Covid-19 And The Turbulent History Of Globalization

There is perhaps no time like the present for reflecting on globalization, the buzzword of the century, but a word that may now be under threat.

For example, China showed that global trade and investment can be a powerful motor for economic development and poverty reduction. But dense global transport linkages highlighted the dangers of globalization as they spread Covid-19 around the planet from its origin in Wuhan, China, at a frightening speed.

And great power rivalry between the US and China has prevented global cooperation that would be the most effective means for addressing the health and economic policy implications of Covid-19.

Globalization and creative destruction

As Jeffrey Sachs argues in his new book, humanity’s story has always been on a global scale, even though its character has changed from age to age. Globalisation refers to the technological, economic, institutional, cultural and geopolitical interlinkages that bind us together.

Looking back over time, despite the immense economic and social progress it has generated, globalization seems like a process of creative destruction.

In the Paleolithic Age (70,000-10,000 BCE), Homo sapiens drove the Neanderthals and Denisovans to extinction, as our ancestors dispersed across the globe. During the Neolithic Age (10,000-3,000 BCE), hunter-gatherers were replaced by migrating herdsmen and farmers, as agriculture developed. The Equestrian Age (3,000-1000 BCE) saw horsemen from the steppes raiding and plundering the temperate-zone societies of Eurasia.

“humanity’s story has always been on a global scale”

In the Classical Age (1,000 BCE-1,500 CE), great land empires battled for domination of Eurasia, while trans-Eurasian trade prospered. In the 14th century, Black Death spread from China to Italy, foreshadowing the recurrent impact of pandemics. Disease was also part and parcel of the Ocean Age (1,500-1.800) as European conquerors brought Old World pathogens to the Americas which devastated the indigenous populations. The transportation of African slaves to the New World was another shameful episode.

Industrial Age, the most turbulent period to date in globalization’s history

The turbulent Industrial Age (1,800-2,000), started in Great Britain, then spread to other Western countries, and saw the most dramatic rise in economic growth and living standards the world has ever seen. It also saw a great increase in the world’s population, along with Britain’s rise to the position of global hegemon. This led to a great divergence between the West and rest of the world, and enabled European imperialists to fight their way to colonial rule over much of Africa and Asia.

Sadly, the thirty-year period from 1914 to 1945 was one of the greatest disasters to ever afflict humanity. It saw two world wars, emanating principally from Europe, and an economic depression. The post-war period saw the US eclipse the UK as global hegemon, Western countries lose most of their colonies, and the rapid economic development of many newly independent countries, especially in Asia.

The US geopolitical leadership showed several faces to the world, during the Industrial Age. The US led the building of law-based multilateral institutions, including the United Nations and European Union. But the US also created a network of military installations and bases around the world that is on a scale unrivaled in history. It used its vast military power and economic leadership for “regime change”, to put into power governments that would favour US business and security interests. Indeed, from the 1960s until this very day, the US has fomented and waged war in Southeast Asia, Latin America and the Middle East.

During the first decades of the postwar period, the US championed the economic interests of the developing countries — in part, to lure them into the US alliance against the Soviet Union. But as developing countries gained economic strength and political voice, the US began to shift position, as it pushed them to be stakeholders in the US-led world order. The most notable case has been China, which the US now considers to be a strategic competitor.

Digital Age and a fracturing world

Since the beginning of the millennium, the world has been hurtling into a digital age, which offers immense opportunities for accelerated development. But it is accompanied by a fracturing world with greater social and political instability, and questions of sustainability.

Immense damage has been inflicted on the environment, with global warming, loss of biodiversity, and depletion of environmental resources. The failure to address climate change is no small part due to the fact that the wealthiest 1% of the world’s population have been responsible for the emission of more than twice as much carbon dioxide as the poorer half.

“from the 1960s until this very day, the US has fomented and waged war in Southeast Asia, Latin America and the Middle East”

Inequality within nations has grown dramatically, as rapid technological change has displaced lower-skilled labour and favoured the higher-skilled. Polarised societies have fostered populism and a wave authoritarian leaders who are undermining democracy.

