Opinion :: Covid-19 proves globalisation is not dead

Financial Times
Opinion –  Globalisation
Covid-19 proves globalisation is not dead
As the pandemic pushes more activities online, national borders seem less relevant than ever
Ian Goldin
The writer is a professor of globalisation and development at Oxford university

Covid-19 will not kill globalisation. Rather, it will accelerate underlying trends, compressing into 2020 a transformation in flows across national borders that would have taken years to emerge.

As individuals and companies move online, national borders become less relevant. Virtual meetings are substituting for travel and physical meetings, with their greater efficiency leading to higher levels of engagement.

This increased digital connectivity facilitates the rapid flow of ideas, the most influential dimension of globalisation. The scientific race to stop Covid-19 and find a vaccine has encouraged unprecedented collaboration. Greater global awareness is evident in the intense interest in the march of Covid-19 and spread of the Black Lives Matter protests to five continents. Not all flows are good, and the spread of bad and fake ideas is also accelerating, from meddling by foreign powers to anti-vax fears that undermine the fight against the pandemic.

Covid-19 will also accelerate and transform financial flows. With more than 100 countries requesting emergency financing, those from the IMF and other multilateral groups will far exceed any previous era of cross-border capital flows. Holdings of overseas currencies are also rising. The pandemic is also likely to precipitate a new wave of cross border mergers and acquisitions, including higher rates of investment in and from the growth markets of east Asia.

Travel has been curtailed by the pandemic, but personal travel will rebound sharply, as soon as a vaccine or medicine allow, thanks to pent up demand in China, the world’s largest source of international tourism. Business travel growth is likely to be permanently lower, since the pandemic has revealed the advantages of remote meetings.

Trade was already declining for reasons that preceded and are unrelated to the pandemic. Overseas supply chains were built on outsourcing repetitive tasks to lower labour-cost countries.

But artificial intelligence, robotics and 3D printing are changing the model: automated processes require machines and skilled labour, which are more abundant in richer countries. Demand for individual customisation and rapid delivery encourages manufacturers to return home. For services, banks, insurers and law firms are putting their back-office functions on servers or in the cloud, rather than relying on far-flung, labour-intensive call or data processing centres. The politics of protectionism and nationalism reinforce these trends.

The transformation of work is being accelerated by the pandemic. Machines do not get sick or spread viruses. Now that office workers are logging in from home, it begs the question as to why they need to be anywhere specific. Increasingly we will see the globalisation of professional services. Many essential services cannot be done in another country. But banking, law and design can, often at a far lower cost.

East Asia has been the principal beneficiary of globalisation and remains an enthusiastic supporter. The region’s assiduous containment measures have allowed its economies to rebound toward pre-pandemic levels of growth. Meanwhile, US protectionism and its disastrous handling of the pandemic is accelerating its relative decline. The UK is less significant than it has been in centuries, with similar self-inflicted wounds hastening its slide. Covid-19 has accelerated the rise of east Asia as the centre of gravity of globalisation.

Covid-19 also has crystallised our understanding of the threats globalisation poses. The superspreaders of the good — airport hubs, fibre-optic cables, global financial centres — are also the superspreaders of the bad, from physical and digital viruses to stock market panic. Only co-ordinated actions can address this “butterfly defect” of globalisation, as no one country can stop the threat. A more globalised world combined with fragmented political systems has left us more vulnerable to the next crisis.

The previous model of globalisation was not sustainable and escalated systemic risks, including financial crises, climate change, rising inequality, and pandemics. Deglobalisation may be an attractive political slogan but it would make matters worse. The world, especially the countries devastated by Covid-19, need cross-border flows of vaccines, clean technologies and investments and trade that create decent jobs. Business as usual is not an option. We need to redouble our efforts to create a healthier, greener, better regulated and more inclusive globalisation.