Blockchain is needed now more than ever to establish a new global paradigm in light of the cracks uncovered by the COVID-19 pandemic.
The COVID-19 pandemic outbreak has profoundly impacted the world economically and socially. This, helping to intensify political tensions while driving nationalist protectionism. While the pandemic’s full magnitude is not yet completely understood, COVID-19 has reignited a media and academic debate regarding the fate of neoliberalism and globalization.
If we were to extrapolate on the basis of recent evidence, the de-globalization would appear to be accelerating. A decade ago, significant globalization indices, such as global trade and foreign direct investment, started plateauing. Faced with the pressures of diminishing returns and an ever-widening wealth gap. Numerous industrialized democracies seem to have begun to turn to protectionism, populism, and nationalism in a paradigm change away from the grand journey of globalization.
Nonetheless, if we were to take a step backward, globalization is a cyclical upward path that embodies human growth. Given the current setback, we are optimistic that technology and society will continue to move the world towards deeper integration and cooperation.
Besides, short-term reversals in human history have struggled to delay technological advances. As we enter the future digital world, we are already starting to grasp and envision a new paradigm based on state-of-the-art technology. Such as artificial intelligence, 5G, the Internet of Things, and blockchain. I assume that blockchain will be a key technical framework for the next phase of globalization going forward. With its intrinsic features, Blockchain is the natural solution to “trust”. A fundamental problem in global trade and collaboration that is crucial at this juncture.
Reflections on the Globalization Context
Two basic and interconnected driving forces drive globalization: technology and political-economic structure. It is prudent to look at these two items when dealing with the past of globalization.
Globalization history can be traced back to the Silk Road and Spice Routes. These linked the East and West through land and sea routes facilitating the exchange of valuable goods and ideas. Advances in navigation subsequently created a more interconnected world during the Exploration Age for technology-enabled explorers from Portugal, Spain, Great Britain, and the Netherlands to travel further.
Soon thereafter, with the Industrial Revolution, technological growth in the world significantly increased. Productivity boomed as countries accumulated wealth increasingly powered by innovative production methods and processes, and transnational connectivity reached new heights. Several waves of globalization, each driven by developments in technology and philosophies, have been witnessed by the world. Along the way, each phase of globalization, due to competing agendas and wealth imbalances, experienced setbacks.
When we follow globalization, we can deduce certain trends over time:
- Globalization has been a persistent, upward cyclical development in the long term.
- Innovations in technical and political-economic systems allow every wave of globalization.
- Thanks to the growing value of technology, each wave was less affected by setbacks.
While Globalization 3.0 is currently facing great opposition, I believe we are on the verge of the Fourth Industrial Revolution. This will once again change how the world collaborates and creates, blurring physical, digital, and biological boundaries.
An Optimistic View on Current Setbacks
A backlash against globalization, triggering the rise of protectionism, populism, and nationalism among developing countries, emerged after the financial crisis in 2008. We must first dig into the underlying dynamics to try to find a possible solution.
The creation of a global supply chain network driven by information technology is one of the most notable developments of the Globalization 3.0 era. Global labor markets converged as a result, whilst labor costs flattened. Thus, this growth was enormously beneficial to the elites, physical, and intellectual property owners. Besides, workers in developed countries were also experiencing increased wages and social mobility. On the other side, Globalization 3.0 resulted in unemployment of the middle class and job displacement for the working class in developing countries. Resulting in divisive social emotions and rising tensions causing significant events such as Brexit and the trade war between the United States and China.
Although these events make it seem as if de-globalization is accelerating, a bird’s eye view will show that the trajectory of globalization and growth has never gone smoothly. Instead, it is moving in phases. In this sense, we understand that we should reinterpret existing pressures and threats as opportunities.
Besides, technology’s ever-increasing prominence has resulted in less destructive losses and aims to create a new global paradigm. The digital revolution, marked by the rapid maturation of technologies such as AI, 5G, IoT, and blockchain, will fundamentally change our environment in numerous ways by improving efficiency while reshaping our political-economic system to restore order.
Cooperation based on trust is more important than ever in these unpredictable and divided times. A blockchain is a distributed, open, autonomous value-exchange network that will serve as the cornerstone of the future.
