The globalization was undeniably going through a gradual process of reversal long before the pandemic. The optimistic perception and view of the open trade market system were starting to crack. However, the economic disruption is raising the question of whether or not financial markets need globalization.
The significant drop in the exports from all across the world leaves logistics experts in dilemma to come up with new strategies. That said, economies will reopen and recover. However, the return to a cheerful and carefree trade is long gone.
Also, the politicization towards non-sustainable economic policies would be the wrong course of action. In fact, this strategy would weaken the recovery process of the economies. Naturally, nations don’t want to make their downward economic growth more vulnerable and unstable.
Pandemic Phases Slow Down Economy
Perhaps the reversal of globalization had begun since the global financial crisis. Besides, continuous trade wars didn’t care for the consequences either. Currently, the first phase of COVID-19 offers a glimpse of the global economic vulnerability that is based on interdependence.
Apart from countries that are experiencing challenges to acquire medical supplies, most nations face the depletion of manufacturing due to broken value supply chains. Evidently, countries will have to reconfigure their state of the economies. It is not just about of import substitute items; it is the drawbacks of overdependence that wreaks havoc on foreign supplies that deserve attention.
The Next Phase of COVID-19 and the Future of Economies
Unlike the flow of data in the online landscape, the movement of goods, capital, and especially people will face new difficulties. It is vital to understand that 90% of individuals reside in countries with closed borders. It means these countries may have just open borders that have the same healthcare protocols. (i.e., Australia and New Zealand or Singapore and Taiwan.
Pandemic has Exposed Human Vulnerability
As much as the economic opportunities and capital growth of the past decade is unprecedented, Humanity is still susceptible when it comes to intense movement across borders. Now, completely flattening the curve of the pandemic will take some time. Therefore, countries should improve their transnational cooperation.
What’s the Solution?
It is true – numerous industries will suffer the consequences of the pandemic. The travel industry, for instance, is bound to witness more decline in the foreseeable future. Interestingly, there is no such thing as a permanent globalized state.
The systemic risks of the current global order where countries are overdependent require minimization. Furthermore, Non-essential remote work conditions, for instance, would become the standard.
Practically, countries need to find means and ways to decrease that level of dependence. It won’t lead to de-globalization – it is a way to limit the visibility of the virus. In fact, a time will come when the virus will have no physical footprint, and Its remnants will remain only on the digital landscape.
The Role of Supply Chain
The COVID-19 has hit the global economic infrastructure causing huge disruptions. And a large chunk of that disruption has to do with supply and demand. Trade is already suffering, but the notion of equal supply and demand for goods is in question.
Contemporarily, central banks are asking taxpayers to make efforts and incentivize stimulus packages. It is a push strategy to revert the previous state of the supply chains and show resilience. Moreover, the countries need to find out substitute domestic suppliers amidst the pandemic. The cost may be high, but the re-shoring can offer absolute certainty and legitimacy to the flow of the supply chain.
Simultaneously, you may witness the re-nationalization of some industries in countries. In fact, several industries will need a new model of the supply chain. Unfortunately, the education and travel sector will continue to face disruption.
The current manifestation of globalization requires changes that would work in favor of financial growth and support medical professionals. It is a new chapter of capitalism that would minimize the large scope of globalization to halt the spread of the virus.
Nonetheless, globalization won’t suffer a complete reversal. Instead, there will be a mass displacement to meet certain market targets and adhere to circumstances. Chinese-based globalization, for instance, won’t face an immediate reversal.
It looks like powerful economies such as China and the US will focus on re-shoring and rediscovery when it comes to globalization. Clearly, the current conditions require a different engaged approach to maintain the reversal of globalization without hurting countries’ economies.