The challenges of covid 19 have led to a dark period both in terms of human suffering but also the damage done to political and social fabric but before the pandemic globalization was already in retreat now that tred looks set to accelerate this is a diminished world in many ways that we’re looking at its a world of slowbalozation
Will covid kill globalisation ?
From smartphone to toys today’s globalized trading system has grown to rely on long and complex supply chains but the pandemic has played havoc with them. Clothing is one industry that has been hit hard worth 2.5 trillion dollars globally it employs over 43 million people in asia alone one of the most footloose industries when it comes to supply chain has always been the garment industry, that’s because it has a high level of human involvement and so the labor cost of a product is much higher than you might find in an automobile for example. For that reason we’ve always seen companies chase the lowest cost .
That means manufacturing mostly happens in Asia and the global nature of the industry make it especially vulnerable to disruptions. Take a typical pair of trousers sold on a high street in western europe the label says made in Bangladesh but many of the parts come from other countries. Chinese factories making buttons and zips shut during the pandemic meaning the items didn’t reach their next port, factories in bangladesh couldn’t finish the trousers and cancels orders to cotton suppliers in india and lockdown hit demand in the west ad customers weren’t shopping on high streets.
In America clothing sales fell by 73.5 percent between March and April this year. Bangladesh Lost out on an estimated 3.2 billion dollars from cancelled exports in just 6 months and across Asia millions of low income workers were laid off goods taking long journeys from factory to the high streets have become one of the signatures of globalization.
The roots of today’s heavily globalized world were put down at the end of the second world war they allied nations created a rules- based system for international commerce ans finance. This allowed companies products science and technology to move across borders the in 1990s the world entered an era of hyper globalization becoming more interconnected than ever before.
The big new player on the scene was china which joined the world trade organization it grew to dominate global trade alongside the united states, multinational companies thrived expanding into china and all over the globe from 1990 to 2008 the total trade in goods and services increased from 39% to 61 of world GDP.
This great globalization boom enabled a billion people in developing countries to lift themselves out of poverty and in the west consumers enjoyed cheaper and more accessible travel and good.
Covid 19 struck a major blow to unfettered globalization but before the pandemic arrived globalization had already taken two other big hits.
The first was the 2008 financial crisis when cross border investment trade bank loans and supply chains shrank globalization started to slow down a process known as slowbalozation.
Free trade went out of fashion and protectionism was all the rage the number of trade of interventions such as tarrifs and subsidies introduced by countries has been increasing year on year and while some of have brought liberalization most have been harmful to world trade in this climate globalization suffered a second assault.
A trade war blew up between the world’s two largest economies for years te west had accused china of flouting wto rules saying is trading practices were unfair to western companies.
The advent of the pandemic this year was the third big distribution to globalization within the last 12 years slowbalozation has sped out. This year the IMF forecasts that global GDP could fall by 4.9 percent that is 50 times more than in 2009 the post-covert world is likely to be a more fractious and regionalized one
Some companies are ahead of the game the Spanish clothing retailer Zara is one of the most successful in the clothing industry and it’s shorter supply chains have helped the company weather the coveted storm while most western street fashion brand have offshored manufacturing to Asia where labour is cheaper distance equals time so retailers have to bulk order six months in advance and in that time a lot can go out of fashion Zara keeps its manufacturing base closer to home for it’s higher fashion lines meaning you can take a design to the high street in a matter of weeks that way it doesn’t stockpile inventory and can respond quickly to consumer trends .
The pandemic has disrupted the mouvement of goods people and capital around the globe but even without covid 19 another pillar of globalization would be facing challenges the flow of data across borders the great firewall of china has kept out the likes of Google and Facebook for years.
The unpicking of globalization may accelerate on a number of fronts irrespective of when covid 19 is brought under control and this could be bad news for developing countries.
But even if the world becomes more de-globalized some of the biggest winners from globalization will endure big digital compagnies like Netflix Google and Facebook will keep getting bigger with the pandemic accelerating the trend towards shopping online companies following the Amazon model of fast direct delivery will also do well cause in every crisis you find some companies that fall behind and those are fundamentally able to rejig the business models and innovate are the ones that thrive.
In a post covid world some aspects of globalization affected pandemic may shift back such a freedom to travel the world has grown to integrated for full unwinding of globalization covid will not kill it off it will deepen the cracks however this may not be all bad news.