Blockchain in a Divisive and Unpredictable World
We live in mistrust and confusion as geopolitical and regulatory forces are continually changing, pushing patterns that contribute to deglobalization. For blockchain, though, we can take a new direction forward — that is, to achieve certainty without needing trust.
Blockchain, at its heart, is a distributed mathematical and cryptographic based network. Code law transcends conflicts over discrepancies and offers us a shared language to communicate in a trust-free manner with certainty.
Confronted with a possible global economic slowdown, the world desperately needs a new boom in productivity to power the emerging technology-led revolution. Built to be the fundamental framework of this aggregated array of technology, blockchain would act as both a technology and a technique to turn the global political-economic paradigm.
How will blockchain drive the Fourth Industrial Revolution and allow globalization’s next wave?
A Modern Foreign Paradigm Driven by Technology
In the cycle of globalization, international organizations have traditionally played an indispensable role. Yet mainstream international organizations such as the World Trade Organization, the World Health Organization, and the United Nations Paris Agreement have all struggled over the past decade to retain their strength and relevance.
In times of crisis, the lack of an impartial, third-party enforcer will also hamper international alliances as nationalist protectionism booms. For example, the US removed its sponsorship of the WHO during the COVID-19 pandemic. At the same time, 80 WTO members have limited their exports of face masks and other supplies. Blockchain could become a new method used to create cooperative alliances in the light of these drawbacks.
Without the need for a trusted third party or a leading force using blockchain technology, international organizations may develop to become more effective whilst maintaining multilateral values. For example, a carbon emissions agreement based on blockchains might create a membership structure based on a consortium with tokenized carbon emission quotas. Under this model, carbon trading could be carried out in an open and equitable on-chain public marketplace, ensuring the deal’s viability while reducing friction.
An Agile and Granular System of Governance That Promotes Social Equality
Over the last few decades, we have witnessed waves of technological breakthroughs, but the construction of a governance system has lagged. In a rapidly evolving environment, there is an urgent need to integrate new technical elements to improve our social policymaking and implementation processes’ agility and granularity.
When we begin to digitize properties, identities, and activities, we are ultimately constructing this massive, continuous, real-time, socioeconomic hyper-database on a distributed network in which cryptographic algorithms secure privacy and ownership. This network will reflect the interest of a continuum of entities over time, from the world to a specific nation, to every person. On the other hand, we should be equipped with a democratic policy-making system to automatically facilitate seamless political engagement and tools to implement policies with the finest granularity and precision automatically. Via blockchain, transparency in governance and social inclusion will reach new heights.
An Open and Efficient Global Financial System Which Inspires Trust
Native digital assets and a frictionless global marketplace are two fundamental elements of the digital economy, and blockchain is the most suitable carrier.
The digitization of properties is the very first step into a digital economy. Blockchain-based digital assets act as value carriers, allowing assets on this network to flow freely among parties. Using a distributed network will no longer entail the authentication of ownership and sale of properties by a trustworthy third party. Thereby offering a solution for global instability and mistrust. Besides, blockchain could dramatically reduce transaction costs and friction. Allowing for the substantially quicker, cheaper, and more transparent cross-border settlement of remittances and payments. The software will also bolster asset liquidity while reducing entry barriers for unbanked citizens. Eventually, blockchain aims to increase the productivity of the financial system dramatically while reducing disparities in funding.
Ultimately, we’re optimistic about the digital economy’s age of accelerated global convergence. The convergence of nationalism and globalism, as well as the multicultural wealth divide, however, are crucial elements for the solution. Blockchain will provide us with value stability, flexibility, and most significantly, faith in a time of discord and mistrust, as a key component of the digital revolution technology stack.
According to Executive Chairman of the World Economic Forum, Klaus Schwab, pessimists will certainly argue that political circumstances stand in the way of a constructive global discussion about Globalization 4.0 and the new economy. But realists should use this time to discuss the gaps in the existing framework and recognize the needs for a potential solution. So optimists will hold out hope that forward-looking stakeholders will build a common interest group and eventually a common purpose.