The COVID-19 pandemic continues to wreak havoc across the globe, disrupting the globalized and interconnected world. With the vaccine rollout, some regions are finally getting a handle on both the disease and the economy.
Many world leaders believe globalization was in retreat even before the pandemic. They argue that to prepare for the post-COVID-19 era, new energy must be infused into global governance through multilateral actions.
Finding common solutions to the challenges of climate change, transitioning to clean energy, terrorism, cyber security, and emerging technologies will require much more global governance than the international community has been able to muster.
Governance advocates point to the July 1 agreement by 131 countries to establish a minimum tax rate of at least 15 percent for multinational corporations as an historic step in the right direction and that globalization of governance is becoming a reality.
Globalization is not a new concept. At some level, trade across national borders has been an important determinant of the wealth of individuals, companies, and countries throughout history. The search for trading opportunities and trade routes was a primary motivation for exploring much of the world.
The roots of today’s globalized world were put down at the end of the Second World War. The allied nations created a rules-based system for international commerce and finance that allowed products, science, and technology to move across borders in an effort to lay the foundation for lasting peace.
In the 1990s, the world entered an era of hyper globalization, becoming more interconnected than ever before. In this era, the big new player on the scene was China, which joined the World Trade Organization in 2001. Along with the U.S., it grew to dominate global trade.
Many still question the benefits of globalization. They argue that interconnection and dependency between nations made economic and public health crises even worse for many countries.
While the globalization of governance may placate some, it hardly offers comfort to those who have lost good jobs and experienced the pain of economic globalization. For them, globalization is just another name for globaloney, although many support the concept with their wallets by shopping at firms who source their products from Chinese suppliers such as Walmart.
Others argue that the benefits of globalization are not distributed equitably. For example, many who oppose globalization of the US. economy do so on the basis that firms make manufacturing, marketing, and other strategic choices in ways that maximize profits for shareholders, often to the detriment of a firm’s other stakeholders, such as employees and the communities in which they do business.
American manufacturing has suffered severe disruption or outright collapse as a result of increased foreign competition and the outsourcing of manufacturing to countries where labor is cheaper. Globalization has become a polarizing issue in the U.S., with entire industries moving overseas and the resulting economic squeeze on the middle class.
Others believe the COVID-19 pandemic has exposed developed countries’ excessive dependence on Chinese manufacturing. They believe that after the pandemic, countries like the U.S. must take action to gradually reduce their dependence upon China’s low-cost global supply chain.
Countries will look to build some duplication and flexibility into their global supply chains to guard against putting themselves into adverse bargaining positions. Such actions may well push China-U.S. relations even further towards confrontation.
Even before the pandemic arrived, globalization had taken two big hits. The first was the 2008 financial crisis, when cross border investments, trade, and supply chains all contracted.
Second, a wave of populist leaders were elected across the globe, championing economic nationalism and attacking the existing global economy. Free trade went out of fashion and a trade war broke out between China and the U.S.
While the post-COVID world will not see a complete unwinding of globalization, it is likely to be more fractured and regionalized. The basic challenge will be reconciling a deglobalized world with the need for collective action to address global issues.