Corona pandemic has given the world a valid reason to reevaluate the risks of lopsided economic dependence under globalization. In all probability the post-pandemic world order will not be the same. From life to livelihood, interdependence to self-reliance, cost competitiveness to risk competitiveness; nations may have to rethink their options and fix up priorities. Above all, the nature and purpose of globalization itself may be redefined. Two decades ago Joseph Stiglitz’s book ‘Globalization and its Discontents’ drew world’s attention towards the lopsided economic agenda of globalization and its adverse impact on economic decisions, public policies and political economy of the world. The book made him the most ardent critic of globalization. Today when the world reels under the most contagious pandemic ever spread due to global networking of businesses, economy and people, Stiglitz’s discontents against globalisation find a glaring example.
While Stiglitz endorsed the spirit of globalization and agreed it can transform people’s lives in more ways than one, his main opposition was to the overzealous short-sighted policies of economic globalization having utter disregard for individual nation’s ability to bear transition smoothly. He accused institutions like the IMF promoting economic globalization, to have become “the cockpit of market fundamentalism”. However, the attraction of quick economic dividend and control over global markets have been too irresistible for nations to pause and audit the cost and benefit of globalization with an open mind. Stiglitz believes globalization was oversold and “gains to GDP or growth overestimated, and the costs, including adverse distributional effects, were underestimated.”
The pandemic has thus necessitated reevaluation of some foundational doctrines of globalization viz. world being borderless, markets becoming integrated, supply chain becoming transnational and value chain becoming imperative for innovation in goods and services. However, in the process, globalization also seems to have enhanced the vulnerability of nations by making them overdependent on others even for simple things. It became awfully obvious when even developed nations were found struggling to fulfil basic demand for drugs, sanitizer, masks, medical equipment and personal protection kits etc. for their citizens battling the novel coronavirus. While analysing the impact of COVID-19 on globalized economy Stiglitz believes that “basic political and economic unit is still the nation-state.” But globalization seems to have altered the nature and purpose of nation-state.
In his recent address to the G-20 meeting Japanese Finance Minister Taro Aso admitted that the spread of coronavirus is both a health and economic crisis causing serious risk to the global macro-economy by halting production activities and interrupting “people’s movement and cut-off of supply chain.” Honda Motors announced reduced output in its two domestic plants due to shortage of supply of parts manufactured in China, as did Apple, BMW, Hyundai in different parts of the world. Globalization made China the manufacturing hub of the world and the most potent source of the ‘global supply chain’. China’s manufacturing thrived primarily due to its competitive advantage of low cost and economy of scale. It thus also positioned itself formidably in the global supply and value chain while most of the nations almost buried the idea of self-reliance.
A post-COVID assessment made by United Nations Conference on Trade and Development (UNCTAD) highlights that nearly 20 percent of global trade in manufacturing and immediate products have their origin in China alone. It used to be just 4 percent in 2002. China is a brilliant case study to illustrate how globalization can change the fortune of a nation and how overwhelming economic dependence on a nation can increase the vulnerability of the rest. Today, any disruption in China can disrupt the global economy. However, it’s true either way. Deloitte Financial Advisory reports that post-corona China’s own economic recovery will be challenged by its dependence on the markets of other countries most of which are still suffering from the pandemic. While China recorded a decline of 13.5 percent in industrial production, 20.5 percent in retail sales and 24.5 percent in fixed asset investment in January and February 2020 due to the disruption caused by coronavirus; the nations dependent on China were also adversely affected. This disruption is impacting the machinery, automotive, and chemicals industries of the European Union. In the United States, it’s going to affect its machinery, automotive, and precision instruments industry. In the Republic of Korea its machinery and communication equipment industry are being impacted. Japanese machinery and automotive industries are already planning to relocate base. China-centric globalization has become an inconvenient truth.
The testimony of Rosemary Gibson, senior advisor at the Hastings Centre before the US Congress made shocking revelations. She testified how America has lost its healthcare security due to overdependence on China which has become the biggest supplier of generic drugs to America. US is not producing generic antibiotics anymore; not even penicillin. In 2001, after the Anthrax attack, US government procured 20 million doses of doxycycline from a European company which procured the raw material from China. Gibson wondered ‘what if China were the anthrax attacker?’ In a Dutch TV documentary on national security risks of Netherlands, a Dutch official expressed fear of the overdependence of his nation on China for medicines. He fears China will try to deprive them of their medication.
So, will the pandemic initiate a backlash against globalization or activate the potent deglobalization sentiments? It may be premature to say so now, but the questions are doing rounds. As of now, the pro-globalization votaries do not seem inclined to accept that a pandemic may ruin the prospects of globalization. Robert Armstrong puts up an interesting counter in the Financial Times. He says, “Corona virus is a global crisis, not a crisis of globalisation.” He believes crisis can happen at any location anytime but that should not alter global trade based on supply-chain. He refers to the earthquake in Japan which damaged the Fukushima atomic reactor and also reminds of America’s vulnerability to floods and hurricanes. But they don’t bring jobs back home. Armstrong refers to Per Hong, a supply chain consultant who argues that crises will make companies redesign their supply chain around risk competitiveness rather than cost alone.
John Feffer in Foreign Policy in Focus expresses similar sentiments. He believes coronavirus alone will not call off the ongoing wave of globalization. It would rather initiate a “rethinking of how the world works together.” Feffer attributes the widespread paranoia this time to the obvious failure of global community to set the new roadmap for economy, environment and healthcare which is creating a “perfect storm of international disfunction.” Gu Xueming, president of Chinese Academy of International Trade and Economic Cooperation looks both optimistic and pragmatic. He still sees a promising future for globalization. Xueming believes that the present international division of labour is rooted in the existing status of development of the productive forces of different countries. Therefore, reversal is unlikely. However, he also accepts that globalization will become more “open, inclusive and balanced” after the outbreak.
Despite the present setback, to expect a wave of deglobalization may be naïve. Yet it may be reshaped by pragmatism and compassion. While the earlier may help strengthen the foundation of nation states through practical economic planning, the latter will nurture the spirit of global cooperation driven by compassion not just economic considerations. Indian metaphysical tradition believes in vasudhaiv kutumbkam. It conveys the idea that “to say this is mine, that is his, is for the small minded, the wise believe that the entire world is a family.” Prime Minister Narendra Modi who has been proactively involved in managing the corona crisis at the domestic, neighbourhood and at the international front, also underscores the need of a human-centred approach to globalization in the wake of the pandemic. Time to reposition globalization is now.
(Author is a Senior Faculty of Science and Liberal Arts at National Institute of Design, Ahmedabad, India)