The rise of China and other Asian economies means that we are moving from an era of Anglo-American dominance of the world economy and technology to a multipolar world, as power spreads more widely throughout the world. Indeed, it is the Chinese company Huawei, not a US or European firm, that is leading the rollout of 5G technology. And South Korea’s Samsung has become a leader in mobile telephony.

Each new age of globalisation has been accompanied by deep shifts in geopolitical power, and have typically been accompanied by war. One of the biggest risks that the world now faces is a possible clash between the two largest economies, China and the US, as we are clearly in the midst of great power rivalry.

Covid-19 and the threat to globalization

Covid-19 is a global phenomenon, as it spread rapidly from Wuhan in China, to virtually every country in the world. And yet it has provoked the most local responses like border closures to trade and migration, quarantines, closure of borders within countries, and lockdowns of neighbourhoods.

“Each new age of globalisation has been accompanied by deep shifts in geopolitical power”

For the foreseeable future, Covid-19 will likely have a negative impact on globalization, for several reasons:

• weaker economic growth is fuelling economic nationalism and protectionism — it is also dramatically slowing migration;
• government support packages favour local business;
• concerns about over-dependence of supplies strategically important products — notably pharmaceuticals and other health products — from China is encouraging countries to increase domestic production facilities;
• the undermining of the World Trade Organisation, notably by the US, is also having an adverse effect on trade;
• another unfortunate trend is the weaponization of trade, such as when China restricts exports from countries that cause it displeasure, like Australia following its call for an independent, international enquiry into Covid-19;
• consumers are also reluctant to purchase goods produced in countries that have been hit hard by Covid-19;
• international travel will be restricted for some time, and the return to low-cost mass tourism will likely take a very long time.
• superpower rivalry between China and the US is seeing some decoupling of their economies. The Trump administration is already working to reduce the US’s reliance on China as a trading partner.
• for its part, China has unveiled a “dual circulation” strategy to cut its dependence on overseas markets and technology in its long-term development, a shift brought on by a deepening rift with the United States. President Xi aims to boost tech innovation and push Chinese firms up the global value chain, key to globalising China’s home-grown companies, boosting household incomes, and in turn, stimulating domestic demand.

At the same time, the Covid-19 pandemic has provoked an acceleration of digitalisation in many countries. This is fostering remote working, electronic commerce, electronically deliverable services including education and health, the exchange of information and ideas, and online communication more generally. Ii is also driving closer scientific collaboration across borders to find treatments and a vaccine for Covid-19.

“Covid-19 will likely have a negative impact on globalization”

Notwithstanding the US withdrawal from the World Health Organisation, important global collaboration is underway through the WHO-backed COVAX to accelerate the development, production, and equitable access to COVID-19 tests, treatments, and vaccines. COVAX is co-led by Gavi, the Coalition for Epidemic Preparedness Innovations (CEPI) and WHO.

In other words, Covid-19 is having mixed effects on globalisation, and some of the negative effects mentioned may only be short term in nature.

Looking ahead

The four big issues facing us in the digital age of globalization are not only still with us, they have been exacerbated by Covid-19. In general, poorer people have been disproportionately affected by the pandemic and its effects on the economy, meaning that inequality has become worse. And with most economies having fallen into recession or depression, there is little appetite to address long running environmental problems.

Most regrettably, there has also been a rise in authoritarian politics, as certain leaders are taking advantage of the pandemic to justify a tighter grip on power. And the great power competition between China and the US has only heightened. China has been taking advantage of the distraction of Western countries to become even more assertive, while the US’s accusatory chanting to China, has only become worse, as the US continues to mismanage the pandemic in the leadup to the presidential elections. What’s more China’s economy will likely grow this year, while a sharp fall in US GDP is on the cards.

In short, the future remains problematic, especially when we ponder the words sociobiologist, E.O.Wilson, that

“We have created a Star Wars civilization, with Stone Age emotions, medieval institutions, and godlike technology”.

This article was originally published by EconIntersect