Globalisation is easy to target but tough to displace

Coronavirus: Globalisation is easy to target but difficult to displace

The free flow of ideas, money, resources, people and jobs has also resulted in political pressures.

The world is in the midst of an unprecedented crisis. The outbreak of a new pathogen COVID-19 has brought humanity to its feet, irrespective of the country, religion, race, language, ethnicity or region. It has had a ripple effect on the global economy and plunged the whole world into recession, erasing trillions of dollars from global stock markets.

One wonders whether pandemics like coronavirus reflect the spillover of globalisation – a phenomenon that represents the good, the bad and the ugly. The beneficial part of globalisation has to do with the sharing of ideas, finance, technology, resources, goods and services. Globalisation has made the world strong as well as weak and vulnerable.

Besides getting millions of people out of poverty, it has also resulted in dangers like financial recession, cyber viruses, terrorism and spread of pandemics. We have also witnessed the unintended consequences of globalisation like climate change. On the flip side, the scale of travel across the global landscape especially for business, trade and tourism has made it even more difficult to contain a pandemic.

The free flow of ideas, money, resources, people and jobs has also resulted in political pressures. Hence, in recent times, especially after the rise of President Trump, the world has seen new immigration restrictions, technological decoupling, new barriers to trade and investment, rediscovering of supply chains and the trend towards ‘country first’ policies and strategies.

Even before COVID-19 has had a crippling effect on globalisation, Trump had imposed tariffs on allies and adversaries, initiated a trade war with China and withdrew from trade pacts like the Trans-Pacific Partnership. In fact, the total value of trade between the US and China declined from $630 billion in 2017 to $560 billion in 2019.

The neo-liberal orthodoxy gave way to slogans like America first and developments like Brexit. coronavirus rubbed salt into the wounds by virtually bringing the global movement of people and goods to a standstill. The coronavirus has infected the vitals of the global economy resulting in huge disruptions, especially on the supply-side and demand-side.

The virus has capitalised on the reality of human hyper-connectivity. This brings into focus some of the disruptions following the 2008 global financial crisis, though they were not for the same reasons and scale on which it is now happening. In that sense, the present scenario is quite unprecedented.

Whether coronavirus would turn out to be a major setback to China’s global stranglehold as the world’s largest manufacturer, only time will tell. Countries and companies are now beginning to realise the risks of this over-dependence.

When Sars broke out in 2003, China accounted for only 4% of the global output which today stands at 16%. One wonders whether time has come for companies to take re-shoring on a selective basis seriously from now on.

However, this is easier said than done since China is presently critical to the global supply chains. In that sense, China’s wealth and health matters. Hence, globalisation can create systemic risks for the whole world when there is so much dependence on any one country like China. Perhaps, countries will now need to figure out ways and means to lessen this dependence.

Deglobalisation is not the answer. Neither can this be done only by building high walls, ostracising China, rejecting tourism and business travellers. Perhaps, the virus will result in a more visible digital and online form of globalisation rather than the one we have been familiar with all these years. Remote working is now catching on, and perhaps it could even become the norm.

The larger issue to be addressed is how globalisation needs to be perceived. The transition is not one from globalisation to de-globalisation. Rather, what we require is the need to recognise the need for globalisation with a human face. It will be globalisation perhaps with less carbon emissions, more equitability and with greater investment in surveillance and healthcare.

Adequate safeguards are also required to handle the risks of globalisation as we are experiencing at this point of time. One wonders whether borders and the nation-state will stage a comeback as the populist and nationalist forces have been making a case for. This may be the trend though without reverting to the days of isolationism.

Humanity is caught between the devil and the deep sea. On the one hand, intense movement of people across borders can create pandemic like scenarios. Yet, to overcome it, we cannot do without transnational cooperation especially among the scientific and medical fraternity.

The coronavirus is a wake-up call not just for the US and China but the whole world. The pandemic exposes the extent of human vulnerability, mutual economic dependence and inter-dependence. The total dependence on the global supply chain can be too risky, which needs to be fragmented.

Domestic suppliers

Hence, in a pandemic scenario, the importance of the domestic supply chain becomes critical too. Countries need to also look out for alternative domestic suppliers even if it turns out to be a little more expensive. Hence, a certain degree of re-shoring can provide greater legitimacy and certainty. Borders may become less porous for industry and the movement of people.

Perhaps we will see the re-nationalisation of industries in some countries. It is not just the supply chain but also sectors like education and tourism which now remains totally disrupted. The coronavirus has resulted in supply-chain havoc.

Globalisation in its present manifestation carries with it the risk of a contagion which can be both financial and medical. Though it will not be the death knell of globalisation, yet we are bound to see a new chapter unfold. Under the circumstances, globalisation is easy to target but difficult to displace. Globalisation will not be totally reversed. Unfortunately, what we have largely experienced is a China-driven globalisation, a trend that cannot be immediately reversed either. The dilemma is that as the pandemic spreads, the Chinese tend to get more engaged. Perhaps, the post-Covid scenario will result in a certain amount of re-shoring as well as rediscovery of the terms and conditions of globalisation.

(The writer is Professor and former Dean, Department of Political Science, Bangalore University)