How the World Really Works: The Science Behind How We Got Here and Where We're Going

by Vaclav Smil

And we now have solid quantitative confirmation that globalization did reach a turning point in the mid-2000s. This development was soon obscured by the Great Recession of 2008, but McKinsey’s analysis of 23 industry value chains (interconnected activities, from design to retail, that deliver final products) spanning 43 countries between 1995 to 2017 shows that goods-producing value chains (still growing slowly in absolute terms) have become significantly less trade-intensive, with exports declining from 28.1 percent of gross output in 2007 to 22.5 percent in 2017.[96] What I see to be the study’s second-most important finding is that, contrary to common perception, only about 18 percent of the global goods trade is now driven by lower labor costs (labor arbitrage), that in many chains this share has been declining throughout the 2010s, and that global value chains are becoming more knowledge-intensive and rely increasingly on highly skilled labor. Similarly, an OECD study shows that the expansion of global value chains stopped in 2011 and since then has slightly declined: there has been less trade in intermediate goods and services.