Economic development since the end of the 19th century and up to the third decade of the 21st took place under the centralization landmark. This long process has been largely related to industrial evolution, but not only to it. Centralization turned out to be profitable for almost all spheres of the economy, including finance.
Having reached hypertrophic shapes and sizes by the end of the 20th century, centralization began to actively transform into globalization. In the past, mainly industrial businesses tended to enlarge and actively acquired weaker competitors in various parts of the world.
Over time they have turned into modern financial and industrial corporations, playing the added role of investment banks and insurance companies simultaneously. Such evolution has been smooth and worked great in the absence of a global crisis. Even during the two world wars, the economic stress proved to be regional, and some countries that were not involved in the hot phases of military conflicts were able to get good profits from the situation.
But by the beginning of the 21st century, with the advent of centralized globalization,[1] the integration of countries and regions had reached such a degree that an economic "earthquake" on one continent became impossible without significant "aftershocks" around the globe. The two crises: the so-called "dot-com bubble" of 2000 and the Global Financial Crisis of 2007-2008 have turned to be forerunners of tectonic shifts in the global economy.
The dot-com bubble was related to supply chains and customer interfaces. The rapid development of information technology and telecommunications has led to a hasty reassessment of the capabilities of Internet businesses, which were suddenly able to attract unprecedented investments. Despite the bursting speculative bubble, there has been a business transformation that has spawned tech giants like Google and Amazon but has also ruined numerous traditional businesses.
America Online's takeover of traditional business giant Time Warner at the height of the investment boom in January 2000 has become the hallmark of this dot-com bubble. And the subsequent losses of $ 98.7 billion in 2002 became a good object lesson for those who loved investment rallies with IT startup companies that have not yet proven themselves.
The Global Financial Crisis of 2007–2008 has turned to be a shake-up for the funding chains. [2] Even though the mortgage crisis in the United States played a role of the trigger, many experts believe that the real reason for the collapse was the massive use of financial derivatives.
Also, an important role was played by the greed of investors seeking to obtain maximum profitability without regard to investment risks, the correct assessment of which was carefully hidden by numerous risk hedging operations. Five leading US investment banks ceased to exist in their former shape, and the stock market crash in October 2008 turned to be an anti-record for the US market over the previous 20 years.
I would like to note that despite the serious consequences of what has happened in 2000 and 2008, none of these "precursors of a global earthquake" really influenced the generally accepted foundations of building a business associated with its centralized globalization. The economic locomotive accelerated to unprecedented speeds, continued to rush in the same direction no matter what.
And then 2020 came out with its unexpected COVID pandemic factors, as well as the subsequent policy of isolationism of individual countries, regions, and continents. All this could not but affect the state of the globalist world economy, well-established global production chains, as well as cross-border supply chains, and even social ties.
In conditions of total offensive shock, followed by significant disruption of the existing economic ties, businesses are involuntarily rethinking their operations. This results in the fundamental restructuring of supply chains and funding together with a transformation of sales techniques and customer care infrastructure.
In 2021 we are at the very beginning of the path to renewing everything that was created in the period of industrialization and centralized globalization, which has been lasting from the late 19th century to the present day. Before our eyes, the dismantling of a long-established centralized ecosystem and global corporations as the highest stage of its development begins.
I do not think that it is a conscious and planned decision of the powerful. Most likely it's all part of the natural process of evolution. It could not have happened otherwise, since if one stage comes to its logical conclusion, resting against the ceiling of its development possibilities, then a new one begins.
So, in my opinion, we are at the beginning of an era of total decentralization, aimed to optimize all aspects of states, businesses, and human, thanks to the new opportunities that have opened up as a result of the technological leap in the late 20th - early 21st centuries.
But I dare to suggest that despite all their high-tech tools and seeming very stable, businesses striving to build their monstrous centralized ecosystems that combine everything and everyone are the first under threat today. Modern IT and information technologies will certainly help them, but seemingly good prospects to deeper control their consumers by influencing their decisions can bring just a beautiful mirage on the way of such a business to a valuable success.
Opposed to the unshakable centralized business, distributed communities of consumers are entering the arena. They are united by their desire to change the established practice of the dictates of fat cats and fastened with more sophisticated and flexible IT technologies, capable to integrate millions of "hamsters with gadgets" into relatively large and influential market players.
And the "red flag warning" has already been released. Unexpected ups and downs in the US stock market,[3] caused by the spontaneously organized numerous smaller retail investors, turned to be a bright and clear signal for those who strive to build a hyper-centralized universal "ecosystems" aimed at serving the business owners' interests instead consumers' ones.
The unprecedented development of communications and cryptography, unrivaled computing power in your pocket is not only adults but even many of the children, as well as the habit of the younger generation to resolve all issues online, shall certainly affect the ability of corporations to continue to control customers and impose their conditions as they did it before.
At the same time, globalization is here to stay. Indeed, what has been created and achieved, can't disappear to nowhere. The harmonious chorus of anti-globalists who seek to dance on the bones of transnational corporations just barely indicates the end of the globalization era.
The transboundary and transcontinental ties relying on the Internet, the rapidly disappearing language barriers, the new possibilities of instant payment, and the fast delivery of direct retail orders could lead to a rapid transformation from the hyper-centric globalism of the 20th century to the socially-oriented distributed globalism of the new generation. Thus the existing centralized globalization may be transformed into a decentralized one.[4]
In this process of transformation from the yet existing centralized to decentralized globalization, much will be dismantled or even destroyed for the sake of restructuring and adaptation to the so-called post-pandemic "new normality". But such changes are not at all inhibition, as it might seem at first glance. Most likely, this is a fundamental renewal, which becomes possible only on the condition of solid transformations and rejection of some of the once unshakable rules and axioms of the past. In the long term, we shall get unmatched flexibility and adaptability, which means the chances of synergy will only increase over time.
FOOTNOTES:
[1] CENTRALIZED GLOBALIZATION is a consequence of an evolutionary model based on centralization, which at its apogee swept the whole world, subordinating it to the interests of a narrow circle of financial and industrial groups.
[2] FUNDING CHAIN - is a set of activities aimed to distribute financial resources from currency issuers to users. Such distribution is carried out for profit by banks, financial corporations, and other financial institutions. For example, an investment bank with access to sources of cheap capital with large volumes distributes it in areas where other regional market participants need funding but are severely limited in their ability to obtain it. Since the cost of capital is always much higher in developing regions and countries, investment banks receive good returns.
[3] This refers to the GameStop story about a group of retail investors from Reddit who gave Wall Street a wild week and subsequent fluctuations.
«How GameStop And An Army Of Reddit Traders Exposed The Riskiest Market In Decades»
«GameStop, Reddit and the Battle of Wall Street»
[4] DECENTRALIZED GLOBALIZATION - is a newer stage in the development of globalization. It retains its basic property of the global world coverage, but at the same time loses the property of centralization, which is being replaced by the flexible self-organized smaller players united into competitive cross-border structures with their ability to successfully compete with the deprecating centralized businesses.