Are we heading towards deglobalisation post Covid-19?

Globalisation increases not only an economic phenomenon, but it also has other aspects such as technological, cultural and ecological. Deglobalisation will shrink these circles of global cooperation.

 |  9-minute read |   15-06-2020
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The Covid-19 pandemic is the worst crisis since the Great Depression of the 1930s. In fact, it is far worse than that because it is both — a health and economic crisis — which has become truly global. The pandemic is yet not over and uncertainty looms large as nobody knows when we will have a vaccine for the virus or the transmission of the virus will slow down. As more and more people are getting infected around the world, the healthcare systems of countries have come under severe strain and have also been bogged down by the shortage of essentials such as PPEs and ventilators. Not only the health system, but economies around the world are also trembling under the shock due to sharply restricted economic activities, growing recession and increasing uncertainties. The current crisis seems to be different from the previous crises, as it is causing unseen disruptions in both demand and supply.

The impact of Covid-19 outbreak has strongly been felt by international trade and global supply chains. Therefore, several times over the past few weeks, scholars and experts around the world are raising doubt that the Covid-19 crisis will slow down the process of globalisation, and the world will enter a deglobalised era.

Globalisation, however, is not only an economic phenomenon, but it also has other aspects such as technological, cultural and ecological. Ignoring other aspects and arriving at a conclusion only based on one aspect (economic) seems to be incomplete and undesirable. Nigerian scholar Chimamanda Adichie warned us against the danger of a single story, not that the single story is untrue, but that it is incomplete.

This article will first analyse ‘why deglobalisation’ and then proceed with ‘why globalisation’.

Why Deglobalisation

In the past few years, far-right governments have come in a number of countries such as the US, Russia, India, Turkey and Hungary. These governments raised the banner of nationalism and adopted anti-immigration policies, or have been 'othering' communities within their own countries. US President Donald Trump raised the slogan ‘America First’ and the Modi government in India has been stressing on ‘Make In India’.

The culmination of these nationalist policies came during this pandemic when the countries closed their borders. Instead of cooperating and coordinating their efforts in finding a solution, the countries are treading their path alone rather than benefitting from the experience of other countries. For instance, Italy could have learned from China, and the US could have learned lessons from Italy. However, the nations have sung solo songs.

The second argument in favour of a deglobalised world has been about trade and production. The United Nations Conference on Trade and Development suggested that the world trade would plummet. It said in its report that global trade has registered a three per cent drop in the first quarter of 2020 and this downturn is expected to accelerate in the coming quarters, leading to a whopping 27 per cent decline in trade. This dip in global trade has been accompanied by a marked decrease in commodity prices such as crude oil, minerals, metals and agricultural raw material. Fuel prices have shown a steep decline, plunging 33.2 per cent in March 2020. Besides this, more than 20 per cent fall in commodity prices in March 2020 was a record in the history of the free market commodity price index.

In this time of crisis, the countries have banned the export of certain essentials. For instance, Vietnam banned the export of rice, the US banned the export of masks and India the generic anti-malaria drug — hydroxychloroquine. Even before the Covid-19 crisis, the US-China trade war and the ineffectiveness of the WTO already proved a dampener to international trade.

main_market-china_re_061220044713.jpgThe impact of the outbreak is felt more strongly by transnational production or global supply chains. (Photo: Reuters)

The impact of the outbreak is felt more strongly by transnational production or global supply chains. It is important to point out here that the process of globalisation, to a great extent, has been facilitated by the transnational production of goods. Nobel Prize-winning economist Milton Friedman said that it has become possible “to produce a product anywhere, using resources from anywhere, by a company located anywhere, and to be sold anywhere”. This fragmentation of the production process resulted in the formation of the global supply chain.

China is the factory of the world. It is estimated that 70 per cent of raw materials for world manufacturing comes from China. The lockdown and the restrictions on economic activity in China due to the pandemic caused massive disruptions in supply chains around the world. As more and more countries ordered business closures and lockdowns to slow the spread of the virus, it threw the production and manufacturing in great disarray and short supply. The governments, the corporates and the consumers were found struggling to procure basic drugs and materials.

The disruption in the global supply chain had crippled industrial manufacturing around the world. The pandemic has forced industry leaders to rethink their supply chain and logistic strategies. The Covid-19 crisis has exposed the vulnerabilities of complex supply chains built on lean manufacturing and single-sourcing model. One likely consequence of this crisis is that global firms will diversify their supply chain and in future, we may see a shorter supply chain and new levels of resilience built in it.

