Ernst & Young’s  list of 7 global mega-trends (see previous blog entry below) is incisive. What’s more important is what the 7 show about 1 mega-mega-trend.

  •  E&Y’s shift of power from East to West => particularly, the rise of China (& India) among emerging markets
  • E&Y’s changing financial landscape => structural imbalances in global liquidity and currency exchange rates
  • E&Y’s overhaul of regulatory environment + rising economic importance of resources & commodities => climate change

Compellingly, China is at the epicenter of all three of these global tectonics.  China is simultaneously the world’s fastest growing economy, its greatest holder of foreign exchange surpluses, and its largest carbon-emitter . More compellingly, these three surface-facts of today’s world straddle a common fault-line:   a quarter century of rapid industrialization in China to produce manufactured goods primarily  for export to Western markets. Over this period, exchange rates have been controlled in China to maximize exports and export production has been further maximized by rapid depletion of environmental inputs to promote economic output (ie, without sufficient regard to what Thomas Friedman calls "marking to Mother Nature’).  In other words, a quarter-century of globalization in China has been discontinuous — accelerating the global movement of goods but but accompanied by restrictions in  the global movement of capital (free movement of exchange rates, transparency of SWF sovereign wealth funds, etc) and  ideas (environmental stewardship, corporate governance, free press, etc).

 During the 1982-2008 period of rapidly expanding global trade, the ‘3 C’ stresses (China’s emergence, currency rigidities, climate change impacts)  could be   absorbed within the policy framework of the global system and conceptualized in separate and disconnected terms.  In 2009, during a period of negative growth in global output growth and and of even sharper negative growth in global trade, we need ‘smart policy’ for  framing the opportunities and challenges we face globally.  Business, also, can focus on the opportunities and challenges of its own ‘3 C’s":  China, capital (especially PE and other alternative investment vehicles) and cleantech.  For public policy and global business, the ‘3 C’s" will prove key to helping promote globalization in balanced and sustainable fashion. Without clear focus on the interrelated opportunities for transformational shift, we otherwise risk falling back on global finger-pointing during global recession. 

The key insight is how to frame the issue.  The E&Y list notwithstanding, these are not distinct mega-trends.  From the perspective of globalization, they are three facets of a single phenomenon.  Among E&Y’s 7 global mega-trends, the 3 C’s are the single mega-mega-trend for both policy makers and business.