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During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Notes from Spain


I’ve been working from Madrid and Barcelona this week, and as always I am struck by how stylish Spanish women are. Everyone, young and old, seems to have the latest platform sandal or the trendiest summer dress, which is no surprise, because Spain is where fast fashion was invented. Every female Swamp Notes reader will understand what that means. But for the benefit of our (mostly) male readership, fast fashion, which was popularised by the big Spanish fashion brand Zara and has become a staple of mass retail, is the use of just in time production techniques to churn out new clothing within a matter of weeks or even days after a trend is seen on the runway, or more than not these days on some chic teenager in the street or on the back of a Kardashian. To do this, you have to keep more labour and supply chains local — a lot more local. No spending weeks or months shipping things back and forth to Asia.

Why do I mention all this in a Swamp Note, which is, after all branded as “money and power in Trump’s America”? Because fast fashion is the new model for all sorts of trade these days, and trade conflict is at the heart of so much of the global economic story. The sort of hyperlocal supply chains that characterise fast fashion manufacturing favour deglobalisation in a benign way, and these methods have already had a much bigger impact on how goods are made than Donald Trump’s own trade wars have (if you haven’t already done so, check out the McKinsey Global Institute’s very interesting work on this topic).

As I tease out in my own Monday column, the cheap labour arbitrage that we’ve seen over the past 40 years is basically over. Technology is now cheaper than labour, so why take on the costs and political risks of outsourcing at the moment when you can.

Deglobalisation may be a boon to cities and regions with smart economic development plans. They could benefit from more local supply chains that connect the dots between manufacturing, higher-end services and digital operations — and figure out how to educate workers well enough to use all the new technologies. I’ve written about Columbus, Ohio as a model of this many times, but in the US several Midwestern cities such as Boise, Idaho, as well as parts of the South such as the Carolinas and Texas, are also making strides.

But like globalisation, deglobalisation also comes with some potential pain. As a new Economic Cycle Research Institute note points out, exports account for only 12 per cent of gross domestic product in the US, and less than 20 per cent of GDP in the major Asian economies of China, Japan and India. In Europe exports account for roughly 30 per cent of GDP in France, Italy and Spain, and a whopping 50 per cent of German GDP. As I mentioned in your last note, Ed, if Europe can’t keep it together in our new tri-polar world, which requires supply and demand to be linked regionally, Europeans could suffer more than either the US or China.

Ed, my question to you this week is this — have you seen any upside to deglobalisation aside from faster fashion?

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