Is this the End of globalisation?
German version: https://joshwagenbach.com/das-ende-der-globalisierung/
For many years, globalization seemed unstoppable and with few flaws. This shift has been reversed in recent years by the emergence of multinational corporations that attempt to restrict and disrupt global economies. The recent global health crisis seems to have achieved the goal, at least in part. Within a few weeks of last year, a visionary disorder, a disease, took over the global manufacturing industry and brought the global market to its knees. . Borders were closed, immigration was severely restricted, tourism and trade were shattered, exports and imports were frozen, and the nation-state took the lead. Could all this eventually lead to the end of globalization?
A modern economy is a complex uncertain network of interconnected parts: Commodities, workers and companies, suppliers and consumers, banks and other financial institutions are links in a single chain, connected by constraints and interdependencies. Failure of any of these connections can cause a domino effect that results in total physical damage. The global epidemic has exposed the limits and risks of today's global market and exposed the fragility of the global manufacturing process. First, we find that many developing countries are highly dependent on commercial (not just medical) products from Asia, especially China. And there are business and geopolitical risks as suppliers become overcrowded in a country. Additionally, the production line has become more segregated over the past ten years due to the substantial replacement process to reduce costs and maximize customer benefits. This inevitably harms health and the environment as large industries pollute. Without the impact of the wave of mutations, the coronavirus makes us self-existing and existent. But it's also about money, relationships, politics, and justice. No person, company, or country has sufficiently prepared for its health and benefits. We can be better prepared than necessary for the next event. Different situations (the final article) are difficult to predict and have different and often negative consequences. Fires should be put out when they can be, not after they have started. However, as mentioned in a recent article, the key to driving change is through good behavior without being affected by the wave of change in management. After the crisis is over, there are three ways.
The first is to try to restore the situation before the crisis and recover the lost balance. This means using the mechanisms of the old social and economic model, which was replaced by the epidemics, to revive the benefits of GDP and jobs. This is a long and arduous path with a major weakness: it leaves little room to learn from change and improve the system by adapting to the new reality.
The second option is to completely replace the growth model, whose limits have been exposed by the crisis, by "abolishing" it. Given the general belief that the disadvantages of globalization outweigh the advantages, such a scenario cannot be ruled out. The most important consequence will be the rise of protectionist and nationalist economic policies. This will lead to a sharp decline in international trade, a sudden reversal of transportation activities, and a return to bilateralism as a means of balancing the world. The situation is not much different from that in the 1930s, which provided fertile ground for the emergence of totalitarian regimes and the outbreak of World War II.
There is a middle ground between the two extremes - the restoration of the pre-crisis status quo and the complete erasure of the past. This is to fully understand the fragility of the current paradigm - from a health, economic and social perspective - and make the most of it by creating new and more stable equilibria while respecting important aspects of the past. The goal is to seize the opportunity, even if it is critical.
To succeed on this path, it is important to adapt to the new reality and learn from what has happened. If some of you remember, we also developed a framework/tool called Jungle Thinking for this path. Without healthy stability, there is no growth. We have learned many lessons from this epidemic. First, the coronavirus epidemic reminds us how important sustainability is: from a health, environmental, and social perspective. It was never clear that there would be no economic growth without healthy sustainability. Here I need to think more about how the economy is structured so that we are not always striving for growth. You can call some of it growth. But that's very bad in theory, and if you look at the current mountain of debt, I think it's a good opportunity to solve something new.
The first is to try to restore the situation before the crisis and restore the lost balance. This means using the methods of the old social and economic system - driven by the disease - to regain basic GDP and employment. It is a long and difficult process that has a very serious disadvantage: it does not leave much room for learning from the changes made and improving the process by making changes to new facts.
The second option is to completely replace the growth model, the end of the problem shown, by "closing" it. Such an example is unthinkable, given the widespread belief that the damage caused by globalization is far greater than its benefits. The most important outcome will be the rise of security forecasts and economic nationalism. This will lead to a sharp decline in international trade, a major shift in the process of delocalization, and a return to bilateralism as a means of achieving global balance. The situation is very different from the 1930s, the land was preparing for the rise of dictatorship and the outbreak of World War II.
Between the two extremes - the restoration of the situation that was the problem and the absolute end of the past - there is a happy process. It is a question of fully understanding the shortcomings of the current model - from health, economics, and social sciences - and using it to create new, sustainable, and innovative solutions. bearing in mind the tragic aspect of the past. The goal is to take advantage of certain opportunities, even if it is or has been a problem.
Difficulty in treating and expanding - reaching 188 countries around the world - has had immediate economic consequences: supply shocks, industry closures, huge cuts in supply chain workers' jobs. The misery of the supply chain follows the desecration and collapse of private consumption as well as a commercial investment. The result is a damage reduction. Difficulty performing well in emergencies is because in many countries health care infrastructure is inadequate, especially public infrastructure. According to many experts, it is easy to get this disease by thoroughly examining the infected people from the beginning, examining their movements, selecting their variants, and distributing coatings and other protection. These are all systems that the public health system, which does not require short-term economic benefits, can do more than the private system. As a result of such a plan, South Korea and Taiwan - gaining experience with SARS in 2002 - have had both media and economic damage. Other countries have adopted - with little positive - plans to open, isolate infected people while waiting for vaccinations. Sometimes these errors are due to myopia, but most often they are due to the weakness of the public health system.
