D I P L O M AT I C A| THE GLOBAL ECONOMY
COVID will dampen our economic future
Fen Hampson
A
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COVID-19 caused airlines to grind service to a halt. Its effects on the global economy will be vast.
The lesson is that globalization is fragile, despite or even because of its benefits.” There is, of course, a grain of truth to these predictions. Some investors, who championed the virtues — and reaped the spoils — of doing business in China, are pulling up their grubstakes and catching the last flight home, while others are shifting their operations to other low-wage Asia-Pacific economies such as Vietnam, the Philippines or Mexico. There can be no doubt that China’s leadership has not acquitted itself well during this crisis. Whether the fault ultimately lies with Beijing or senior officials in Hubei province or the former mayor of Wuhan (or all three), their concealment of the truth meant that precious time to alert the rest of the world and take proactive, preventive measures to nip the pandemic in the bud, was lost. However, Western leaders themselves also share the blame for dithering or downplaying the gravity of the situation and not restricting travel (especially to and from China). Though none was as reckless as Sweden, normally a paragon of prudence and good sense, whose leaders stumbled badly when they refused to adopt quarantine measures like
their Scandinavian neighbours. Sweden’s chief epidemiologist, Anders Tegnell, the chief architect of the country’s response, smugly asserted that Sweden’s sophisticated and socially complaisant population would voluntarily adopt social distancing policies. When Sweden’s COVID death rates soared in early June, reaching one of the highest levels in the world on a per capita basis, even he was forced to finally admit that more should have been done to curb the spread of the virus. China market remains crucial
Nevertheless, despite all the rhetoric about restructuring global supply chains to reduce dependence on China — especially for products such as personal protective equipment for medical workers, testing equipment and drugs that have been deemed critical to dealing with the pandemic — and also shunning business with the Chinese firm Huawei for 5G networks because of cybersecurity concerns, China will remain a crucial market for global trade and investment because of its sheer size and economic heft. It is just too important and significant to abruptly yank out of global supply chains. SUMMER 2020 | JUL-AUG-SEPT
DAVID MARK FROM PIXABAY
s the coronavirus took its toxic flight around the globe and the health crisis in many countries — developed and developing alike — deepened, many pundits forecast that globalization was finally lurching to an ignominious end. “Davos Man will need rebranding,” one commentator cheekily observed in Forbes business magazine, arguing that the crisis was forcing many companies to reshore their overseas manufacturing operations. “New data shows U.S. companies are definitely leaving China,” blared another headline, underscoring mounting investor concerns about sourcing supply chains in China, where the pandemic originated. “The coronavirus crisis has highlighted the downsides of extensive international integration while fanning fears of foreigners and providing legitimacy for national restrictions on global trade and flows of people,” observed Philippe Legrain in Foreign Policy magazine. “All sorts of businesses have suddenly realized the risks of relying on complex global supply chains that are specific not just to China — but to particular places such as Wuhan, the epicentre of the pandemic,” and “Chinese people — and now Italians, Iranians, Koreans, and others — have become widely seen as vectors of disease.” Henry Farrell and Abraham Newman offered an equally Stygian prognosis in Foreign Affairs: “As critical supply chains break down, and nations hoard medical supplies and rush to limit travel, the crisis is forcing a major re-evaluation of the interconnected global economy,” they write. Furthermore, “[n]ot only has globalization allowed for the rapid spread of contagious disease, but it has fostered deep interdependence between firms and nations that makes them more vulnerable to unexpected shocks. Now, firms and nations alike are discovering just how vulnerable they are. But the lesson of the new coronavirus is not that globalization failed.
