While nations struggle to contain the outbreak due to the coronavirus, the world seems to be on the brink of a sudden recession. The stock markets are registering losses of up to 10%, unprecedented since 2008. Billions of dollars and pounds have vanished from this dip in the stock market crash.
Typically, recessions only affect one continent or two. However, with the advent of globalisation and the dominance of China in the global trading market, the economic quarantine of China has led to the suffering of trading partners all over the world. As airlines and factories close down or suffer significant losses, we see the oil price plummeting to half its peak.
The international macroeconomy founded on capitalistic ideals is dependent on keeping demand high while engaging the dynamics of production. With the loss of confidence by both business leaders and governments, nations have taken to isolating themselves, building walls, impeding congregation and stifling trade. As such, this has sent the world economy hurtling towards recession.
Additionally, the tools of economic recovery available to governments are national and not international. There are national treasuries to stimulate demand or to pump cash into circulation, but there are no global storehouses to do the same or subsidise employment or maintain investment. It seems that the globalisation of the recession and trade has made this period of economic dip difficult to recover from.
Killing Off Globalization?
The upheaval caused by the coronavirus outbreak is leading large corporations around the world to rethink how they want to operate in a globalized economy. Many of these large corporations have supply chains that sprawl across different continents. When there are shortages or production stoppages in particular regions, this affects the overall production levels globally. In this regard, pharmaceutical giant Sanofi has announced plans to create a standalone company that will make key ingredients for other pharmaceuticals to ensure supplies of essential components and to reduce reliance on Asia.
While globalization has led to a more interconnected global economy, it has in the process created production shortages for those companies who deem themselves too dependent on supply from foreign countries and China. Would the coronavirus crisis spell the end of globalization as large firms seek to create their independent supply chains? Can our global economy ever revert to a time without globalization?
Furthermore, the coronavirus pandemic is not just a health crisis. As is evidenced by the panic buying at the supermarkets, the pandemic stirs up deep uncertainty and fears which ultimately leads to new behaviours and beliefs.
From the perspective of businesses, companies and probably even the government would try to protect themselves from the uncertainty by developing complex contingent contracts. For instance, finance lawyers and insurance providers may develop new products to pay out to automobile producers or airline carriers if a virus pandemic reaches a certain level of fatality.
Social Impact of the Pandemic
Some historians have argued that the Black Death in Europe led to the waning of the Middle Ages. It was not only the economic disruptions of a pandemic, but also the irrationalism and xenophobia which heralded an end to the universalist culture. People became more insular and nations became more protectionist.
With regard to the present coronavirus pandemic, there have already been individual cases of racism and aggression towards Asians. When you can identify a major event with global implications to a particular racial ‘other’, it is very easy for people to start scapegoating others on the basis of their appearances. Would there be a further wound dealt to globalization caused by the ensuing xenophobia and racism?
However, there are some who believe that the coronavirus would not end globalization, but will change it significantly for the better. While the unregulated, free-market globalization has exacerbated the pandemic, a new form of globalization is taking shape. Globalization 2.0 is one that recognizes the interdependence of the nations as well as the need for evidence-based collective action. Since we cannot do without globalization, we would need to find ways of managing it through greater international governance.
Further, as governments invest more in public health institutions and respect the science they represent, there may also be greater investments in climate change, the oceans and cybersecurity. Instead of furthering nationalist divides, the change in globalization due to the coronavirus outbreak may lead to greater collaboration among the nations for the world’s pressing issues.
Watch this YouTube video on the economic impact of the Coronavirus outbreak
Questions for further personal evaluation:
- To what extent do you think the coronavirus pandemic will end globalization? Explain.
- What do you think are the merits and detriments of countries collaborating together on issues of global importance?
- ‘xenophobia’: dislike of or prejudice against people from other countries
- ‘universalist’: a person advocating loyalty to and concern for others without regard to national or other allegiances
Here are more related articles for further reading:
- The Drum: How social media helps and hurts during the coronavirus outbreak
“China, famously unprepared to take the stage during the 2009 H1N1 outbreak, learned its lesson, being upfront and transparent about the coronavirus situation on social media. In the days following the initial news, there was no shortage of verifiable information from official Chinese sources.
WHO and other public health organizations also use social media to inform the public about the outbreak, and control the panic. Of course, it doesn’t mean that misinformation is not being circulated among social media users. For many people, conspiracy theories are a natural response to the senseless cruelty of this crisis. They offer clarity and an opportunity to blame someone for the havoc. So it’s not unreasonable that a number of dangerous conspiracy theories ‘blew up’, offering interesting, albeit completely incorrect ways of viewing the situation. Some claim that the virus is a biological weapon, created by either the US (to kill Chinese people) or China (to kill Americans). Some claim that the outbreak was orchestrated by big tech – to undermine China’s status as the world capital of high-tech manufacturing.
Social media websites are actively fighting this misinformation and fearmongering. Chinese tech giants, already well-versed in censorship, put their tools to good use to prevent the spread of such lies. The creators of WeChat — China’s number one social media platform — are using a popular fact-checking platform to dispel harmful misconceptions. Western websites, such as Twitter, Facebook, and Instagram, are also actively working to ensure that only correct sources get amplified. When people search for ‘coronavirus’ on these platforms, they’re less likely to encounter any unsubstantiated claims than they would during the recent Zika crisis. Content from ‘reputable’ accounts is given priority, while amateur claims are being scrutinised and factchecked.
Of course, no fake news — filtering algorithm is perfect. As coronavirus became a trending topic, many people tried to profit off its popularity in ways that couldn’t have been predicted. Several teen bloggers pretended to be infected to elicit shock from their peers, pity from their online followers, and, most importantly, clicks. Stunts like these cannot be controlled as well as the claims of international conspiracies, but they’re still largely illegal — and the perpetrators are likely to face consequences for their acts of sowing panic on purpose.”
- CommonDreams: Will the coronavirus kill globalization?
“The global spread of a new pathogen has exposed the fragility of modern life. As it moves around the world, the coronavirus has compromised the circulatory system of globalization, dramatically reducing the international flow of money, goods, and people. The disease has done so rather economically, by infecting fewer than 100,000 people so far. Extrapolation and fear have done most of the work for it.
In the world of things, the coronavirus has infected the global supply chains that connect manufacturers and consumers. Port traffic in Los Angeles, the largest U.S. port, declined by 25 percent in February. Container traffic in general was down over 10 percent last month.
Manufacturers that depend on the sourcing of components in far-off countries had already been rethinking their participation in the global assembly line because of tariffs, the costs of transport, and increased automation. This “reshoring” will get a boost from the disruptions of the coronavirus.
People, too, are not moving around as much. Airline service in and out of emerging hot spots—South Korea, Italy—has been cancelled. Airline ticket sales last week were down 10 percent over the same period last year. The cruise industry, after outbreaks on a couple big ships, has taken a major hit.”