The COVID-19 pandemic has transformed the world into a different place as most nations have restricted themselves within their territories to stop the relentless march of the invisible army.
The world is facing a twin crisis: public health and global economy. Post the pandemic, there is a possibility that globalisation will go through a structural change in its various dimensions.
Globalisation has dominated the world’s economic order. It has created a borderless world and transformed the whole world into a global village.
International trade flourished rapidly after 1990 driven by the mix of technological changes and policy reforms. This was also fueled by the growth of a complex network of Global Value Chains (GVCs).
However, on the negative side, globalization has been criticised on account of increasing global disparities, spread of international terrorism and cross-border organised crime, and has allowed for the rapid spread of diseases.
Economic growth based on economic globalisation has been challenged long before Covid-19 — the 2007–08 global financial crisis (GFC).
Protectionist measures are being implemented globally. In 2016, thousands of European citizens protested against the free trade deal between the European Union and the United States of America.
Increasing incidences like Brexit, economic decoupling due to superpower rivalries (U.S. and China trade war), etc., have been a challenge to globalisation.
The COVID-19 pandemic is bringing globalisation to the brink of a collapse by affecting international supply chains.
COVID-19 will lead to a short term economic recession. This will structurally change globalisation, having long term effects which can be measured under the following conditions according to Frederick van Til, a political scientist:
- Nations may move towards localisation instead of globalisation. The GVCs will collapse. Inter-regional value chains will also decrease and may lead to more trade wars and economic decoupling. The intra-regional value chain will also decline which has already begun with Brexit and the eurozone crisis. Even in India PM Modi addressed the nation to become self-reliant and self-sufficient, being less dependent on other nations.
- The second possibility is the emphasis on regionalisation. In this case the intra-regional value chains will grow. E.g. US companies are moving their production units to Mexico; European nations are moving to Eastern Europe and Turkey.
- The third possibility is the continuation of globalisation. In this scenario, economic globalisation will recover once the economic recession has ended. Participation in inter-regional GVCs and intra-regional GVCs will recover and economic globalisation will return to pre-corona levels.
According to the United Nations Development Programme (UNDP) past data shows that the world economy often reacted according to a ‘V-shaped’ model to an epidemic, meaning a quick down and a quick back up.This is evident after the previous epidemics such as SARS in 2003 and the ‘Hong Kong flu’ in 1968, where economic growth fully recovered and more or less absorbed the economic crisis.
Thus, there are multiple known and unknown factors that may affect the global economy. Leaving aside the value chains, there are different factors like people to people contact, socio-economic factors of various regional groups, role of international organisations like the World Trade Centre (WTO) that will play an important role in shaping the fate of globalisation and future global economy.
At this point the nations must come together to revitalise the economies as well as enhance resilience, scalability and sustainability of our health care system.