10 May The shifting sands of globalisation
- Will the Coronavirus pandemic hasten deglobalisation?
By Emanuel Skoog
Humanity is presently facing an international crisis – perhaps the greatest, all-encompassing of our generation . The spread of the Coronavirus globally is alarming, however, not unexpected since globalisation creates universal risks. With travel, finance, commerce, cyber, and other networks increasingly growing in scale and universality, they become more sophisticated and interdependent.
Commerce across vast geographical distances and borders have been an integral part of humanity’s shared international history for centuries, if not millennia. However, the scale and speed of globalisation have exploded during the last decades to unparalleled levels in human history. Globalisation is a phenomenon that has not only raised the global economic output, lifted billions out of abject poverty and facilitated the dissemination of information and knowledge. The phenomenon has also facilitated the spread of contagious diseases, enabled cross-border terrorism, international crime, and it can exacerbate global inequalities . The super-spreaders of the goods of globalisation, for instance, major airport hubs, are also super-spreaders of contagious viruses .
The global financial crisis of 2008 exemplified how a financial meltdown emanating in the U.S. could infect global markets almost instantaneously. The Coronavirus pandemic has laid bare the sheer global interconnectedness of today’s world which is why the spread of the virus has had such imminent international global economic and health ramifications . Though, a stark difference exists between the two cataclysmic occurrences. In 2008 there was more of a cooperative global response to the financial meltdown than is the case 2020 .
Are we on the cusp of witnessing a move away from an ever more globalised world as the pandemic closes borders, wreaks havoc on global stock markets, and disrupts supply chains, the economic arteries underpinning the global economy? If yes, have we already crossed the Rubicon and are we heading into uncharted territory? Or will this crisis merely lead to a temporary slowdown towards a more globalised world?
The Sars epidemic vis-à-vis the Corona pandemic
Whilst dissecting the current crisis and its impact on global trade it is imperative to look at international trade patterns through a historical prism. Trade optimists and proponents of globalisation have been waiting for things to go back to ‘normal’ since the financial meltdown of 2008 however they never did – and perhaps never will. Global trade has slowed considerably since 2012, making this the longest period of relative trade stagnation since World War II . International foreign direct investment has now been decreasing for three consecutive years . The nature of globalisation is also changing: more digital flows, more finance, fewer products. And the pandemic accelerates these ongoing developments.
When the SARS epidemic occurred between 2002–2004 China accounted for just four percent of the world economy. Today that figure is 16 percent . This underscores the fact that whatever happens in China affects the world to a much greater extent today than ever before. The Chinese economy grew, as many companies started to rely on cheap Chinese exports, not overly troubled regarding the risks associated with making a country run by an authoritarian regime the hub for global production . However, producers are commencing to implement contingency plans to reduce their exposure to long-distance vulnerabilities due to the current crisis . The trade war [mainly between the U.S. and China] coupled with the Coronavirus will lead Western companies to seriously consider re-shoring according to Professor Beata Javorcik, chief economist at the European Bank for Reconstruction and Development . The reasoning behind this is that as a firm you do not have to be as concerned about your country’s national trade policies. It also provides a possibility to diversify your supplier base. Even prior to the outbreak of the pandemic there was a growing and considerable discussion of the need for economic decoupling from China among U.S. firms . Interdependence is increasingly viewed less as an asset but rather as a liability that needs to be brought under control amongst business and political leaders.
Globalisation in a post-Corona world
The Coronavirus pandemic has shone a light on today’s integrated and sophisticated economic systems and highlighted that they are only as strong as their weakest links. According to Ian Goldin, professor of globalisation and development at Oxford University, we can turn to history specifically World War I and II in assisting us to comprehend how a post-Corona world might potentially develop and look like. We could, like after 1918, get weak or weaker global organisations, an upsurge of nationalism, protectionism and economic depression . Or we could get a post-1945 world anchored in more cooperation and internationalism supported by the foundation of Bretton Woods, the Marshall Plan, the UN, and the General Agreement on Tariffs and Trade .
When evaluating the two contrasting events one needs to bear in mind that what enabled the development of the post-1945 world and its organisations was in this case primarily robust U.S. leadership imbued by boldness and foresightedness. Though, as the Coronavirus pandemic is sweeping across the globe leaving death and destruction in its wake the world is presently experiencing a lack of clear global leadership from either the U.S., the EU, or China further exacerbating an international coordinated response. It is beyond doubt that there will be changes to the nature of globalisation as a direct result of the Coronavirus. How far-reaching will the changes be, how will they be addressed, and by whom? These are the set of questions most pertinent to ask as humankind crosses the Rubicon into the unknown.
. https://www.project-syndicate.org/commentary/covid-19-deglobalization-pandemic-by-harold-james-2020-02?mod=article_inline and https://thediplomat.com/2020/03/coronavirus-and-the-future-of-globalization/