Foreword: The local flavor of globalization
The Olympic Games Paris 2024 are just around the corner, and the fervor is already palpable. When I asked my team at Allianz Research whether they wanted to do something on the economics of the Olympics (not the costs, which have unfortunately become Parisians’ latest obsession), there was a resounding yes. We all secretly dreamt of being an Olympian, of representing our country in the world’s most famous and historic gathering, and of uplifting millions of people through the higher moral values of participation, grit and surpassing oneself.
Let me start by sharing where I find economic value in the Olympics. For me, the Games should remind us that globalization has always a local flavor, that together we are stronger, simply put: to “make trade not war”, to quote my late friend Philippe Martin’s seminal paper in the Review of Economic Studies.
The golden era of global trade may well be behind us: until recently, tariffs were going down and free-trade agreements going up. Sovereignty and strategic autonomy have now replaced open borders and partnerships in most politicians’ roadmap. Trade may be more inflationary for people, and definitely more complicated for companies and investors. But, globalization is not dead, it’s just changing, and we will have to adapt.
Since 2017, rising geopolitical tensions have made protectionism the new normal. Last year, economies around the world implemented over 3000 trade barriers, five times more than in 2017. The upcoming US elections could ring in the return of the trade war, should Donald Trump secure a second term. Even if it will likely be more moderate and targeted this time around, it could still send US tariffs to the highest levels since the mid-1970s. At the same time, conflicts and climate change are highlighting the very real risks of choke points on vital trade routes, from the Red Sea to the Panama Canal. Innovation and knowledge exchanges may be more subject to regulation and taxation, just like the financial sector which has also been taken into the deglobalization vortex.
The answer? Trading successfully in this environment will require different strategies: stronger public affairs, building strategic stocks, securing alliances for critical input supply, diversifying again and again, creating more value locally, etc. All in all, managing frictions will become central to CEOs around the world, after enjoying a flat world.
The Olympics are a unique moment of unity and transcendence. They remind us that the world can be flat every couple of years. So when businesses lose hope as sanctions and barriers mushroom, they may well think of the Olympic creed, Pierre de Coubertin’s words "The important thing in life is not the triumph, but the fight; the essential thing is not to have won, but to have fought well".
In this report we cover:
- The power of participation: Health and wellbeing
- Women’s empowerment through sports
- The commitment to sustainability
- Technological innovations: The Next-Gen Olympics
- Economic impact: A boost to GDP and beyond
- The legacy of infrastructure and housing
Enjoy the read!