by Anitra Pavlico
There has been much discussion lately of whether the COVID-19 pandemic will spell the end of globalization. It’s hard to get economists to agree on the meaning of the numbers, or foreign policy analysts to commit to a vision of the future in a world that changes from one moment to the next. Globalization means different things to different people and entities. Its many facets, and many narratives about those facets, complicate discussion about either a contraction or a resurgence of globalization. For corporations, it means access to inexpensive labor markets; for money managers, it means access to capital markets. For the typical business traveler, it may mean something as basic as greater choice of airlines and flight times for an international trip. For an optimistic humanist, it might symbolize enhanced international cooperation and a suppression of nationalism and xenophobia. For an environmentalist, it is marred by the dangerous policies that accelerate climate change. For a technocrat, it seems the obvious economic approach to accompany the paradigm of social-media-fueled connectedness, data collection, surveillance, and targeted marketing.
Regardless of what we talk about when we talk about globalization, most of the articles that I have seen over the past few weeks have posited that the coronavirus will mean the end of the current wave, just as the Spanish flu epidemic halted the wave of globalization that steamships, trains, and the telegraph ushered in. Soldiers returning home from fighting in World War I in 1918 helped to spread it. Nationalists’ fears of literal foreign “contagion” are not entirely unfounded, as the ease of international travel has certainly facilitated the spread of the current outbreak. The predicted reversal of globalization appears to be a sensible conclusion, as it would simply reflect the implosion of financial markets, shutdown of borders, grounding of planes, and freezing of lines of trade. Will it last, though?
Stephen M. Walt, professor of international relations at Harvard, writes a “realist’s guide” to the outbreak on the Foreign Policy website, suggesting that the realist approach, while it has had little to say in the past about public health or pandemics, may still shed some light on the future of globalization.
He sides with Reinhold Niebuhr, who said in the 1930s that “the development of international commerce, the increased economic interdependence among the nations, and the whole apparatus of a technological civilisation, increase the problems and issues between nations much more rapidly than the intelligence to solve them can be created.” An idyllic state of cooperation between nations to address the crisis with the needed alacrity has yet to materialize. Walt sees the current “hyperglobalization” as having made the global financial system more prone to crises, and as having caused domestic problems due to job displacement. He foresees tighter borders in the wake of a pandemic that was facilitated by uber-connectedness. At the same time, Walt acknowledges the obvious retreat globalization that has already been taking place over the past decade, as evidenced by Brexit and Trump’s trade war with China.
Philippe Legrain, founder of the international think tank OPEN, takes a similarly bleak view in his unambiguously-titled article “The Coronavirus Is Killing Globalization as We Know It.” The pandemic has highlighted the weaknesses of complex global supply chains and has increased anti-foreigner sentiment, and governments have not cooperated with each other: France and Germany banned the export of face masks, for example, and no EU government responded to Italy’s appeal for medical assistance (China did, however). Legrain predicts that the crisis will provide political ammunition to those who want to localize production of certain products on national security grounds, restrict immigration, and limit global trade–as well as to those who believe in strong government, and prioritizing societal needs over individual freedom.
Academics Anthea Roberts and Nicolas Lamp, currently working on a book exploring competing narratives about globalization, also point to the potential of the coronavirus to bolster those who argue for localizing production and are alarmed by the reality that over 80% of active pharmaceutical ingredients are produced abroad, mostly in China and India. Roberts and Lamp also note that the pandemic will prop up capitalist reformers who criticize the “just-in-time” approach to manufacturing, which prizes short-term efficiencies over long-term resilience. Rather than keep a backlog of parts, manufacturers order parts as needed, leaving them vulnerable to supply chain shocks such as those caused by a virus originating in the manufacturing hub of Wuhan. I had little notion of this reality until I worked on a lawsuit involving a major U.S. auto manufacturer some years ago. The urgency with which their engineers had to coordinate parts orders from China one minute and from Nicaragua the next was dizzying.
Mike O’Sullivan writes in Forbes that the lack of coordination between nations reveals a world that is fractured, not interconnected. He foresees the Chinese government’s monitoring citizens’ health data in ways similar to its monitoring of social credit scoring, which might not be tolerated in the West. Then again, the virus, like 9/11, may end up changing people’s privacy expectations worldwide. With respect to the Chinese markets, O’Sullivan considers the Chinese government’s lack of trustworthiness in the early days of the spread of the virus to have potentially put at risk future foreign investment in China. Investors will sell first and ask questions later, rather than trust the government to be forthcoming in future crises. As an aside, O’Sullivan notes the irony that in a machine age in which social media companies are dominant, the markets are responding to the risk that humans will not be able to physically interact with one another or enjoy physical forms of consumption such as travel and shopping. This almost makes one optimistic about a renewed emphasis on offline relationships once the crisis subsides.