It is therefore important to invest in improving the public health system to ensure an effective and robust response to similar emergencies in the future. But it is essential for economic growth. Investing in job security and meeting places can also be a source of growth. Companies and warehouses, trains and airports, public transport and shopping malls, banks and shops, theaters, cinemas, and stadiums will have to move - sometimes remodeled - to win music users and customers. An important investment in this can be eliminated - or at least, reduce the impact of the insecurity caused by infectious diseases, which is a major impediment to economic growth. Reducing the risk of relapse or the threat of another disease can restore and strengthen the confidence needed to stimulate investment in consumption. Health emergencies remind us that health is a global concern - such as the environment, diversity, education, and culture - and must be managed. Its goal is to create a flexible, well-prepared world to deal with future threats. Our world prioritizes human health on the planet and promotes the growth of mobility.
A prudent globalization
One of the reasons to take globalization seriously is to be sure that our citizens are not denied the benefits of global interdependence. To date, many of the benefits of globalization have gone only to people in the wealthiest countries. Some of these benefits can be described in general terms: global commodities can be made cheaper as a result of economies of scale; global markets can become more transparent to the benefit of all; there are increased transparency and accountability within the international community.
However, in many places, some of these benefits are being denied to some of our citizens. In much of the rest of the world, poverty and lack of health care are realities, as are food shortages and environmental degradation. Furthermore, many people in developing countries lack the means to participate meaningfully in global markets and are consequently denied the opportunity to benefit from new global prosperity. For these people, globalization raises both challenges and opportunities, and there is still much to do to secure all the benefits that globalization can provide.
The second lesson from the pandemic is the vulnerability of the global value chain. While it is certainly an exaggeration to view the epidemic as a consequence of globalization, the virus has undoubtedly brought to light its inherent weakness. Today, there is a greater awareness that it is enough for a shock to hit one of the links in the value chain for the effects to become systemic. The lesson to be learned - the opportunity to be seized - is that a transition to new and stable equilibria is necessary. This means being more prudent in our decision to move production offshore, building shorter supply chains that are less vulnerable and closer to the end market, facilitating the relocation of certain strategically important activities - in pharmaceuticals, technology, and telecommunications, for example - and making greater use of local territories and turning them into a competitive advantage. This approach is not a rejection of the many benefits of international trade and economic relations, and should not be an alibi for falling into economic nationalism, but merely a spur to prudent globalization. This crisis does not mark the end of globalization-a process that is largely irreversible-but it can help understand its excesses and limitations. And to pursue more sensible and sustainable growth. In many areas, this would mean starting to develop and produce regional products. For food, this seems easier at first glance. But we are also already able to produce robust materials such as nacre, glass, or cement from bacteria or other renewable raw materials. So we are not that far away from producing our vehicles and houses of the future decentrally in a 3D printer (or press).
Respect for the environment and sustainable growth
Another lesson of the health crisis is that it reaffirms the importance of environmental security. The link between the decline of biodiversity through deforestation, pollution climate change, and the spread of human disease is more evident than ever. It is also known that melting permafrost can release germs and bacteria that can be dangerous to humans. People have a great responsibility. The large-scale harvesting and use of natural resources, the conversion of forests for agriculture, the expansion of the fishing industry, and abundant animal husbandry are all activities that affect the ecological balance, reduce biodiversity and promote disease transmission. It should be noted that while humans have become the most important species in the world throughout history, they are also the best carriers of the disease. Interestingly, this is not the first time in recent years that an international epidemic has started in China. This casts doubt on the stability of Beijing's strategy of forcing 1.4 billion people into the industrial economy, using constant resources, and causing natural disasters. China, on the other hand, has the best financial and economic security, which can bring great benefits to the region in the future. The growth of the industry needs to take into account the limits of energy and environmental sustainability. Thus, it may be useful to influence the reduction in transmission observed immediately after infection with the coronavirus. This can be an incentive to rethink some of the manufacturing and transportation practices and create a sense of environment. Greater knowledge, concern, and understanding of environmental issues can create significant opportunities for growth by investing in green markets, developing well-balanced practices, commercializing and re-exploiting local gains and resources.
Solidarity networks, the role of the state in the economy, and international cooperation.