Not only companies, but also governments around the world have been awakened to the dangers of offshoring essential commodities and not producing them locally. The US has asked its companies to shift their bases from China to back home. Indian Prime Minister Narendra Modi, in his latest address to the nation, talked of self-reliance and to develop a market for local goods. But all this onshoring and shorter supply chain could take several years before it can be played out. National economies are now part of the global economic networks and the choices are not so simple.

Rosemary Coates, the executive director of the Reshoring Institute has said that pulling manufacturing out of China is not like flipping a switch. But it can be said that diversification will be the future so as to manage the risk and crisis.

main_currencies_reut_061220044931.jpgCurrencies have lost their national character and their values are fixed by global market forces. (Photo: Reuters)

Economic globalisation is not only about trade and production, though states have learnt new lessons in this field. It is also about the increasing mobility of financial capital and growing investments across national boundaries. The breakdown of the Bretton Woods system i.e. shift from the fixed to floating exchange rates in the 1970s exposed national economies to greater competitive procedures. The financial integration of the world in the last few decades represents the end of geography. Not only do investments come in bonds and securities, but currencies are also being traded freely in the global financial markets at the speed of thought. Resultantly, currencies have lost their national character and their values are fixed by global market forces. As a result, in conjunction with other factors such as growing importance of multinational corporations and liberalisation, national economies have been increasingly drawn into the web of interconnectedness, which is difficult to erase even in the post-Covid period.

The globalised world

Before arriving at any argument on deglobalisation based on trade and production, it is important to highlight that globalisation is a complex and multifaceted phenomenon. It is about the universal process or set of processes which generate a multiplicity of linkages and interconnectedness that transcends the borders of state and societies. In fact, globalisation is about the flow of goods, people, capital and ideas. These flows were also there in the earlier period of human history. However, what is new in the post-1990 phase of globalisation is the volume, visibility and velocity of these flows across the globe and also the vulnerabilities of people to these flows.

In the 1990s, globalisation was facilitated mainly by two developments. Firstly, the revolution in information and communication technology. Second, the spread of markets around the world after the disintegration of the Soviet Union and the opening of the Chinese economy.

main_globalization_061220050202.jpgGlobalisation generates a multiplicity of linkages and interconnectedness that transcends the borders of state and societies. (Photo: Facebook)

Technologies such as the internet, satellite communications, high-tech computers have irreversibly linked humanity and marked time and space as less important factors. This is true not just for governments, but also in the calculations of other actors such as firms, investors or in the activities of social movements. What else could be a better time to show the role of technology than this outbreak of the Covid-19 pandemic? In these times of lockdown, most people around the world are working from homes, the entire education system — from nursery to universities — has been shifted online. During the Covid-19 lockdown, overseas universities have signed up more than a lakh Indian students for online courses. To maintain social distancing, governments are carrying out meetings through video-conferencing, medical apps have been developed to track infected people. In fact, the pandemic has suddenly awakened the world to the usefulness of technology and this global dependence on technology will further increase in the post-Covid-19 period.

The economic integration of the world is accompanied by globalisation in the field of culture. Media, markets and migration have been creating conditions for ‘cultural globalisation’. With a global communication structure, there is a transnational spread of ideas, images, symbols and culture from Madonna to Mohammed, leading to solidarity among like-minded people and differences among different cultural and ethnic groups. Malls and markets have spread the culture of consumerism around the world and helped in developing new cultural icons such as Coca Cola, McDonald’s, Disney and Nike. Without entering into the debate of whether what is happening in the world is homogenisation or Americanisation of culture, it is certain that globalisation has also spread in the field of culture, creating its advantages and disadvantages.

Last but not the least, is ecological globalisation. Global warming and climate change have been posing an existential threat to human civilisation and have become a global problem of great concern. It is not one country’s problem to solve, but for the whole world to show their resolve and pull their resources. The progress in this direction is very slow, messed up by the debates among nations on who are polluters and who will pay the price.

To sum up, so many pebbles such as science, technology, market, media have been thrown in the global lake, which creates ever-widening circles. The need of the hour is to throw one more pebble of global cooperation and governance, rather than talking about shrinking of circles which means deglobalisation.

Also read: How a changing global order will emerge in the post-Covid world


Sushma Gupta Sushma Gupta

The author is an associate professor of political science at the University of Delhi with over 30 years of teaching experience.

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