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Economy

A New Wave of Globalization

May 14 , 2020
  • Zhang Yun

    Associate Professor, National Niigata University in Japan

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The COVID-19 pandemic, which took the entire world by surprise, has not only dealt a heavy blow to public health and economic development worldwide but also left the people perplexed about the prospects of globalization afterward — when and if the pandemic ends.

Nowhere is the damage to globalization more obvious than in global industrial chains. Stringent quarantine measures have caused unprecedented interruptions to the supply chains that had been growing more interconnected since the end of the Cold War.

In many countries, including in some segments of American society, skepticism about the benefits of globalization has grown. For example, an overdependence on imports of such things as medical supplies, including face masks and personal protective equipment, has led to growing calls for domestic production. Surging unemployment only fuels negative sentiment.

Before the pandemic, however, trade wars and the notion of a high-tech decoupling of China and the United States had already stirred widespread concerns. The enormously destructive pandemic turned that fire into a major conflagration. Will it put globalization on a path to inevitable demise?

I believe the pandemic marks the end of a period of a globalization model driven by cost-efficiency and the beginning of a new wave of globalization driven by social equality and justice.

First, the fragility of supply chains is not the result of globalization but of misconceptions about globalization. We place too much stress on cost-efficiency, thus leading to manmade fragility.

In the previous wave of globalization, many multinational companies relied on multiple layers of outsourcing. At any given time, a company’s headquarters may have had no idea where their fifth or sixth layer of subcontractors were. As fans of market principles, the subcontractors pursued optimal allocation of resources to maximize profits by keeping costs low. They had to fill orders in the shortest time possible to maintain seamless connections. But facts have demonstrated the glaring weaknesses of this approach.

This is not the first time that global supply chains have been interrupted, as the 2004 Indian Ocean earthquake and tsunami and the 2011 Japanese earthquake remind us. The coronavirus pandemic now rings the loudest alarm bell of all.

I believe that an important post-pandemic topic is how to strengthen the resilience of global industrial chains, a process that certainly will involve adjusting the current cost-efficiency approach. Even with growing costs, nations will consider withdrawing some investments and production facilities from abroad, and place more emphasis on the well-being of subcontractors at the bottom of the supply chains. They may also push forward the globalization of production to mitigate risks.

As a result, the pandemic will make the restructuring of global industrial chains an inevitability (probably a multi-directional restructuring).

Second, the pandemic underscores that the gains of globalization are unevenly distributed — a problem that requires more energy to deal with in the next wave.

For example, both domestic and international migrant workers make huge contributions to local economic development, but given their poor living and working conditions, they are among the most vulnerable to infection. It has been reported that in the Gulf states, most of the infections are found among international workers. In Thailand, an estimated 3 million migrant workers will have to return home because of factory closures. In India, 140 million domestic workers are out of work and must go home.

All this puts enormous pressure on the pandemic response. When the gains of globalization are not fairly and evenly distributed, the wider society foots the bill.

Third, we see that some countries, fortunately, have acted to address this problem. In Singapore, a country noted for its pandemic efforts, many international workers were infected because they lived in crowded dormitories in which social distancing was difficult. In response, the government praised their contributions, pledged equal treatment and promised to review its policies when the pandemic ends.

The dual structures of globalization mean that both within and between countries, the value of certain social groups is clear, but it may be difficult for them to fit into the communities where they work. The end of this pattern is that the process of globalization will become unsustainable.

Fourth, a new wave of globalization will place more stress on diversity, rather than single-mindedly pursuing identity and homogenization.

During the pandemic, nations have responded differently, taking a variety of measures against the pandemic and its consequent economic challenges. The issue is not about which model is best but about a recognition that each model is a result of local realities and cultural traditions.

Mutual learning among nations and societies will become a new fashion going forward. For example, strong interventions in some Asian countries have played a critical role in the containment of the pandemic. Initially those measures were criticized by some Western countries as undemocratic and a violation of human rights. But the United States and Europe took even more stringent measures when they emerged as new epicenters. If this can be seen as convergence, then a new wave of globalization will need to be built on exchanges and learning on a more equal footing.

The previous wave of globalization driven by cost-efficiency has delivered extraordinary benefits to humanity, but it has also created winners and losers. The ongoing pandemic is a stark reminder that we must heed the needs of the losers; otherwise, we will all lose. To avoid this scenario, we need to be poised for the arrival of a new wave of globalization. 

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