The crisis tends to promote individualism between peoples and nations. However - and this is another lesson from the pandemic - the coronavirus underlines the importance of coherent networks. Families are the first cells of unity to deal with closed schools, teleworking, and unemployment. Many companies play an important role in supporting workers, their families, and sometimes the whole community through social events in the workplace. States are working hard to mitigate the negative economic and social consequences of the virus. This crisis offers a great opportunity to promote community cohesion. The health crisis underlines the importance of re-evaluating and adapting certain institutions, starting with international institutions that have proved ineffective. This can be achieved by changing their governance and introducing rules that prioritize cooperation so that they can respond more effectively to global emergencies. At the European level, coordination needs to be improved in many areas - from health - and transnational economic policies need to be put in place. It is not an easy step because it requires individual states to relinquish part of their sovereignty, but it represents a major step forward in the decline of the project of European integration. But do we still need to stand in a fully interconnected world? Or does the future offer a global but decentralized system of government and finance? If we look at Europe and the ECB, I think we have already failed on the issue of monetary policy in recent decades. Hans Werner Sinn has a very good analysis of EU monetary policy in this regard. While the EU's initial response to the pandemic has been slow and confusing, some steps taken to address economic crises have been relevant and effective. At the global level, it has become clear that some institutions need radical reform, starting with the WHO. The pandemic generally explains that in the face of global challenges - not only health crises such as coronavirus but also other types of emergencies such as climate change and environmental sustainability, terrorism and cyber security, money laundering, and drugs as human beings. trafficking in human beings, mass migration, and world hunger - only strong political and technological cooperation at the international level can provide answers with a high chance of success.
Innovation, labor, and social sustainability
The coronavirus has also contributed even more to community safety. The pervasive disease has accelerated the spread of technological advancements and left many jobs unused. The economic slowdown caused by the health crisis has weakened the middle class and led to new inequalities. The technology that could change the way people work is already here, and the design has continued. But in the post-coronavirus industry, the rise of technology will be faster and cover new areas than ever before. There are at least three reasons for this. First, market pressures are forcing companies to cut costs, and downsizing is usually first and foremost immediate cost savings. Second, to reduce the risk of future transmission of infectious diseases: non-infectious robots, intelligent operation and remote learning protect workers and students, and virtual theaters and fashion theaters dangerously congregate. COVID-19 will enable businesses and individuals to use the latest technologies, introduce and scale them, and overcome existing adoption cultures.
The higher rate of innovation penetration will lead to productivity gains, provide new investment opportunities, and stimulate the creation of new jobs. However, many traditional jobs will also have to be sacrificed to achieve this, putting a strain on social sustainability. Moreover, a scenario with less work and more precarious and lower-paying jobs weakens aggregate demand, negatively impacting growth and prosperity.
It is, therefore, more urgent than ever to rethink the relationship between humans and machines. One option is to passively wait for the point of singularity - the moment when, according to some, machines will overtake humans - and lazily delegate most jobs to robots and AI. The alternative is to maintain the primacy of humans over machines so that humanity can put technology at its service and use it to increase productivity, but also to improve the quality of life.
One example is the sudden and forced spread of distance learning to improve teaching methods and expand access to education. Thus, on the one hand, it is possible to bring education to more people. On the other hand, we learn, especially children in this environment worse. Another example is the spread of New Work to reduce the negative impact of commuting on the environment and improve the quality of work and, more generally, the lives of individuals and families. There is also an opportunity for companies to leverage through work to tap into a larger talent pool, increase attraction and retention, and improve diversity. Just silly if these companies also have no right to exist in the future, but are kept alive by banks through zombie loans (CLO). In the balance a win-win situation.
Putting people first means focusing on the future of work, investing in education and training to prepare people for new jobs (or using technology to do current jobs in other ways), introducing new ways of redistribution. Or, as I have suggested in this essay, introducing a mechanism of prior distribution that not only transfers income but enables people to earn it. Finally, the primacy of the human over the machine means rethinking the right to privacy and personal freedom of citizens - at a time when technology, while a very useful tool, is also a potential means of surveillance and mass control - for corporations and governments.
Heading for new waters
The coronavirus pandemic was the beginning of a long and difficult journey through uncharted, largely stormy waters full of dangerous and treacherous currents. Confidence and vision are essential to successfully navigate them. Confidence is key when it comes to turning threats into opportunities, having the courage to change course and chart a new course. Accepting the past is critical to moving past it and moving forward. The end of something can be the beginning of something else. The pandemic and the crisis that followed offer an opportunity to build a more sober and sustainable society that respects the limits of nature, and a more equitable economy that is resilient to future shocks (not just health ones). The goal is to create a growth model that is slightly less efficient than the previous one, but much more resilient. Resilience means efficiency in the long run. The way to seize this opportunity is to make some adjustments to the current growth model and improve health, environmental and social sustainability.
Confidence is the wind that makes it possible to navigate uncharted waters. However, the wind alone is not enough to weather the storm and reach a safe harbor. You also have to know which direction to go, have a detailed navigation plan, and have a clear destination in mind. In addition to the wind of confidence in our sails, we also need a compass of vision, a long-term perspective. Because, as Seneca says, "If you don't know what port you are sailing to, no wind is favorable".
After the health emergency caused by the coronavirus and the economic and social upheavals that followed, it will be very difficult to turn back. This sudden and unexpected change is throwing us inexorably into a new era. The pandemic has accelerated a revolution that was already underway, encompassing sustainability and technological innovation, with transformative consequences for business, society, politics, and ethics. Redefining new equilibria and eliminating the economic and social contagion of the pandemic will take much longer than developing the vaccine. Our future depends largely on our ability to manage this difficult transition, learn from the past, and adapt to the new reality.