The world's attention, at the end of 2019, was dispersed by a set of factors, the dimension of which was worrying.
Tension in the Middle East and the threat of global conflict resurfaced after the assassination of Iranian General Soleimani, on the orders of US President Donald Trump.
In another part of the world, more precisely in Australia, gigantic fires destroyed vast areas, threatened the extinction of different animal species and once again highlighted the impacts of climate change. In Europe, the strong themes continued to be Brexit and the migration of refugee populations.
Meanwhile, in China, a tiny agent, barely visible under a microscope, has emerged in association with some employees and consumers of the market in Wuhan, a city of 11 million people in the center of the country, an important economic hub with numerous international relations. Technically called SARS-Cov-2, which causes Covid-19 disease, this agent has become the true global threat, causing structural changes in less than three months.
The World Health Organization was forced to decree Covid-19 as a pandemic, fear has taken hold in many places on the planet, the daily habits of millions of people have been changing, leaders of different countries have taken shocking measures with each passing day, economic activity has slowed down, globalization has given way to protectionism and nationalism, and financial markets have dropped sharply.
It seems unnecessary to talk about the numbers associated with the ongoing pandemic. These change every minute and make any writing on the subject out of date.
Nobody can predict how long this situation will take, but some of its damages are already noticeable. The first and most worrying impact is on public health, with the impressive ability to spread this virus, making new transitory or fatal victims at every moment, without any predictive capacity regarding the slowdown of this situation on a global scale. The second is on economic activities and geopolitical relations, and it is on this that I will devote the next lines of reflection.
The virus has exposed some of the weaknesses of globalization
The current pandemic is generating an enormous crisis in international cooperation, threatening essential points of the organizational model that sustains globalization.
More than half a century of growing interconnectedness has dictated a world marked by gigantic flows of goods, services, people and data. The global economic macrostructure is based on a network, with a strong dependence among its various “nodes”, with some essential functions located in specific poles.
As an example, financial activity has its main focus in the United States of America, which helps to explain the international financial crisis that erupted in 2008, as it was in this country that it began and from which it expanded.
Industrial production, in turn, has China as its main center of activity, whose production capacity was severely affected in recent months as a result of the restrictive measures imposed by the crisis caused by Covid-19.
Both situations, motivated by different reasons, have a cascade effect in common. Given the existing model of interdependence, local problems can quickly turn into extreme events, becoming systemic, that is, causing a global upheaval.
The current globalization model is based on a significant division of labor between regions and countries. To make this expression more understandable, just think of some goods on the market, such as the automobile. The vehicle we drive is the result of a combination of parts and components produced in dozens of countries.
This means, among other things, that: i) a car is the result of many factories spread across the planet; ii) production sites are far from consumption sites; iii) if one or several of these industries fail to deliver their parts or components, the car will not be produced, at least within the time intended by the brand.
Let's apply this exercise to many other goods that we use daily, such as household appliances, computers and mobile phones, and it is easy to understand that the risks inherent in this globalized economy are very significant. The failure of one of the “nodes” can weaken the entire network.
The macroeconomic earthquake that the world is currently experiencing began in China and quickly spread throughout the world. At its origin is a drop in production because of virus containment measures in many countries, such as quarantine and restrictions on internal and international mobility, as well as the closing of production and trade spaces, among others.
This shock, which many believe to be temporary, is, however, quite significant in some sectors of activity, such as industry, commerce, restaurants, tourism, also attacking financial stock markets and the price of oil.
The growth of nationalism and protectionism
Among the many trends that may emerge, to counterbalance the crisis of this model of globalization, nationalism and protectionism stand out. Many of the shock measures adopted by different countries go in this direction, some out of necessity of circumstance, others out of conviction.
The discourse of distrust and fear in relation to the external, the foreign, the “others” has been reinforced in the political positions of some leaders, as well as in the daily conversations of many ordinary citizens. Populism finds fertile ground in this crisis to pursue its strategy of affirmation.
Donald Trump embodied this tendency by unilaterally deciding to close air connections to Europe, with the exception of the United Kingdom, a territory that has curiously demonstrated one of the most negligent attitudes towards containing the virus.
The same US president, critical of science when it defends the climate emergency that the planet is going through, was the first to try to obtain the exclusive of a vaccine to combat Covid-19, enticing a German laboratory with high payment sums of money, thus demonstrating not only its well-known lack of character, but also, once again, its total contempt for the international community and for cooperation between countries.
The crisis caused by the spread of the virus is therefore being used by some political leaders to impose their nationalist and protectionist agendas, just as others took advantage of the 2008 crisis to adopt ultra-liberal measures to reduce the role of the state and strengthen supremacy. of the markets. Ideological opportunisms find a vast field of progression in crises.
Other trends could emerge after the pandemic
Among other possible trends for the restructuring of the global economy, I identify at least two that could occur.
The first will be shared by defenders of the current model of globalization. These may simply relocate their production from China to other more favorable destinations, essentially maintaining the broad division of labor that exists and the distant chains of production and consumption. Countries with stable political situations and low production costs may become the alternative to the “Asian giant”.
The second may be carried out by economic agents who may prefer to produce closer to the places of consumption, as a way of limiting supply risks.
This approach will be based on the globalization of new information and communication technologies, such as artificial intelligence, robotics, 3D printers, Internet networks and telework, whose focus will be on the creation of networks and production centers adapted to each market, abandoning global production chains and creating international linkages between local companies. In this modality, what will travel will be mainly information and not merchandise.
This bet implies, however, facing the high production costs of markets such as the European Union and the United States, which may imply the reinforcement of the robotization of jobs, a strategy that some will adopt to become more competitive, understand if, achieve greater production capacity with reduced labor costs.
The relocation of production, with obvious benefits at various levels - including in the environmental dimension, with the reduction of gas emissions into the atmosphere - may, however, entail other types of risks for people and for States, such as the increase in unemployment and the respective social benefits, together with a reduction in revenue from contributions from companies on labor income.
The world has changed and needs to ensure some balances
Among the few findings that we can make from this huge international crisis, triggered by a microorganism, is that the world is not the same as we had at the end of 2019. Never does the expression “a sneeze on the other side of the world causes contagion on this side ” seemed so drastically evident.
This happens with the virus and cascades with factories, exchanges, airlines, borders, states and also with people. Covid-19 and everything that goes on around it has become the only current topic, creating an atmosphere of uncertainty and anxiety.
The global economy has been quarantined as the virus has spread, infecting new countries and increasing disruptions in multiple production and supply chains. The pandemic has created dynamics of economic isolation and dissociation, difficult to imagine a short time ago.
The impacts of this crisis will be felt at the level of each country, depending on the intensity and density of the problem, as well as its capacity for self-sufficiency, but also at the international level.
Whatever the post-crisis scenario and direction, some balances are essential, among which I highlight two. The first points to the need for a greater relocation of development processes, together with an intensification of international cooperation in key sectors, among which I highlight science and environmental preservation, areas in which competition has taken precedence over collaboration.
The last few months have shown that the world, even at different speeds, has been acting quickly and on a large scale to the public health crisis generated by Covid-19. Treating the climate with this same emergency is essential and this requires a commitment to science and international coordination.
Another balance to be ensured is that which refers to technological progress and the humanization of the world of work. Since the relocation of development processes may accelerate investments in the robotization of many work functions, as a way to reduce production costs, regulatory action by the States is needed to curb the most hostile forms of artificial intelligence, especially when these represent a threat to the humanization of essential sectors.
Author Nelson Dias is a sociologist and consultant
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