Tag: Economy

Competitiveness is not a new concept. It is likely embedded in our DNA, much like other fundamental instincts such as cooperation, survival, reproduction and mobility. What has changed over time is its geographical scope: once local, then national, competitiveness has now become global. That shift has fundamentally transformed how we understand prosperity, business, work and everyday life.

At its core, competitiveness is the ability to solve problems better than others. “Better” may mean cheaper, faster or, most importantly, with greater added value for the user. Competitiveness applies to everyone. A plumber is competitive if he fixes your sink quickly and reliably; a doctor if she cures you efficiently; a company if it consistently creates value and earns a profit. Historically, competitiveness was constrained by geography. A local plumber could not repair a sink in Beijing. But globalization has changed that equation. Today, even small, locally rooted companies may be tempted—or forced—to compete far beyond their original markets. Within a few decades, barriers to trade, communication and capital flows have fallen dramatically, opening global markets to firms of all sizes and origins. 

The golden age of competitiveness

The era of openness can be dated quite precisely. It began on December 18, 1978, when Deng Xiaoping announced China’s open-door policy. That decision triggered a four-decade-long expansion of the global economy that lasted until the Covid-19 pandemic struck. During this period, unique in human history, it became possible to travel, communicate, invest and conduct business in virtually every country. 

For companies, access to previously closed markets meant the possibility of supplementing an export strategy with direct investments. Such a change also implied greater knowledge of local markets, legislation, government policies, customers and value systems. Globalization rewarded scale, specialization and efficiency. 

This period of openness also promoted multilateralism. Conflicts, at least in principle, were managed through international institutions rather than unilateral force. As President Reagan once observed, “Peace is not the absence of conflict, but the ability to cope with conflict by peaceful means.” 

Vulnerability steps in

While this period delivered remarkable economic growth, it also produced structural vulnerabilities. Globalization encouraged specialization and, in turn, specialization created dependency. Certain nations came to dominate strategic minerals, key technologies or critical manufacturing capacities that could not easily be replaced.  

China’s trade surplus has exceeded $1 trillion. This has been driven by expanding exports in critical minerals such as rare earths, renewable energy technologies like solar and wind, biotechnology and automobiles. For example, in 2001, China began investing in electric vehicle technologies, aiming to enhance competitiveness in an area where it struggled to match the U.S., Germany and Japan in traditional internal combustion engine and hybrid vehicle manufacturing. In 2009, with the support of financial subsidies from the Chinese government, fewer than 500 electric vehicles were sold. However, by 2022, following over $29 billion in tax breaks and subsidies since 2009, China sold more than 6 million EVs, accounting for over half of the global EV market. Projections suggest that by 2025, China will have sold well over 11 million electric vehicles. 

With domestic consumption accounting for just 39 percent of China’s GDP, compared to roughly 70 percent in the U.S. and Europe, exports, in part, fill the production gap. The result is mounting international trade tension.  

The empires strike back

Today, the U.S., China and Europe together account for over 60 percent of global GDP. What’s more, they are also political, technological and military powers. In 2025, the U.S. and China account for nearly half of global defense spending. Military procurement has become one of the fast-growing business sectors worldwide, rising by 9 percent to a total of $2.7 trillion in 2024.  

Thus, the empires are back. As Henry Kissinger wrote in his book Diplomacy, “Empires are not interested in an international system; they want to be the international system.” Multilateralism is under strain, and geopolitical confrontation is increasingly replacing cooperative governance.

The politicization of conflict

The proliferation of tariffs and industrial policies is rightly alarming. However, these tools often mask another reality: access to markets is threatened. Or at least it is subject to political interference. “Geo-economy” is the new policy. It means transforming economic strength into political and diplomatic goals.

In the past, conflicts between nations largely centered around employment and economic fairness, and were resolved within multilateral frameworks such as the World Trade Organization. Today, international disputes increasingly invoke national security. The recent cases involving Huawei and TikTok in the U.S. illustrate this shift. When security is invoked, debate becomes more emotional, less evidence-based and firmly sovereign. Each nation claims the final say. 

How does a fractured world economy function?

A fractured economy does not imply deglobalization. The world economy will remain interconnected, but its rules will no longer be universal. For example, transaction platforms such as SWIFT for payments or global credit card networks may no longer be universally accepted. Instead, countries will increasingly develop parallel institutions to retain control. 

At the same time, multilateral institutions have not disappeared, and some will continue to operate to the greatest extent possible. According to the World Trade Organization, a majority of global trade still operates under multilateral agreements. Despite pressure from the U.S., non-American trade accounts for 86 percent of global commerce. 

Alternatively, bilateral agreements continue to expand rapidly, either between economic blocs, such as the European Union and Mercosur, or between countries. China continues to forge bilateral agreements, notably with many nations in the Global South.

Between multilateralism and bilateralism lies a third model: ad hoc coalitions. These involve limited groups of countries aligning around defense policy, economic strategy or shared values. Examples include Europe’s SAFE program and the Coalition of the Willing, which bring together countries concerned about military security in Europe. Their aim is to make decisions and implement them quickly without being hampered by the need for broad consensus. 

What strategies for companies in 2026?

Navigating this environment is extraordinarily complex. Companies must contend with several layers of political interference, market disruptions and profound technological change, from teh electrification of the economy to the rise of A.I. Nevertheless, four strategic axes are emerging for 2026. 

Diversification. Companies are reducing excessive dependence on a limited number of suppliers, markets or customers. It is a quiet revolution taking place under the radar, but with a profound impact on nations and companies alike. China is redirecting its business towards Europe and the Global South while companies worldwide seek alternative energy and technology partners. Managing vulnerability has become a strategic imperative. 

Resilience. The world will not stop interfering with corporate strategies. Thus, even if the future is more unpredictable, decisions must still be made, often under uncertainty and risk. Resilience is the capacity to adapt quickly as conditions change. As Carl von Clausewitz noted, “Strategy is the evolution of a central idea through continually changing circumstances.”

Reliability. In a fractured economy, a company’s competitiveness also depends on strengthening confidence in its relationships with business partners. When the environment is in turmoil, a few things, precisely, should not change. Trust is one of them. Reliability implies transparency and efficiency. The ease of doing business is critical. As Peter Drucker said: “There is nothing so useless as doing efficiently something that nobody needs.”

Pricing power. In 2026, operating costs will inevitably rise. Political barriers and national priorities leave limited room for cost reduction. Price increases often become unavoidable. Competitiveness, then, depends on a firm’s ability to convince customers that value justifies price. Warren Buffett’s advice remains apt: “Price is what you pay; value is what you get.” 

Optimism for 2026?

Business leaders must remain optimistic—whether by choice or necessity. Their primary role is to solve problems and motivate people toward success. Nostalgia, however comforting, is not a strategy. The world of 2026 will not return to a reassuring past. Nor does it have to be worse. It will simply be different. When Mark Twain was asked what he thought after listening to an opera by Richard Wagner, he replied: “It’s not as bad as it sounds.” 

That, perhaps, is the most realistic mindset for planning 2026. 

Stephane Garelli is Professor Emeritus at IMD and the University of Lausanne, the founder of the World Competitiveness Center, and a former managing director of the World Economic Forum and the Davos Annual Meetings. His latest book, World Competitiveness: Rewriting the Rules of Global Prosperity is published by Wiley.