Will the coronavirus reverse globalization? – BBC News


A Chinese freighter

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Coronavirus Interrupted Global Deliveries

Globalization has been one of the buzzwords for the past 25 years.

This may sound like a rather strange concept, as any economic historian will tell you that people have been trading long distances for centuries, even millennia.

Just look at the medieval spice trade or the East India Company to find out. But globalization is really about the scale and speed of international trade, which has exploded in recent decades to unprecedented levels.

Easier travel, the World Wide Web, the end of the Cold War, trade agreements and new, rapidly developing economies have combined to create a system that is much more dependent on what is happening on the other side of the world. than it ever has been.

This is why the spread of the coronavirus, or Covid-19 to be specific, had an immediate economic effect.

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Auto factories worldwide shut down production

Professor Beata Javorcik, chief economist at the European Bank for Reconstruction and Development, says that the pace of change in the world economy in the past 17 years alone has been profound.

"Coming back to 2003, the Sars epidemic, China accounted for 4% of world production," she said. “China now accounts for four times more, 16%. So that means that everything that is happening in China affects the world to a much greater extent. "

Globalization explains that almost all of the UK's major car factories have closed - they depend on sales and components from around the world. When the two collapsed, they just stopped making cars.

China’s wealth and health therefore matter to us all much more than before, but it’s not just a matter of scale - there is also a deeper problem with globalization.

Ian Goldin, professor of globalization and development at the University of Oxford, and author of "The Butterfly Defect, How Globalization Creates Systemic Risks, And What To Do About It", says that "the risks may have multiplied, they are the belly of globalization "".

This, he said, is seen not only in this crisis, but also in the credit and banking crises of 2008, and the vulnerability of the Internet to cyber attacks. The new global economic system brings huge benefits, but also huge risks.

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Media captionWill 3D printing make objects closer to where they will be used?

If it has helped increase incomes, rapidly develop economies and lift millions of people out of poverty; who came at increased risk of contagion, whether financial or medical.

What does this latest crisis mean for globalization?

For Professor Richard Portes, professor of economics at the London Business School, it seems obvious that things will have to change, as businesses and people have now realized the risks they had taken.

"Look at the business," he explains. "When supply chains are disrupted [by coronavirus], people started looking for alternative suppliers at home, even if they were more expensive.

"If people find domestic suppliers, they will stay with them ... because of these perceived risks. "

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Professor Javorcik agrees and believes that a combination of factors will mean that Western manufacturing will start to take work home, or to cut it back as it is called.

"I think the trade war [mainly between the US and China], combined with the coronavirus epidemic, will cause companies to take re-shoring seriously, "she said.

“They will re-support activities that can be automated, because re-shoring provides certainty. You don't have to worry about your national trade policy, and it also gives you the opportunity to diversify your supplier base. "

However, not all of this is good news for Western economies, which may now think that they have become too dependent on globalization. Instead, it goes both ways.

A large part of globalization is not to move manufactured goods around the world, but to move people, ideas and information; something that we in the UK and other western economies are very good at.

As David Henig, director of the UK Trade Policy Project at the European Center for International Political Economy, points out: "The service sector must have fallen from a cliff and just look [in particular] tourism and universities.

"There must be real concern about the number of new admissions to Western universities this fall. It’s a huge export industry ... many universities depend on Chinese students, for example. "

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Many Western universities are said to miss international students, who often have to pay more for their courses, and are a key source of income

The idea that globalization is simply a matter of moving manufacturing or supply chains to cheaper Asian countries is too simple. It has also resulted in a massive increase in the number of foreign students willing to pay to study at our colleges and universities, and a massive influx of wealthy tourists who want to spend money here, to name just two service companies .

A slowdown, or even a reversal of globalization, would hit these industries very hard. But even so, Professor Goldin believes that this pandemic marks a radical change and that "2019 was the year of maximum fragmentation in the supply chain."

Although some factors such as 3D printing, automation, demand for personalization and fast delivery, as well as protectionism have already been felt; it seems that Covid-19 can only speed up this process.

The real concern, however, is not whether these changes are happening, but how far they are going and how they will be managed?

Professor Goldin has a simple and clear way of explaining the options - will the result be more like what happened after the First World War or after the Second World War?

One could, as after 1918, weaken or weaken international organizations, the rise of nationalism, protectionism and economic depression. Or, as in 1945, more cooperation and internationalism, like Bretton Woods, the Marshall Plan, the UN and the General Agreement on Tariffs and Trade.

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There was much optimism that the world would become a better place after World War II, with the illustrated Bretton Woods conference aimed at ensuring a fairer economic order

Professor Goldin remains cheerful, but worries who will take the lead. "We can be optimistic, but we certainly don't see leadership in the White House," he said. “China cannot live up to it, and Britain cannot lead in Europe. "

This is a concern shared by Professor Portes, who underlines that: “The G20 summit in London in 2009 agreed on a package of international cooperation of 1 billion dollars (800 billion pounds sterling), even Germany adhered to it. the USA is absent from the international scene. "

Will globalization be reversed? Probably not, this is too much economic development for this to happen, but it may well be slowed down.

The biggest question is, however, have we learned from this crisis? Are we going to learn to identify, control and regulate the risks that seem to be an integral part of globalization? Because the cooperation and leadership necessary to achieve it seems to be lacking.

  • Jonty Bloom also explored whether the coronavirus would affect globalization for a special program on BBC Radio 4's In Business program.


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