paper 1/2017 - Shaping a New World Order

Jobs of 3.5M men that drive cars or trucks in the US are going to disappear through the advent of self-driving cars. Each former driver could get a new job in the future if they moved to China to teach English. Prime Minister Abe gave to President Trump a golf club, when they met in November; it was actually a product of a Chinese company. These stories are just some anecdotes, but they illustrate, how the world is changing. In the past, industrial revolutions have caused political destabilization, new political movements and even civil wars.

The United States and the United Kingdom have been at the forefront of economic development since the Second World War. Both countries have benefited from these networks and often seen themselves as leaders in global development, often above all others earned by their struggles and ultimate victory during the Second World War. The rise of Asia has been underway for decades. In contrast to today’s China, Japan never challenged the US in foreign policy and was fully dependent on the US from a military perspective.

Last year Chinese companies completed the most international M&A transactions in the world. Asian Infrastructure Investment Bank was a Chinese initiative, but it has now representation from dozens of countries even though the US had a negative initial reaction to it and saw it as an attempt by China to challenge the positions of institutions like the World Bank and IMF. The US has accused China of protectionism and of currency manipulation. At the same time, most of countries or market areas, including the US and EU, protect their own markets through various restrictions, customs policies and requirements for local market approval.

Asia is far larger than only China. ASEAN countries have for decades worked for economic cooperation and integration. They were a key coalition in the Trans-Pacific Partnership (TPP) which President Trump has decided to abandon. ASEAN countries have disagreements with China regarding the South China Sea and especially China’s desire to expand its influence in the region. Now the Trump Administration is seeking to challenge China’s position, while opening the door for China to lead economic policy in the region.

Automation, digitalization and artificial intelligence are having an increased impact in world markets and fundamentally changing jobs. Artificial intelligence, Turing Machine, already won a war 70 years ago and had been a major contributor to the post-war security and geopolitics new order that we’d been living in until recently. Countries are also vastly different in how prepared they are for the paradigm shift of the machines.

Digitalization also changes the face of the economy. It allows the rapid creation of global business with minimal equity. Digitalization allows true grass roots global business, where that was earlier limited to multinational companies. Digitization also raises new political and security questions. One example is data security and privacy.

Some people say distributed ledger technology (such as blockchain) will do for finance what TCP/IP did for the Internet – it could change the whole finance world, just as the Internet has changed many businesses and operations since the 1990s. When finance and fintech services become globally distributed, then we can talk about real globalization.

When Asia is emerging to be a leading economy in the world, several countries and cities in Asia are also building their future positions. Brexit has an impact on the role of London as a European and global finance center. Emerging economies, intelligent machines, and raise of middle class in the emerging markets are shaping now the global economy, but also all local economies. More democratic finance services should include all people in the world to use them, enable run business and raise funding anywhere in the world, and enable fairer systems to collect taxes and distribute wealth.

Read Grow VC Group’s latest research paper that focuses on the mega trends in the world and their influence on finance, fintech and economies. You can get the report here.