Is deglobalization a reality in post-pandemic world?
There has been much discussion lately about whether the world is becoming deglobalized, with countries pulling back to become, in the simplest terms, more self-sufficient. There has been a slow rise in nationalist and populist parties since the global recession of 2008-2010. People’s fears for the economy do encourage some to try to preserve what they have, pushing “others” out or perhaps even look for a group to blame.
Turkiye, the US, Hungary and Poland all saw a shift in their democratically elected parties. The call from Donald Trump that he would build a wall to keep migrants out of the US was a loud and frequent one. The UK undertook Brexit, leaving the EU, in part because some citizens did not want centralized laws, in part because of cost and in part because of perceived migration levels. Some other nations, such as the Netherlands, watched with interest to see if they might want to follow suit.
Despite these uncertainties and the changes they caused, the world’s economies were improving and on track for recovery. Then the COVID-19 pandemic hit, pushing many countries into national and regional lockdowns. This really brought many back to a sense of community; people got to know their neighbors across fences, on their one daily permitted walk in the park or in the socially distanced queue to enter the supermarket. Those who were healthy signed up as volunteers to collect medication or deliver food parcels to strangers who were isolating or immobile. There was a return to the old-fashioned community and to old-fashioned pastimes, such as baking with the family, DIY and making things.
Conversely, the digital world opened up. Students were not traveling internationally and there were no tourists, but in some ways it felt like the whole world became a global village. TikTok became a household name, with whole families making videos together to share with the world. Actors, musicians and comedians performed live, weekly concerts, broadcast free across the oceans to keep their own and everyone else’s spirits up and to build a sense of community, with interactive comment boards to accompany their performances. IT companies shared free interactive coding courses for children to help parents who were homeschooling. Fitness trainers did daily online sessions to keep viewers mentally and physically healthy.
Now that most nations have opened up, offering relatively free movement, the world is, economically, in a different place to where it was before the pandemic. The lockdowns have taken their toll. Many European countries implemented furlough systems and entrepreneur loans. The US passed the $2 trillion coronavirus bill, incentivizing businesses to retain workers and providing Federal Pandemic Unemployment Compensation for those who were laid off. These plus medical care — vaccines, PPE and free healthcare in those countries that have it or additional insurance support for citizens in countries that do not — caused greater national debts. As a result, many countries’ gross domestic product is now forecast to fall.
Supply chains have been severely affected by reduced workforces due to lockdowns and on top of this is the invasion of Ukraine by Russia, which has had global consequences because of the world’s reliance on that region’s fuel and grain. The decrease in these vital resources has rapidly increased prices, impacting costs and delivery times for the supply of all commodities.
Despite many supply chains, even prior to COVID-19, having become more regionalized with local warehouses, albeit with lower stock levels, large delays are being seen in industry, in part due to lower numbers of migrant workers to do the jobs after many returned to their native countries to be with loved ones during the uncertainty of the pandemic. Part of the impact of this and the lockdowns is that many who were laid off or were at home on furlough schemes set up entrepreneurial home businesses and, as such, people have reignited their love for homemade items, gifts, decor, clothes and food and are selling locally or nationally. So, commerce has, in some ways, become deglobalized. On the other extreme, Amazon filled a gap for many during lockdowns, when people could not leave their houses to shop. Streets were left to the delivery vans bringing goods from all over the world that would usually have been bought from the supermarket or high street.
We have a global trading market, which is not going to go away. For the time being, people still are not traveling as much as before the pandemic, thanks to fuel rises and an increase in IT capability. It makes sense for businesses to hold meetings online and for people to work from home, with fewer overheads for businesses and less travel time and cost for workers. This reduces the number of people visiting shops and high streets, perhaps reducing spending too, and puts more strain on economies.
The US and Canada are a bit different, as they cover such a large geographical area with a large supply of natural resources and manufacturing capability, meaning they can easily become self-sufficient. But the demand for the dollar is dependent on global trade and travel and will, therefore, affect their economies too.
China, although vast, relies heavily on exports. Deglobalization would vastly affect its GDP, although the likelihood of other nations being able to take on the fabrication of items at the very low cost seen out of China is small. The main threat to China is likely to be India thanks to its steady growth forecasts over the next few years. However, no matter how deglobalized the world becomes and how slow supply chains get, it is highly unlikely that even increasing fuel prices and delivery times will completely knock out the international market based on cheap production in India and China. Parts of Europe have lost much of their production industry and to rebuild it to the magnitude needed to accommodate economies of scale would be unlikely to be much of a threat to Asian production.
Now that most nations have opened up, the world is, economically, in a different place to where it was before the pandemic.
Dr. Bashayer Al-Majed
The other pressing matter is climate change. Deglobalization is unlikely to be long term or on a large scale. Developing nations are where the big production takes place and these nations are likely to be — and in many cases already are — the worst affected by climate change. Their infrastructure is not able to mediate the effects of droughts and flooding. If we do not work as a global whole to both limit the impact and set up a global system of assistance to manage the effects of climate change, the effects worldwide will be much greater.
While globalization may be changing, it is probably here to stay. What is clear is that the global power centers are shifting. So, while the influence of the “old” powers of Europe, the US and Russia may be lessening, particularly as they struggle to overcome the costs of the pandemic and the fuel crisis, economic power is shifting to the East.
- Dr. Bashayer Al-Majed is a professor of law at Kuwait University and visiting fellow at Oxford. Twitter: @BashayerAlMajed