John Feffer, director of the think tank Foreign Policy in Focus, points out that globalization has long been under attack from not just Trump/Bannon “anti-elite” types, but environmentalists and critics of economic inequality, and COVID-19 is simply another blow. Feffer says that if something with such a relatively low mortality rate can do such damage to the global economy, “perhaps the patient was already suffering from some pretty dire underlying conditions.” He predicts that like the Spanish flu, COVID-19 could contribute to greater fragmentation. Far from seeing the death of globalization, though, Feffer sees the pandemic as potentially bringing about the next wave, with reduced carbon emissions, greater economic equity, and strengthened capacity of international institutions to fight future pandemics. But he says this won’t happen without an end to the current cold war between the U.S. and China, and it won’t happen with the current U.S. president in office.
Globalization usually conjures up the notion of the international flow of money, goods, and people. The agreements making this possible, while newsworthy, are generally unsexy–but the negotiation process deserves closer scrutiny. As Dani Rodrik, professor of international political economy at Harvard’s Kennedy School of Government, has pointed out, most if not all of the major international trade agreements have been marked by a “corrosive asymmetry” of capital and industry drowning out voices of workers. Our current state of globalization is based on policy choices privileging the movement of capital investments and facilitating international trade while placing restrictions on an analogous movement of workers to take advantage of similar inefficiencies in global markets. Rodrik suggests that the mechanism of investor-state dispute settlement, via which businesses can sue national governments for trade agreement violations before international arbitration tribunals, should be adapted to allow for labor or consumer groups to challenge violations of labor rights or consumer-protection laws. That such mechanisms and tribunals don’t exist, speaks volumes for the lack of equitability that plagues the current state of globalization. Rodrik stresses the “skewed form” that globalization has taken, and the uneven playing field on which trade talks for every major international agreement take place. He stresses that labor interests “are scarcely paid lip service” when global regulations and trade agreements are drafted: “It’s all about reducing the costs of doing business across borders and facilitating cross-border capital flows. The World Trade Organization and the International Monetary Fund command all the attention and carry the big sticks, while the International Labour Organization is merely a talking shop.”
I was almost convinced that the pandemic would reverse globalization until I read a piece in the Wall Street Journal a few days ago that changed my mind. Author and money manager Zachary Karabell describes the coronavirus crisis as not an end to the globalizing trend, but a new chapter in the story. He says the crisis confirms “what we already know about globalization: that it’s easy to hate, convenient to target and impossible to stop.” In China’s case, far from causing the government to focus inwardly, it has seemed to invigorate its commitment to engagement with the outside world. The Chinese government invested over $100 billion internationally last year, and has invested nearly $1 trillion since 2014 as part of its Belt and Road Initiative. The government has hinted that this trend will continue. Even after the past two years of decline in U.S.-China integration, trade levels between the two countries are almost five times what they were in 2001. U.S. investment abroad, meanwhile, was around $6 trillion in recent years after being barely $1 trillion in 2001. It does defy belief to imagine that many countries will take on the burden of renationalizing industry or, as Karabell puts it, “make trillions of dollars of global investment worthless.” Not to mention the fact that technologies facilitating rapid collection and transfers of data seem to impel a continued movement toward greater interconnectedness, and not the erection of barriers and obstacles.
Yet if we don’t consider the interests of those who are not even at the bargaining table, we have only a partial view of what globalization could be. Karabell describes globalization as having “enormous benefits that have flowed from it for billions of people,” but we have all been hearing lately about jobless claims, businesses closing, gig workers worrying about how to feed their children. It’s hard to see the world as being in great economic shape if the current pandemic, and there will be others to come, has brought so many people to near-collapse over the course of a mere couple of weeks. The imbalances inherent in the current state of affairs are obvious when proposed thousand-dollar checks for American families are viewed alongside a proposed $50-billion airline bailout. Surely the single-mom Amazon factory worker will want to snag a cheap flight to the Fiji Islands to decompress once the current crisis abates.
Stephen M. Walt, “The Realist’s Guide to the Coronavirus Outbreak,” Foreign Policy, March 9, 2020
Philippe Legrain, “The Coronavirus Is Killing Globalization as We Know It,” Foreign Policy, March 12, 2010
Anthea Roberts and Nicolas Lamp, “Is the Virus Killing Globalization? There’s No One Answer,” Barron’s, March 15, 2020
Mike O’Sullivan, “Globalization Crashes – Spread Of Coronavirus Signals End Of Interconnected World,” Forbes, Feb. 29, 2020
John Feffer, “Will the Coronavirus Kill Globalization?” Foreign Policy in Focus, March 4, 2020
Dani Rodrik, “Rebalancing Globalization,” published as “The Trouble with Globalization,” The Milken Institute Review, Fourth Quarter 2017, available here
Zachary Karabell, “Will the Coronavirus Bring the End of Globalization? Don’t Count on It,” Wall Street Journal, March 20, 2020
Image by cdd20 at Pixabay