IMPACT OF COVID-19 PANDEMIC ON GLOBALISATION
9th Jul, 2020
- Globalization refers to international trade and investment flows among economies often enabled by technological developments. But today the globalization stands at a crossroads.
- From Brexit to protectionist policies by the USA, from western against immigrants to new snags in the world’s path to free trade, this era of world politics is being called de-globalization today.
- The global order is regularly facing a challenge as we’ve never seen before. All multilateral institutions in the world are today collapsing from the burden of their contradictions.
- The shock of the coronavirus to the global economy, which was already struggling, has also eroded the possibility of increased inflows of money, goods, and people around the world.
- Since the global economic crisis of 2008-09, the world was constantly moving in this direction and stood at the turn of the current global economic turmoil. This can be understood through the following data:
- There are several causes for the great stagnation in the globalization of goods and capital. It became increasingly apparent that not all countries, societies, and people were benefitting equally from globalization, and that soon began to be reflected in national and international politics.
COVID19 Pandemic and Globalization
- Disrupting global supply chains and international trade
- According to an analysis by the United Nations Department of Economic and Social Affairs (UN DESA), the Coronavirus (COVID-19) epidemic is disrupting global supply chains and international trade. The World Trade Organization (WTO) has estimated that in a worst-case scenario, global trade could dip as much as 32%.
- Restricted movement of people and the pace of tourism
- During the past month, about 100 countries have closed their national border, which has completely stopped the movement of people and the pace of tourism, which has hampered global growth. Developed countries as well as many in the Asia Pacific economies that are highly dependent on tourism and commodities trading will shrink.
- Job crisis and stimulus packages
- According to DESA, “millions of workers in almost all countries of the world are facing a job crisis. Besides, various governments are considering large stimulus packages to deal with the outbreak of coronavirus, which may further affect the global economy.”
- Import substitution
- Countries are facing difficulties in getting medical supplies; some find their manufacturing can’t run as value chains are linked with China.
- Countries will reconfigure their economies to look at import substitution with greater clarity now, as the perils and pitfalls of overdependence on foreign supplies become clear.
- Disillusion with the role of multilateral institutions
- Trade rules have worked best when the global economy is booming and isn’t facing a crisis. Position of Multilateral Institutions like WTO is going to get worse because if countries need to bring their domestic industries back, they would need space for policy flexibility and WTO will be redundant there — for instance, on the issue of subsidies for small industries, no country will like the WTO to be telling them what to do or what not to do.
- Indian Context
- The world is becoming fragmented every day, the challenge of reviving support for globalisation will be bigger. This is a major problem for countries like India, which have benefited greatly from the vigor of globalisation. Because of the free flow of information, ideas, jobs, and people has given Indian citizens an unprecedented opportunity to prosper.
- But, now that the world scenario is changing rapidly, India’s policy-makers will have to find a way to make the most of the new emerging opportunities in India. Because today the old global supply chains are being disrupted and replaced by a new system of trade and investment.
- The impact of the severity of coronavirus (COVID-19) on the global economy will depend primarily on two factors: a period of restriction on people’s movement and economic activity in major economies; and the real size and effectiveness of fiscal measures for the crisis.
- According to analysts, there is a need for a properly designed fiscal stimulus package to mitigate the impact of the virus on the global economy, which includes prioritizing health expenditure to prevent the spread of the virus and providing financial assistance to families affected by the epidemic.
- According to the Secretary-General for Economic and Social Affairs, all nations need some immediate policy measures that not only work towards preventing epidemics and saving lives but also help protect the weakest person in society from the economic crisis and maintain economic growth and financial stability.