The disruption of supply chains coupled with an unprecedented economic disaster waiting for the world due to the pandemic, the pertinent question is - has the time come for the world to have a rethink for globalization, asks Pranay Kumar Shome for South Asia Monitor
Ever since the COVID-19 outbreak evoked an unprecedented lockdown in the epicentre of the outbreak, Wuhan, the bustling industrial hub of central China with a population of over 11 million, such a kneejerk yet necessary action has been replicated by many countries to contain the virus. But the actions have thrown the global economy into a tailspin, with supply chains disrupted, billions of people forced into confinement and governments worldwide scrambling for action. The virus has put at peril the nascent recovery of the global economy in the aftermath of the 2008 financial crisis.
Before the pandemic struck, the IMF predicted that the world economy would grow at 2.1%. However the Coronavirus has forced a drastic rethink on such an analysis. Although the outbreak appears to have slowed in China, COVID-19 and its impact is global. Infections are heavily mounting in Europe, West Asia, Iran, the United States and elsewhere, with authorities implementing increasingly restrictive measures to contain the virus.
Europe and Japan are likely already in recession, given their weak fourth-quarter performance and high reliance on trade. Estimates of the global impact of the virus vary: recently, the Organization for Economic Co-operation and Development (OECD) predicted that COVID-19 will lower global GDP growth by half a percentage point for 2020 (from 2.9 to 2.4%); Bloomberg Economics warns that full-year GDP growth could fall to zero in a worst-case pandemic scenario.
In India, the price of paracetamol, which is the most commonly used analgesic, has surged 40%, while the cost of azithromycin, an antibiotic used for treating a variety of bacterial infections, saw a spike of 70%, according to a Bloomberg report.
The sectors which have been the hardest are real estate, tourism, airlines, hospitality and other sectors. According to the Centre for Asia-Pacific Aviation (CAPA), a leading aviation consultancy firm, global airlines are set to go bankrupt by May this year if the restrictions and expeditious steps to contain the COVID-19 outbreak are not achieved. Therefore, it is clear that if the virus is not contained in the near future, not only would millions of people be thrown out from their jobs but there would be chaos in the global economy. It is necessary to ensure that the supply chain of essential goods is not disrupted in this moment of uncertainty.
The buzzwords of the 21st century have been globalization, integration of supply chains, increasing interdependence of nation-states for their inclusive and holistic development. That is what drove countries after the Cold War to adopt the nuances of the Washington consensus and tread the path of liberalization of their economies. India followed suit in July 1991. Since then, despite hiccups, the world has grown by leaps and bounds to promote the flow of a globalized economy.
However the COVID-19 pandemic has sparked a rethink of globalization; the fact that China is the focal point of many industries and an important supplier of raw materials of a large number of industries such as electronics, automobiles and pharmaceuticals has accelerated the disruption of supply chains globally. In this context, it is necessary to introspect whether too much globalization is necessary for the global order.
The disruption of supply chains coupled with an unprecedented economic disaster waiting for the world due to the pandemic, the pertinent question is - has the time come for the world to have a rethink for globalization?
In the coming years, the coronavirus outbreak may be remembered as a milestone moment on the road toward the end of the first phase of globalization. Over the past few decades, markets have opened, supply chains have gone global, middle classes have emerged, and new connections have been made. More recently, a severe backlash against the increasingly free flow of information, ideas, money, jobs and people has created extraordinary political pressures. The result has been tightened immigration rules, new hurdles for trade and investment, a deliberate curtailing of supply chains, a technological decoupling and a new emphasis on right-wing nationalistic politics.
The pandemic has also unleashed the wrath of the extreme right-wing nationalistic leaders across the globe to hold globalization responsible for the ills of their respective countries, Jair Bolsonaro of Brazil, Viktor Orban of Hungary are some of the heads of state who have lambasted globalization for the respective economic woes in their countries.
The world is at crossroads. While the effect of the Wuhan virus is likely to recede soon, as leading researchers are desperately trying to find a vaccine for the deadly virus, it will have a profound impact on the course of the global economy, at a time when protectionism is on the rise. This is manifesting itself in the form of the US-China trade war, the US withdrawal from the Trans-Pacific Partnership (TPP) in 2017 and India’s recent withdrawal from the Regional Comprehensive Economic Partnership (RCEP), to protect domestic industries and jobs, thus demonstrating that multilateralism has taken a backseat.
The need of the hour is to try and save globalization. The steps that need to be taken by nations can be in making the flow of ideas, jobs, working of institutions more transparent and integrated. Promoting greater cooperation and goodwill by promoting the spirit of brotherhood is necessary.
(The writer is a student of International Relations, Jadavpur University, Kolkata)